this post was submitted on 29 Oct 2024
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Didn’t the internet essentially make the Concord obsolete? Its main purpose was flying businessmen from New York to London/Paris so they could finish major transactions before the markets closed.
Tickets were also 20,000 dollars in 1985 money, so even if China makes a plane with a modern ticket price of 10,000-15,000… who exactly is the customer base for this?
It's all going to depend on what the ticket prices will actually be. I'm going to go out on a limb and assume the company developing these planes has done the basic math to figure out whether it would be remotely profitable or not. It's been many decades since the Concord was conceived, and it's entirely possible that the operating costs for the new approach are much lower.
What worries me is that those profit calculations don’t mean that Chinese firms aren’t just as susceptible as western firms to speculative investing and venture capital interests.
The role of the market in China is very different from the west. SOEs control the commanding heights of the economy. These pillars of industry, spanning banking, energy, and telecommunications, form the bedrock of the economic system, accounting for roughly a third of its GDP. While private companies and a vibrant stock market exist, they operate under a socialist framework, guided by the principles laid out by Chen Yun. Chen advocated for a “birdcage economy,” where the market acts as a bird, free to fly within the confines of a cage representing the overall economic plan.
His approach, adopted in the early 1980s, allowed for use of market forces for efficient allocation of resources, while the state maintained ultimate control over the direction and goals of economic development. The state, acting as the planner, sets the overall goals and priorities, while the market, acting as the allocator, determines the most efficient way to achieve those goals.
While Chinese stock market plays a key role in raising capital for companies to invest in productive activities, it operates under strict regulations to curb speculation and short-term profit-making, ensuring its primary function as a tool for economic development rather than a platform for unchecked wealth accumulation.
Concrete examples of these regulations include restrictions on margin trading, limits on short selling, and measures to prevent insider trading. When companies prioritize profit maximization over social value, regulators can intervene with corrective action. The recent dismantling of the Alibaba Group into six separate business units serves as a clear example of such action, taken to curb the abuse of monopolistic power among the country’s tech giants. In this way, the state is able to exercise oversight and regulation to ensure that the markets serve the broader interests of society.
Private companies, while encouraged to innovate and compete, are also expected to align their activities with broader state goals. This entails contributing to social welfare programs, investing in research and development, and adhering to environmental regulations. In essence, private enterprise in China functions within a framework that prioritizes the collective good and long-term sustainability over the unbridled pursuit of profit and short term growth.
I know all this. Nothing you mentioned prevents Chinese companies from making bad or speculative investments. Regulatory authorities are not going to step in just because one company invested into a bunk project that went nowhere. Hundreds of companies go bankrupt in China every week, and hundreds more are formed, as it would be a bureaucratic nightmare for the central economic office to micromanage the investments of individual firms. Speculative venture capital is also not "gaming the system" as insider trading and short selling are, and the entire point is that there is a high risk to those investments.
I don't see how you describing China's mixed command economy is at all relevant to a small startup firm taking a risk on a single aircraft frame. A bird in a cage can still choke itself on a poor investment and die.
Sure, and there's nothing wrong with any of that. The system allows for flexibility that's necessary for innovation. Companies trying speculative things is how technology progresses. Some ideas will be good, others will not. Meanwhile, the government nudges overall development towards particular goals that are seen as socially useful.
If this particular company is making a product that's not viable then they will die, and that's perfectly fine. If their idea works then it will produce something useful that will advance the state of aeronautics in China. Either way something useful will be learned in the process.