China's reform has reached the bottleneck; while the reform designers hope to open more fields and space to the market, there are very few private enterprises and private capital that can enter such fields and spaces. The reason is that China has a planned market economy that has lasted for a long time with too many plans, while the market economy has too few roles to play, and this was only discovered when the reform process required the role of the market economy. In some areas that require huge capital, such as railways and aviation, there are very limited private enterprises that have the strength to enter and compete with state-owned enterprises. Indeed, the private economy only has a lesser role to play in China.
Can crowdfunding, public offerings, and funds play a major role in the market economy?
Although these concepts are the most popular ones in recent times, but are not new. In the late 1990s during the internet stock booms, we called such boom as the "new economy" or the "virtual economy". At that time, everyone thought that the new economy was unclear and what it could achieve. Therefore, on the one hand, it was the problem of what it could do, and on the other hand, the problem lies in what things appear to be. Everything became clear later, and the "new economy" had already vanished. Therefore, these new economies, apart from debt, left no traces of what benefits and possible harms they could bring.
China's economic growth, especially industrial development, requires investment. When the economic growth rate drops, the government will become anxious and the interest rates and taxes would be reduced, even local bonds can be mortgaged. Various measures have been introduced, but they can only give little practical economic benefits. On the contrary, there are many cases of strengthening the original defects and problems. This is mainly because any quantitative easing under the conditions that China's economic structural defects have not been resolved is an error amplification of defects. The increase in debt has also increased, and the excess of overcapacity may be only a figure of economic growth. Taking interest rate cuts as an example, the credit resources that the private economy could have received are very few. Therefore, interest rate cuts only benefit state-owned enterprises and this would further create problems for future market reforms. The situation of real estate is also similar; initially, the real estate in many cities has already been overdeveloped, and one can only imagine the outcome of the implementation of easing policies such as interest rate cuts.
In the current difficult situation, the solution proposed by Anbound is to introduce the consortium system to achieve capital accumulation and to stimulate economic growth.
For a long time, the consortia have been labeled with certain ideological characteristics in China. According to the general definition, a consortium is a monopoly group controlled by a handful of the financial oligarchy, usually including a few large banks, insurance companies and a large number of industrial and mining, commercial and transportation enterprises; such group is also known as a financial capital group. It is rather unpleasant to be considered to be an oligarch or a monopoly of profits. In addition, the consortium foundation does not have a clear position in Chinese laws. Generally, a consortium refers to a legal person formed by the laws to empower civil rights for a specific purpose collection. Some even said that according to the Chinese laws, a foundation in itself is also a consortium.
The consortium has, in fact, a long history with its earliest form existed during the ancient Roman period. In modern society, the Rockefeller in the United States and the consortiums in Japan and South Korea are renowned enough. This is especially true in Japan; in addition to six consortia of Mitsubishi, Sumitomo, Mitsui, Fujitsu, Sanwa, and Dai-Ichi Kangyo Bank, when it comes to specific large-scale projects, variously specialized consortia will be formed to realize and implement the projects. Therefore, the consortium is actually an important form of industrial capital agglomeration, which deserves our serious consideration.
Compared with other corporate forms, the consortium has three major characteristics. First, it has a stronger strength. Under the influence of laws and policies, the industrial sectors controlled by the consortium encompass heavy, light, traditional and emerging industries, as well as production and circulation sectors. Second, there is a stronger control. The consortia's capital and industrial ties far exceed those of ordinary financial institutions. Third, there are family and local characteristics. Each consortium penetrates and integrates with each other; some consortiums can be controlled by a single family or by several families, which can promote the further socialization of consortium capital.
Judging from China's current situation, if there is an average of ten consortia in each province, and the policy delineates the bottom line of the consortium to be at RMB 10 billion, China's "consortium economy" may consolidate RMB 3 trillion of capital in a short period of time. Once such a consortium and capital strength emerge in the market economy, the scale of the industries that can operate will be greatly enhanced, and the competitiveness will be greatly improved. What is especially important is that the government has also pointed out a common development for the future of the family businesses, and the development path of the succession of the families has resolved the urgent problem the businesses being succeeded by the second-generation.
Final analysis conclusion:
Looking at the macro environment, the major challenge is transiting towards rational industrial investment from the nationwide financial craze.It will not be ideal for a big country like China that everyone should involve in finance, someone has to engage in the industries. Therefore, it is a good choice to encourage a group of consortia to develop, and give them preferential policies and credit support, and support their investment in industrial investments.
