Why China Doesn’t Have a Wall Street and Why It Doesn’t Want One

By Dr. Yu Bin Professor of Economics at Zhejiang University

Capital is a fundamental component of economic development regardless the political-economic system that employs it. What renders Capitalism deadly is the lack of regulation and not dedicating its purposes for the good of the general public, which could easily be done via corporate charters and business law.

A few articles ago, I informed readers of an English language Chinese publication called The China Academy that provides another source for Chinese views on critical geopolitical and geoeconomic issues. The most major distinction between China’s system and the West’s was its relegation of finance to the public realm at the outset of the New China’s existence in 1949—perhaps the most important aspect of Communism/Socialism the privatized West can’t stand and will wage war to overturn as we’ve seen with USSR/Russia/Cuba and a smattering of others. Financial control as I noted in my last article is the primary pillar of the Class War between Creditors and Debtors that’s been ongoing for 4,000+ years. One of the reasons the Kuomintang was so poor at governance was its very deep level of corruption—easily as deep as the Trump Gang’s—and is the primary reason for its being overthrown. The Chinese are outstanding students, and they’ve studied the West and the Outlaw US Empire for decades to see what China might use and what China must avoid. China decided it must avoid the accumulation of great wealth by individuals for political usage. The Jack Ma example is the best available. China’s been extremely protective of its financial system because they knew it was weaker than the West and that the West has tools at the ready to undermine and capture it setting the clock back to 1900. In 2024, Xi Jinping gave a landmark speech at a closed venue about making China into a financial powerhouse and outlined the steps to take. That speech was kept classified until February 2026 when it was published and I reported it in-full. What many didn’t know was that China had already been working hard for two years and had already instituted some of the required steps. China learned that its industrial success would attract Capital wanting to benefit from that success, and so it has. Several articles I’ve read speak about the entry of Big Capital into the development funding mixture augmenting what the CPC funds via the budget. IMO, it’s very possible that Hong Kong and Shanghai displace New York and London as the planet’s main financial centers—yet another reason why China’s being targeted by economic war. Now that the table’s set, let’s read what Dr. Yu Bin has to say about the issue:

Why China Doesn’t Have a Wall Street and Why It Doesn’t Want One

Western market design relies on post-hoc tax extraction to balance private asset ownership with public goods. China, through public ownership and robust market regulation, flips the script:

Finance is usually presented as a technical subject: interest rates, credit, stock exchanges and risk. But beneath all of these mechanisms lie political questions.

Who owns the productive wealth of society? Who receives the gains when finance succeeds? And when it fails, who is left carrying the losses?

China’s answer is neither the abolition of markets nor their elevation into a ruling principle. Financial markets are permitted to grow, direct investment and reward innovation. But they are expected to remain subordinate to public goals.

That distinction is central to understanding China’s socialist market economy.

Public Ownership Changes the Equation

In a conventional capitalist economy, most productive assets are privately owned. Governments can reclaim part of the resulting profits through taxation, regulation or voluntary donations, but the wealth belongs first to private owners.

This creates a permanent political struggle. Governments need revenue to fund healthcare, education and social security. Companies and wealthy individuals, meanwhile, have strong incentives to reduce their tax burden, move assets abroad or shift profits into low-tax jurisdictions.

Public ownership changes this relationship.

When the state holds major assets on behalf of society, the public does not need to rely entirely on taxing private wealth after it has been created. It already possesses a claim on the income generated by publicly owned enterprises.

China’s state-owned companies operate across banking, energy, telecommunications, transport and heavy industry. Their profits can be reinvested, paid into public budgets or transferred to social funds. In 2017, the State Council formalized a program transferring portions of state-owned capital into social security funds, explicitly linking public ownership with long-term welfare provision.¹

This does not mean that every hospital, school or pension payment can be traced directly to one state-owned company. China’s fiscal system is far more complicated than that. The point is structural.

A government that owns productive assets has sources of revenue beyond taxes on private capital. Public welfare does not depend entirely on persuading private owners to surrender part of their gains. [Russia also enjoys this.]

That is the practical meaning of socialist ownership. It is not merely a legal label attached to a company. It gives society a permanent economic claim on part of the country’s productive capacity.

The contrast with a social-democratic welfare state is important. Northern European countries also provide extensive public services, often funded through high taxes. But taxation and public ownership are not the same thing.

Taxation asks private owners to transfer part of their income to society. Public ownership begins from the position that society already owns part of the income-producing asset.

The Ant Group Test

The limits placed on Ant Group offer a clearer view of how this principle operates in practice.

In November 2020, Chinese regulators suspended Ant Group’s planned dual listing in Shanghai and Hong Kong, which was expected to become the world’s largest initial public offering. The Shanghai Stock Exchange cited changes in the financial regulatory environment and concerns that Ant might no longer meet listing requirements.²

Outside China, the decision was widely portrayed as a political attack on private enterprise. But this reading ignores the financial structure beneath Ant’s rapid expansion.

Ant used data collected through Alipay and its wider platform ecosystem to assess borrowers, market credit products and facilitate consumer and small-business loans. Yet much of the underlying money was supplied by partner banks and other financial institutions.

The platform could therefore earn technology and service fees without carrying the same proportion of credit risk as a traditional bank. If borrowers defaulted during an economic downturn, a significant share of the losses could fall on the regulated banking system.

This raised a basic question: was Ant primarily a technology company, or was it performing banking functions while avoiding the capital requirements and regulatory burdens imposed on banks?

Chinese regulators ultimately chose substance over branding. A company does not cease to be a financial institution merely because it describes lending as technological innovation.

The broader issue was not opposition to innovation. It was opposition to a model in which gains could be privatized while risk was shifted toward banks, depositors and the wider financial system.

Ant also represented a second problem: the commercial use of personal data.

Digital platforms collect enormous quantities of information about identity, purchases, location, social connections, health, travel and personal habits. That information can be used to generate credit scores, advertisements, lending decisions and financial products.

The company receives the commercial value. The individual whose life produced the data is rarely compensated.

At the same time, users bear the risk of surveillance, discrimination, data leaks or misuse. The platform profits from the information, while part of the potential cost remains with the public.

Economists describe this kind of imbalance as a negative externality. A factory that pollutes a river keeps the profit from production while passing part of the cost to nearby communities. A digital company can operate in a comparable way when it monetizes personal information without fully bearing the social cost of collecting and controlling it.

China’s Personal Information Protection Law, which took effect in 2021, strengthened requirements governing consent, data processing, sensitive personal information and the responsibilities of large digital platforms.³ The law reflects a broader principle: technological innovation does not give companies unlimited ownership over the lives and behaviour of their users.

This principle matters far beyond Ant Group. In the digital economy, data increasingly functions like labour, land or capital. It is an input into production. Yet the legal and economic rights attached to it remain unsettled.

Who owns personal data? Should individuals be compensated when companies profit from it? How much control should platforms have over information that users cannot realistically avoid producing?

No country has fully answered these questions. But China has shown a willingness to stop companies first and settle the rules before allowing them to become too powerful to regulate.

Markets as Instruments

China did not always possess modern capital markets.

Under the early planned economy, state institutions allocated investment directly. Enterprises did not need to raise capital through public stock exchanges, private equity or venture funds.

Reform and opening changed that system. Private companies emerged, state enterprises became more commercially oriented, and new industries required more flexible forms of financing.

China consequently built stock exchanges, bond markets, venture-capital networks and specialized institutions such as Shanghai’s STAR Market, which was created to improve financing for science and technology companies.⁴

The existence of these institutions does not, by itself, determine the nature of the system.

A stock market is a mechanism. It can finance productive investment, but it can also reward speculation. It can help innovative companies grow, but it can also concentrate wealth and political influence. It can serve industrial development, or it can draw talent and capital away from the real economy.

The relevant question is not whether a country has markets. The question is what those markets are expected to do—and what happens when they cease to perform that role.

China’s position is that finance should support production, innovation and national development. It should not become an autonomous power capable of dictating policy to the state.

The Real Divide

The divide between capitalism and socialism is often reduced to whether private companies, billionaires or stock exchanges exist.

That is too shallow.

China plainly has all three. The deeper issue is whether private wealth can translate itself into unchecked political power.

In many Western economies, large financial and technology companies influence legislation, fund political campaigns, shape public debate and negotiate with governments from positions of enormous strength. Regulators are often expected to bargain with the industries they supervise.

China’s model rests on a different claim: capital may contribute to growth, but it does not possess an independent right to rule.

That power can be applied inconsistently. Regulation can create uncertainty, and state authority is not automatically wise simply because it is strong. But weak government is not neutral either. When the state retreats, private power does not disappear. It fills the space.

China therefore allows finance to operate but reserves the right to define its boundaries.

Markets may help decide where capital is invested. They should not decide what society is for. [My Emphasis Bolded Italics]

Endnotes

[1] State Council of the People’s Republic of China, “China to Transfer State Assets to Social Security Funds,” November 18, 2017, https://english.www.gov.cn/policies/latest_releases/2017/11/18/content_281475941833500.htm.

[2] Shanghai Stock Exchange, “Decision to Suspend the Listing of Ant Group Co., Ltd. on the STAR Market,” November 3, 2020, reproduced in Ant Group, “Announcement—Suspension of Listing,” HKEXnews, https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1103/2020110301888.pdf.

[3] Standing Committee of the National People’s Congress, Personal Information Protection Law of the People’s Republic of China, adopted August 20, 2021, effective November 1, 2021, official Chinese text: https://www.gov.cn/xinwen/2021-08/20/content_5632486.htm.

[4] Shanghai Stock Exchange, “STAR Market,” official English-language portal, https://star.sse.com.cn/star/en/.

As we discovered, the article’s title is misleading since China has stock and bond markets. The main difference is Capital and its influence is heavily regulated and not allowed to go beyond the set boundaries. Capitalists are to remain capitalists and not meddle in China’s political affairs. We do see human failure often enough where some official is caught taking bribes, an offense that can merit the death penalty that proves China’s seriousness on the matter. One possible reasoning is political involvement takes business away from concentrating on what it’s supposed to be doing—innovating, modernizing, opening new markets, etc. China has a massive very well educated political class that’s proven itself very adept at governance, although like all humans it errs occasionally. There’re several instances in US history where to promote the public welfare the federal government needed to intervene in markets, energy production and electrification most prominently during the Great Depression. There’s also what was known as the American System promoted by Federalist then Whig politicians that called for government investment in fundamental infrastructure projects like roads, bridges and canals. (It’s a shame railroads weren’t included at their outset.) The Anti-Communist Crusade was all about the preservation of private ownership versus public ownership of Capital and related assets. It’s easy to see the very strong anti-public bias of the wealthy who fueled the Crusade and its propaganda. And with deregulation government was captured by Neoliberal Dogma where the public domain is seen as something to devour to the point where nothing much is owned by the general public—even your house and car are owned by the bank that provided the credit for that purchase. The Empire currently has 25%+ of its people living with their parents because they can’t afford housing. And those people have no incentive to procreate. In his Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy, published in 2015, Dr, Hudson described where Neoliberalism and adherence to its dogma would lead, and we’re living it now. The nations that rejected the West’s prescription have prospered, which is fundamentally why they’re targeted by economic and/or kinetic warfare. China avoided that by adopting what seem to be rather simple ideas related to the common good that provide the foundation for avoiding societal unrest and raising almost a billion out of poverty. It’s easy to see why the West doesn’t want the Global Majority to emulate the Chinese model of development.

The test for China is to keep private capital closely regulated. Chinese history is filled with tales of landlords exploiting the peasantry while corrupting the local government charged with disciplining them, while more recent examples during Chaing Kai-shek’s rule and what transpired on Taiwan during the dictatorship there remain living memories for many. I’m sure some readers were surprised at China’s view of personal freedom versus corporate designs and the asking of fundamental questions regarding that relationship that certainly aren’t being asked in the West to the same degree. The question being asked by a growing number of people is will we have Socialism or Barbarism and how do we get to the former from the latter.

*
*
*
Like what you’ve been reading at Karlof1’s Substack? Then please consider subscribing and choosing to make a monthly/yearly pledge to enable my efforts in this challenging realm. Thank You!