But this points to a third, more worrying, characteristic of such businesses: theirvulnerability. Chinese regulation of its private sector is often referred to as one eye open,one eye shut. It is a wonderfully flexible system, but without a consistent rule of law,companies are prey to the predilections of bureaucrats. A crackdown could come at any time. Itis also hard for them to mature into more permanent structures.
Cultivate it, dont cut it
All this has big implications for China itself and for the wider world. The legal limbo createsample scope for abuse: limited regard for labour laws, for example, encourages exploitationof workers.
Rampant free enterprise also lives uncomfortably alongside the countrys official ideology. Sofar, China has managed this rather well. But over time, the contradictions between anarchicopportunism and state direction, both vital to Chinas rise, will surely result in greaterfriction.Party conservatives will be tempted to hack away at bamboo capitalism.
It would be much better if they tried instead to provide the entrepreneurs with a proper legalframework. Many entrepreneurs understandably fear such scrutiny: they hate standing out,lest their operations become the focus of an investigation. But without a solid legal basis, it is very hard to create great enterprises and brands.
The legal uncertainty pushes capital-raising into the shadows, too. The result is a fantasticallysupple system of financing, but a very costly one. Collateral is suspect and the state-controlled financial system does not reward loan officers for assuming the risks that comewith non-statecontrolled companies. Instead, money often comes from unofficial sources, atgreat cost.
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