Why China Will Fail

This is not a happy time to be an entrepreneur seeking to list your firm on one of China’s stock exchanges. Nor is your situation better if you’re one of the Securities Commission members charged with approving listing applications.

Chinese companies aren’t doing very well, and Beijing thinks it’s because the standards on initial public offerings (IPOs) weren’t strict enough in the first place. A better winnowing process is needed to ensure that only the crème de la crème of Chinese companies gets listed. Those not making the grade are viewed as “locusts that must be killed,” or as viruses, with the commissioners’ mission being to “prevent diseases from entering the body via the mouth.” That kind of thinking would put a dampener on an entrepreneur seeking seed capital no matter how great he thinks his idea is.

In China, the only way to obtain seed capital is first to get regulatory approval. That’s a process that can take years. And the commissioners aren’t inclined to view applications benignly, for they will be held “accountable for life” for each IPO they approve. Only last month, Chinese authorities swooped down to seize a large private insurer deemed to have become too risky. One would not want to be one of those who approved its application.

Is there any wonder, then, that the Chinese are widely regarded as not being creative? Yes, they file a lot of patents, but the quality isn’t great, with the state news agency Xinhua complaining, “China owns very few patents featuring originality and high or core technology.” In fact, Chinese innovation relies on the modification of existing technologies, like putting together a cell phone and a cigarette case. These creations are fun, but they lack depth according to a Chinese writer who prefers to remain anonymous.

Israel, on the other hand, is a tiny country of about 8 million people that’s been called the “Start-up Nation.” Israelis have created, among many other technologies, the Waze app used by 50 million drivers worldwide, a technology that’s allowed blind people with intact optic nerves to see (OrCam), and a lithium car battery that’s tripled the mileage for electric cars (Phinergy). These are more than mere trinkets. They will have a lasting effect on future technology.

The difference is that Israel encourages risk-taking. Israelis are innately risk-takers or they wouldn’t be living in a country that’s surrounded by 17 hostile Arab countries with 46 times its population.

Creativity, like entrepreneurship, thrives in an environment that welcomes risk, not in one where risk-taking is punished. By its very nature, creation is risky. This is why I’m amused when I hear people sneering at Donald Trump’s bankruptcies, as if failing when taking big risks is a cause for shame. Gary Shapiro, author of two best-selling books on innovation, explains the innovative success of the United States and Israel: “Both countries share the unique view that entrepreneurial failure is an education rather than a badge of dishonor. They don’t punish risk-taking the way many other nations do.”

Billionaire Mark Cuban explains it this way. “Failure is part of the success equation.” You don’t succeed unless you take risks. And when you take risks you sometimes fail. When that happens you pick yourself up and start over again. Except that doesn’t happen when failure means you get a visit from your friendly local commissar.

China has aspirations to become a world power equal to the United States, and many American declinists believe this is inevitable. I don’t share their view. So long as the Chinese people lack the freedom to fail, China will remain weak. The country that today funds its failing companies is running out of money, and the international community is running out of patience, as can be seen from the tariffs President Trump is levying on Chinese steel.

China’s response is to try to strong-arm its companies into succeeding. It will have the opposite effect.

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78 responses to “Why China Will Fail”

  1. East Asia tends to be conformist, Lu Ban’s Axe.


    Stay within the lines, don’t rock the boat, don’t Think!, much less outside the box. Be a good little Mandarin (or the Japanese or Korean equivalent).

    Because they would lose face for errors, which is much more serious, they won’t report even glaring errors. The Takata air bag fiasco isn’t merely understandable, it is expected, at least that something like it would happen. I can also recount other engineering disasters.

      • Personal experience, and reading various sources.
        Do you have good, well documented and/or reasoned sources to the contrary?

    • This has been my observation as well. There are two main cultures in the world: Eastern and Western. Whereas western culture is individualistic and guilt-based, eastern culture in communal and shame-based.

      The first rule in a communal culture is “We’re all in this together so don’t rock the boat.”

      I’m a computer programmer and I work with a lot of Indians. They’re all good people but I’ve found that they make lousy programmers. That isn’t to say that there aren’t a lot of technology jobs at which they would excel, it’s just that some aspects of any kind of engineering discipline require a great deal of creativity and I think that is shunned in a communal culture because it sets one apart from the group, which is a no-no in that kind of culture.

      • Western is more subsidiarity – Individual, then family, then village/tribe, then county, then nation, so cooperation and such radiates outward – including charity and organization.
        As to Indians and Chinese, they are good at cut-paste, so that if their task is a simple variant of some Javascript they can copy, they can do it. If they have to think (which sorting algorithm is best for this dataset), they just use whatever sorting algorithm the language provides that comes up first in search.
        Perhaps more importantly, you nailed it with the guilt v.s. shame difference. Guilt is individual conscience and causes avoidance or repentance of objective evil. Shame is society’s ostracism, so don’t get caught. It explains things like changing ingredients in the story from “Poorly Made in China” – they see no shame in cutting corners even if it violates a contract. Or in putting melamine in pet food to get past the protein QA.
        Westerners will create within an ethical framework.
        Easterners will adapt within community standards.

      • Here’s the situation I encounter often:

        Gupta is assigned to fix a bug in some code. He finds the error is in Patel’s code. He doesn’t want to point out Patel’s error (thus shaming him) so he writes additional code that bypasses Patel’s code in that particular instance. Now, in addition to the fact that we still have Patel’s bad code running in our system, we have a bunch of new code that may have its own problems and must be read and understood by future developers and support personnel.

      • Something else I noticed with the Eastern culture is a profound difficulty in “thinking outside the box”. When I was in the Army, I did a 13 month tour in Korea and the unit I got assigned to (like almost all American units in Korea) consisted of about 25% Korean Army augmentees known as KATUSAs.

        One day our First Sergeant announces the next day we would conduct training on the M203 grenade launcher and there would be a written test. That afternoon all the KATUSAs congregated together with the M203 tech manual and copies of prior M203 tests and started cramming. Our American Soldiers watched TV, left the post to go partying, wrote letters, basically everything except study for this test. The next day, we did the training and gave out the multiple choice/fill in the blank test. While the Americans were all over the board with the test, the KATUSAs all had perfect scores.

        Out of curiosity, I picked up the M203 and took one of the lower scoring Americans outside. I pointed down the hill, told him there was a squad of North Koreans coming up the hill and then directed him to show me how to use the weapon. He did so perfectly. I then went back and got 2 KATUSAs and ran them through the same hypothetical and they were unable to do anything except inform me this hypo wasn’t part of the test.

      • I used to work for a software development company. They had two development centers, one in Lithuania and the other in Thailand. The Lithuanians would often fail to think outside the box but I attributed this to years of Soviet collectivism. The Thais, on the other hand, did not even know there was a box.

  2. Outstanding! I’ve worked in several venues that were a veritable “United Nations” and had a chance to observe the cultural influence upon individual creativity. One might say that “what happens in Hong Kong stays in Hong Kong.”

  3. Can we admit a lot of the decline talk comes from people who are well past having any positive impact on America other than finally dying?

    • I’m plenty old and the declinist talk I see is coming from younger people who have lost their nerve. Like the recent hand wringing NY Times article about Madison Indiana and the ridiculous number of young people in that area that kill themselves. I had decent prospects when I was young but grew up with people who lived in shacks with dirt floors who fought like badgers to better themselves. I’ll die when God decides its time and in the mean time the declinists can can stick their perseveration where a monkey sticks its nuts. ;-)

      • “Fought like Badgers”. Love that. Let’s not give up on the youth. America might be stumbling but I sense a shift as people are starting to wake up to the need to come together. It’s time to kill off the Alt-left and Alt-right and get back to work.

    • Pretty morose statement and one that sounds like resentment coupled with arrogance and likely underpinned by deceit.

  4. China will fail because of its centralized control, lack of creativity is a by-product of that kind of society.

    • Do not underestimate the negative power of their sexual imbalance. Millions of young men who can’t find wives do not bode well for the country, or it’s neighbors.

      • you’d think they’d go for mail order brides to keep things going except racism is not only rife in China it’s official policy there – marrying non-Chinese is a no-no. So we wont be seeing any ads seeking white (or black or brown) girls to move to China any time soon

  5. Trump bankrupcies is because he took risk? He let other people take the risk more like.

    • No one forces you to invest. And sometimes when you invest in a project it goes bankrupt. And sometimes they succeed and everyone makes money. That’s the nature of investing.

      • Sure, but when you transfer the risk to your lenders/investors, you can’t say you took the risk. Others took the risk for you.

      • In order for you to convince someone to assume the risk, you must have an established record of success.

      • precisely the reason why no banks are willing to lend him money after a string of bankruptcies except the russians, we just dont know what the russians ask for in exchange..

    • Trump bankruptcies are because he is stupid, amoral, and unprofessional in the extreme.

  6. In regards to tech I think you’re incorrect. Today in china you can do everything on your phone, the innovation is amazing. China is the leader in electronic payments which is amazing considering where the country was 10 years ago

    • Much of the ‘tech’ innovation is simply ripped off IP. To your point though, what China has accomplished in 40 years is impressive by any measure.

  7. I follow a YouTube channel by two guys, one a young American and one a young South African, who moved to China. They both ended up marrying Chinese women and building lives and careers in Southern China. Their channel has been quite an education for me.
    One of the observations they’ve made is that Chinese leaders run China for themselves and the Chinese people. Foreigners cannot list their products on the Chinese Amazon, since that would take business from Chinese producers (although Amazon allows Chinese producers in and allows them to sell to the world). China uses all homegrown apps for social networking, and companies like Facebook and Twitter and PayPal are locked out of China. I’m not certain, but I don’t think foreigners can own land or businesses in China.
    When I hear about tariffs on Chinese goods, I laugh. You mean Trump is going to China a little bit like they treat everyone else? Cry me a river.

    • all homegrown apps for social networking, and companies like Facebook and Twitter and PayPal are locked out of China.

      They may say they do this to promote Chinese businesses but the truth is that information is the tyrant’s worst enemy. They allow Google in but only with the understanding that you can’t search for anything that attacks the Chinese government or system.

  8. China will do just fine. They will blow by the US within a few years. Our cultural arrogance is pitiful. China was a world dominant power when our ancestors were living in huts and wearing animal skins. Americans totally overestimate ourselves.

    • Completely agree. “I am American and that is all I need to be the best. We are exceptional and Jesus wrote the “flawless” constitution that we have. China built a world power in 20 years while Americans were sucking their own di**.

  9. China will not fail bacause they dont have to go thru a dead end economic debate everytime a decision has to be made. If the country needs stimulus thru govt spending, they do it and if they need austerity, they go for it, in a day. Debt bubbles have been dealt with without a lengthy debate featuring Ayn Rand and John Maynard Keynes. JAPAN, inc became a powerhouse economy by simply copying and improving. After they mastered this, they became inventors that sometimes failed, sometimes didnt. Needless to say, but i completely disagree with this article

    • Japan, the country with zero economic growth for something like three decades now?!

      So you think that there are really smart government bureaucrats who know just how to do everything, if the unwashed masses will just obey? Science! You mention Rand and Keynes but still think that central planning can be made to work?!! You know nothing about those two people, do you?

      • Right, because the libertarian mindset always brings prosperity (wink wink). Ask South America or Africa about the small government mantra and let me know what they tell you. Japan is a powerhouse inventing things, with the problem of an aging population that no economic policy can cure. Japan, Inc started by companies such as Canon copying Leica cameras and lenses for a fraction of the price. Korean economic miracle was made thru copying technology. America will not be saved this time by its supposed “exceptionalism” . Education investment, college enrollment, patents filings, all are number that are down for the US, the soon to be second biggest world economy.

      • Totalitarian governments and apartheid are Libertarian?!

        Your apparent belief in government central planning exhibits an extreme ignorance. Sure, government bureaucrats taking money from the productive and spending it on the politically connected is the road to wealth!! If you are one of the parasites.

        I was just telling my daughter this morning about how the collectivists just never learn. Plato’s Republic, The Divine Right of Kings, Das Capital, all excuses for some people to rule others. All claims of superiority based upon some form of opposition to the individual. All evil.

      • Ignorance is believing the the US became a world superpower based on individualism and every man for himself philosophy. Big govt, 70 % tax rates, and a solid welfare state created the largest middle class the world ever saw. Funny you mention apartheid. Was it not Reagan the one who opposed divesting from South Africa until Nelson Mandela was freed and apartheid abolished? His opposition was overrriden by the Democratic majority. This pretty much spelled the end of apartheid. Damned collectivist, communists, socialists.

      • Opps, I did not realize I was arguing with someone who was 14 and had a 45 IQ!

        You are an underwear gnome, aren’t you?

        1. Have bureaucrats confiscate wealth.
        3Have bureaucrats redistribute wealth which they did not create.

        Only the abjectly ignorant or evil could think that bureaucratic wealth transfers make nations wealthy. You appear to be the former.

        Something, something Reagan aparthied? What does that have to do with the abject failure of centrally planned economies?! The collectivists killed 100,000,000 of their own citizens in the 20th century. You don’t damn them but want to celebrate them!?

        Our public school system certainly has been effective at raising a generation of ignoramuses. Your idiocy is truly pitiful. You should sue your school teachers for fraud. You should also damn your parents for failing to teach that governmental theft is still theft and still evil.

      • Oops.
        1. Ignoramus is not a word.
        2. Alex jones is not real news.
        3. I dont live in the US (never would). I live in Denmark where they “steal” our wealth and create the most advanced health and education system in the world. That is why I am kicking your ass from every angle.
        4. Your argument simply failed and you have no other venue but to attack me personally.
        5. Back to the argument: people like you are the reason China will kick your country’s ass pretty soon.

      • Your parade of straw men is not original, not by a long shot. Did you copy and paste?

        As a simple example, brevity prevents me from listing every one, is the 70% tax rate making the American middle class. It is as if you are completely unaware of WWII. You know, when the rest of the world lay in ruins with millions of dead and the US was practically unscathed? High taxes and central government planning are what made us wealthy? That is serious DERP.

        You still do not even attempt to defend how bureaucrats transferring wealth they did not produce, creates wealth, which is the actual argument. I say, “what an absurd proposition, centrally planned economies killed a hundred million in the 20th”, and your response are straw men about South America and Apartheid being examples of either small government or libertarianism.

        Alex Jones? Isn’t Mr. Jones also a collectivist? Is that some reference to cover for your ignorance of “The Black Book of Communism”?

      • Alright, fine. Go on in sucking your own cock while China gets closer to fuck your country in the ass. In the meantime I am going to my welfare state, redistribution funded Master’s Degree classes. Enjoy your idiotic president, your school gun shootings, your income inequality, your crumbling infrastructure, and the tax cuts that created all this mess. What a wonderful place America is.

      • ” I am going to my welfare state, redistribution funded Master’s Degree classes”

        I never, for a second, doubted that you were a parasite upon the productive and proud of the money coerced from others by government, too.

        If you would also note, I never said America was anything other than not destroyed in WWII. I haven’t promoted America as anything, other than wealthy. Most of the West is wealthy and not because of bureaucrats transferring coerced wealth.

        I get it. America and Americans make you feel small and you must attack them even when they have not been mentioned. You should not feel inferior simply because you are a member of a small and insignificant nation. Denmark being little and unimportant doesn’t make you little and unimportant any more than the US being the most wealthy makes me the most wealthy.

      • Small and unimportant, but the happiest country on Earth along with Norway. On the other hand, your country sucks on every metric, except massive stupidity. Like somebody said: “A country full of apes with money”. But enough, I love trolling you jesus freaks, bible carriers, gun lovers. Don’t get a heart attack, remember: you don’t have universal healthcare; all that massive wealth you probably don’t have, can be taken away by your closest clinic.

      • “I love trolling”

        Obviously. It is all that you can do when you can’t make intellectual arguments.

      • It must really suck being a collectivist. You think that by insulting “Americans” I am somehow insulted. You are, personally, as an individual, pathetic and pitiful.

        If you want to insult me, you should direct your insults at “Marshall Gill” not white dudes, or Americans or Libertarian leaning conservatives slightly under six feet tall.

        Fat people on the government teat are the exact opposite of me, so I also make fun of them. It sounds from your posts that you have more in common with the picture you used than I do.

        Since you are so dense: I hold no loyalty to tyrannical government. When American government defends Liberty I support it. When it supports the ability of bureaucrats to steal from the productive, I am opposed to it. You should have found a picture of someone who doesn’t steal from their neighbors and works regularly. Instead of a picture of someone who is undoubtedly also proud of what the government has stolen in their name.

      • Man, I just can’t wait to get to my email to see your rants; it is really becoming a hobby. I am pretty sure you call yourself the backbone of the American economy, you believe in the whole sovereign citizen mantra, patriotism fits you well when it works for you and faux news and Alex Jones is the source of your intellectual information, . I didn’t intend to insult all Americans, I know many Americans who have moved here pursuing a happier fairer life and I love them. It just happened that I pictured you in that meme. White dudes? lol! I am whiter than than the sun! Defending liberty? hahahahahaha dude, your country is the number 1 violator of human rights in the world!! what are you talking about? “Let’s invade Iraq, because it will be fun. We just need oil to feed our taste for stupid looking SUVs”
        -Steal from the productive? Like your banks? who capitalize on risks and appropriate on their profits and when everything went to shit, they socialized their loses? Really productive fuckers you have there. Like your president? who never paid a dime of taxes, but when he went broke, laid on the arms of bankruptcy laws and big government to save him.

      • I haven’t blocked several thousand comments. You have proven that you are fantastically lazy, or perhaps simply intellectually inferior by your consistent assertions about me which completely lack any basis. Americans this, Americans that, what part about “I am not a collectivist” don’t you understand? You are not an individual but only a member of the collective and don’t understand? Basically an insect?

        “Your banks”?!! Can you tell me which banks are mine? I had no idea that I owned a bank or set banking policy or voted on a board of a bank. Are you sure you understand ANY English?

        My country is the blah, blah, blah. I don’t own a country and do not take personal responsibility for actions of a democratic republic of 320,000,000. If I reference Americans it would probably be in the form of “taxpayers” or “voters”.

        So, like everything else you think, your assertions about who I am are so far off they are only exceeded by your apparent lack of understanding basic English.

      • Hahahahaha when I say your banks, I don’t imply you own a bank. I barely believe you own a car. Probably you drive around in a beat up impala with “Dont tread on me sticker”. But you know what I meant already, you big idiot.

      • oh and by the way. People here is not coerced to pay taxes. Actually a voter mandated measure, stopped the austerity measures of the past government because people here believe in redistribution, because it works. Plain and simple. So yeah, a country of parasites who happens to have a higher standard of living than your beloved US.

      • So if you don’t want to pay taxes you don’t have to? I realize that English isn’t your first language but I am certain that taxes in Denmark are coerced. If they were not, they would be called “gifts”.

        So you use words whose meaning you don’t understand. Unsurprising.

      • Over the last three decades Japan’s economic growth per person has been higher than America’s. You are confusing America’s immigration-driven economic growth with real prosperity.

        Sure our economy’s gotten larger, but the average American has seen precious little of this “growth”. Meanwhile, the average Japanese is appreciably better off.

      • I am sure you have some source to back up that claim? And since you apparently have reading comprehension issues, I never compared Japan to the US. I only stated the fact that they have had next to no economic growth since the 1980’s. They Japanese refer to them as “lost decades”.

      • How does that article pertain to centrally planned economies, the subject of this article and the point of my post? Was I really that unclear? Liberals use the lost decades to support immigration? I am sure you have some source for that, it is a new one to me. It is a pretty standard damnation of central planning by conservatives.

        And, your claim is specious on it’s face which is why I did not reply there. Zero growth divided by any number is still zero.

      • It doesn’t. You asked for a source to “back up the claim” that Japanese growth was higher per capita than America’s during the “lost decades”, so that’s what I linked.

        If you haven’t heard liberals point to Japan’s “zero growth” as evidence why America needs immigration, then you’re entirely checked out from the news cycle, so I can’t really help you there. It’s literally mentioned every few days by an immigration advocate on Tucker Carlson Tonight etc.

        Zero economic growth can actually be positive, if the population is falling. For example, if GDP remains constant (zero growth), but the population falls by 5%, GDP per capita actually increased (by 5.2%). GDP per capita is what matters, not GDP as an absolute measure.

      • “You asked for a source to “back up the claim” that Japanese growth was
        higher per capita than America’s during the “lost decades”, so that’s
        what I linked.”

        Your linked article provides no actual numbers about Japan, simply your assertion about immigrants and NPV. It doesn’t compare the actual rates of growth or population of either country. You haven’t even compared the two with NPV, or at least did not provide the numbers. You mention technology, as if it comes from some place other than human capital.

        A centrally planned economy of no immigrants would suck, in spite of your assurance that immigration is the worst of all evils, apparently.

    • Japan hasn’t invented anything of significance.

      • Nope. Got a look at the top ones and it’s as usual; the Japanese taking things they didn’t invent and improving on them. Totally different animal.

        Oh wait, they invented Airsoft!! That’s about as awesome as inventing submarines or spacecraft able to reach the Moon.

      • 18 Nobel Laureates in Chemistry and Physics. I am pretty sure they might have invented or discovered something.

      • Is it a horrible thing to just admit the Japanese (or Chinese, Koreans, etc for that matter) don’t dazzle the world with inventions? After all, the certainly are awesome at taking other peoples’ stuff and making it much much beter.

      • I am giving you arguments. I am not japanese, and I really dont care. I just know that such a small island has massive ingenuity. Nobel prizes in physics and chemistry are no small feat.


      • I know little about fiber optics but Wikipedia say you’re wrong. Looks like you’re right on the printers. So that’s printers and…nothing else.

  10. Just how many different names do you use with that same picture? $98 dollars an hour to stay at home. You are telling us you make $98 an hour but only work 13 hours a week? Put some sweat into it and make money you can brag about.

    Here you go, whoever your name is. They found his smart phone still in his hands and his head behind the seat.

    Do you text and drive?


  11. Exactly the type of articles you expect to get in a website named as “American Greatness”.

  12. You realize all China needs to do is stop printing money, which will inflate their currency and the U.S. Debt. That’s why they can afford to throw away money.

  13. And yet,…at the very time when the intellectual property of

    Ai is being established, when invention of unprecedented
    technological importance is emerging, when innovation of
    unprecedented economic value is being built, and when future
    businesses worth literally hundreds of trillions are being
    launched,… at exactly worst possible moment in economic history,
    that’s the moment the US has chosen to gut it’s own Intellectual
    Property protection.

  14. A successful businessman from Guizhou, China wants to build a condominium here in Tyler, Texas. He hopes to add to the city’s stature as an education-medical-retirement city. Exchange students and seniors would move here. He’s like to see projects integrating East & West medicine. I’ve been trying to help the process through visiting with our Economic Development director. At present, the project is stalled because the condos are just too big a project. My latest suggestion was that he write a proposal for the East-West medicine project, as I sent an article on Eastern medicine to that economic development director. Any thoughts? I’ve been a fan of Far Eastern culture since 3rd grade and wrote a thesis integrating Neo-Confucianism with cognitive-behavioral & existential therapy nearly 35 years ago.

  15. So many quotes not enough references. Great closing statement (your a lawyer so this has to be good). Average article.

  16. I think the author is confusing two things. Firstly, China being like America – which will never happen. And secondly China being a world power equal to America by another path, which is in process right now and seemingly unstoppable. Central planning is often poo-pooed in the west but it clearly has some very powerful uses, particularly when comes to competing with established technology. Remember that China only has to produce one quarter of the GDP per person to compete with America as a whole, and they passed that milestone some time ago (PPP and not Dollar based).