Article Type : Research Article
Authors : Pachankis Y
Keywords : Anti-trust; Currency; Dumping; Financial crime; International settlement; Nash equilibrium
The research outlines the sovereign-fund based Ponzi scheme of the People’s Republic of China (PRC) rent-seeking powers. It analyzes into the evidence from the internet economy in PRC with Alibaba and the failed Nasdaq Initial Public Offering politics of Ant Group. Five angles have been adopted to describe the phenomena with justification from evidence, and the research has noticed the involvement of the Chinese military in the power competition in the rent-seeking financial realm with oligarchic characteristics. The research concludes that Ponzi schemes do not necessarily have to not involve product delivery, and the element of the time value of currencies is more fundamental to it in the process of truth emergence.
Albeit the People’s Liberation Army (PLA) background
of the founder of Huawei Zhengfei Ren has led to the suspicion of the company’s
ties with the Chinese dictatorship among the Trade War, less known in the
international and global community have been the red capitals and shareholders
behind the Chinese internet giants such as Tencent and Alibaba (AliPay). The
research focuses on Alibaba (AliPay) and its affiliated sectors from the market
and stock perspective. Early researches on online purchasing mainly criticized
such models’ impacts on the economy such as real estate and people’s physical
mobilities in retail purchases. The research takes another perspective, among
the macroeconomic power struggles, in the nature of finance and stock market in
the problem of definition on the goods sold on the internet market. From the
currency perspective, online purchases from the buyer’s market genuinely
constitute of futures purchase, yet from the guarantor involvement in monetary
custody on the goods sold from manufacturers’ ready-made products, the delivery
of goods are de facto spot trading. It may be less influence to the costumers
quantitatively, but in a buyer’s market from the economies of agglomeration on
the internet, the time value of currencies are quantitatively accumulated in
the “middle-man”. The Western media have captured the power political reasons
in halting one of Alibaba’s sectorial chains Ant Group’s initial public
offering (IPO) in Nasdaq, but not the deeper economics and power competition
reasoning’s behind the phenomenon [1]. The research offers a qualitative analysis
from the special framework of the Chinese communist-labelled economy, and may
provide some hindsight, if not hurdles of halftime, to the decade’s economic
and financial problems. In summarizing my research in the literature, my
methodological overview outlines the untold reasons for Alibaba’s myths of
commercial success behind Jack Ma’s media appearances first, which is also the
main reason for Ant Group’s failure in Nasdaq IPO now. The methods are arranged
to five subsections: 1) a case analysis
on the model of currency chains in terms of real economy with Taobao.com; 2)
the inferential and analytic perspective on the twitched currency value of the
commercial operations; 3) structural incentive analyses on the stakeholders’
dumping strategy formation under the influence; 4) mass market customer
behavioral changes under the influence and the influence from Purchasing Power
Parity (PPP); and 5) the financial power base coopetition between the People's
Bank of China (PBOC) and the internet giants.
Alibaba’s key geopolitical stakeholders are apparent
in the maritime routes. With geopolitical neighbours Japan, Singapore, and
Russia that have seaports, the involvement of the Silicon Valley furthered its
global reach, such as the Goldman Sachs Group and Bank Of America’s financial
backup [2,3]. New York Times Chinese reported the company’s then-top-officials’
direct family members’ holdings in the company, which includes the
then-prime-minister of People’s Republic of China (PRC) Wen, Jiabao, and others
from the military and financial sectors [4]. Its financial involvement in the
offshore realm and PRC’s sovereign fund determined Alibaba’s inevitable success
in the global economy [4]. The research started on the question of why on PRC’s
macro-money over-issuance significantly disproportional to the industrial
indicators in the World Bank data up until the year 2017. After the structural
framework analyses, the piece delves into the real economic analyses with one
of the prominent cases [5,6].
Currency categories in
online purchase
The business model of the Alibaba Groups mainly deals
with the business-to-business (B2B) and business-to-costumer (B2C) models. The
business model concept would have been unproblematic with the minor details of
time variations if not for the financial mechanism of the middleman custodies.
With the latter, the customers, either in the B2B or B2C model, only see the
photos and text descriptions on the products for customer decisions, and the
payments are not directly made to the businesses. Even though to the customers,
the middleman claims the transactions are spot goods in nature, the de facto
customer decision mechanism and financial arrangements are futures in nature.
The methods of delivery from the seller side of businesses are also constituted
of futures sales. The sellers do not receive the money for their products being
delivered until the customers have confirmed the deliveries. This arrangement
borderlines between the banking mechanism of mortgage for customer reach in
company laws in PRC and the stock market mechanism of company evaluation. The
basis in real economic terms have conceptually shaped the business model of the
middleman to be a financial sector entity with its core advantage in market
monopoly without necessities in physical goods development. From the
perspective in the sectorial finance, the quantitative basis of the said
business model is an entity in the service sector while having control of
quantitative time values of cash flows no different from a bank. Such business
model is apparently in competition with the PBOC and against normative laws
governing corporate operations, let alone in a country with strict import and
export controls. Therefore, the existence of such a business model is impossible
without substantial rent seeking powers. The cash flow differentiation
mechanism of time values is illustrated in (Figure 1).
Hedged derivatives
The game theoretical model of the PBOC-Alibaba coopetition depends on the levels of players in the dictatorial regime’s hierarchy for rent-seeking. In a cooperative model, the price market can be effectively controlled, while in a competition model, the vie for power depends on the relative advantage. From the observation on the Chinese banking’s double-entry bookkeeping method, the de facto shaping of accounting for derivatives with Alibaba in macro money, and the oligarchic, if not monopolistic, order of the currency market in PRC representatively by Shanghai CFETS-NEX International Money Broking, Table 1 is summarized on the static competition model between the PBOC and Alibaba. From Table 1 it can be seen that with the strict controls on the currency market by the PRC regime and Nasdaq’s de facto inheritance of index methodology from the Bretton-Woods System, Alibaba’s Nasdaq IPO sought to swap holdings from liquidity in order to preserve and appreciate the fiat money values of Renminbi (RMB) (Table 1) [6]. If there were no conflict of interests between the centralized banking of PRC and Alibaba, the deal would have been a win-win situation, even though it could have undermined PBOC’s power over the real economic market. The conflict of interests was reflected in the dictatorial changes since Xi, Jinping took power in 2013. Apart from the risk models’ conflict of interests in bank runs, Xi’s power ambition in total control of the regime and Jiang, Zemin’s family’s lingering controls and influences on the military, financial economy, PRC state department, etc. could have been the main reason. A summary of the competition model is seen in (Figure 2). The objectively positive sum model for country economy is negative sum for the rent-seeking interests of the big families with power. Controls over Shanghai CFETS-NEX International Money Broking have always been the interests of the Jiang family and the succeeding Communist Party of China (CPC) leadership, while PBOC’s asset evaluation is critical for Xi’s rent-seeking power by over-issuing macro money with the Belt Road Initiative [5]. Like any Ponzi scheme, the crumble starts only from the late-comers and it is the same with the Ponzi scheme on a sovereign level [6]. The CPC’s bureaucratic model on economic controls has never exceeded from the supply side hijacking strategy for its partisan ideology of materialism, and the Jiang and Wen families’ combined interests would have cashed out PBOC with the geopolitics and the offshore realm against PBOC’s gold reserves [7]. Yet in 2013 when Xi initially took power, I was informed that China Cultural Media Group, Co. Ltd., Dong, Ping was summoned by relevant people and subsequently had to sell the company to Jack Ma, currently becoming Alibaba Pictures Group Limited. The information came from Dong’s daughter, a personal friend and undergraduate classmate who was worried about her father during his absence, five years before the formal establishment of the National Supervisory Commission and China Banking and Insurance Regulatory Commission (CBIRC) under Xi, implying the estimated timeframe of Xi’s realization. The change of attitudes and actions towards Alibaba since Xi took power reflects a change in realpolitik interest analysis in macroeconomic terms with his “Belt Road Initiative” in 2013. Albeit “Belt Road Initiative” in theory adds up to the capitalization interests of Xi’s power with RMB, the existence of Alibaba’s financial power without physically capitalizable assets in a custody model equivalent to PBOC can cash out Xi’s realpolitik power if Xi cannot exercise effective control over Shanghai CFETS-NEX International Money Broking, which can also substantially undermine Xi’s authority by the decrease of PPP of RMB and increase in RMB’s currency evaluation in exchange rates [7].
Figure
1:
Alibaba’s Cashflow by Business Model.
Figure 2: An Objective Model of Alibaba-PBOC Coopetition.
The threat of Alibaba to both the formative power and
rent-seeking opportunities of Xi’s could have been the reason behind the change
of attitudes and actions in the necessities of establishing CBIRC for
macroeconomic totalitarianism, followed by the assignment of new official
representatives in Alibaba and other companies in 2019 [8]. The arrest of
Caihou Xu, Jiang’s power surrogacy in the PLA, in 2014 implies that Xi was not
satisfied only being second if not third to the sum of interests in the
rent-seeking group. This could be contributed to the fact that in order to
sustain the quantity of monetary custody in Alibaba seen in Figure 2, there is
an inevitable result of price war and dumping strategy from the downstream of
the interest base chain, which could substantially undermine Xi’s Belt Road
Initiative’s power, especially the offshore involvement in military supplies.
Since the cinematic industry in PRC is both a propaganda tool for “United
Front” and a money laundering tool for military transactions, Alibaba’s
takeover of China Cultural Media Group, Co. Ltd. could have only implied the
initial defense arrangements of the Jiang family [9]. Jintao Hu’s initial
voluntary submission of the military power over to Xi upon the latter’s first
term and subsequent arrest of Caihou Xu reveals the military-power-driven
motivations in the PRC rent-seeking interest chains, with the macro money indications
followed in the reversion of relative advantage between Alibaba and PBOC.
Degree of freedom field
research
There is a unique thing about using sovereign as Ponzi
scheme: the belief in power over legitimacy. Hardly anyone questions the nature
and use of fiat money under the abstraction of power, and sovereign debt run
always seems to be able to be transferred into geopolitical strategies.
Ideological control becomes important for the element of tulip prices
expectations. Thereby, confounding the buyer’s market’s perception of spot
goods with de facto futures market operations is key to the Ponzi scheme’s
sustainable development. As long as consumption exists with the fiat money, and
as long as supply exists, it does not matter if the tulip is real fresh flower
or is made up of plastic. The diversity of goods was critical in the collapse
of the Soviet Union, and the globalization of the fiat money with the
International Monetary Fund (IMF) eliminated the necessity [6-10]. The
institutional design has been there since the founding of the Communist regime
with the import / export controls, international settlement, and quantitative
restrictions. Market incrementalism further gave room for currency
manipulations in expectations with the nature of futures in international
settlement [11]. (Figure 3) illustrates the bookkeeping rational underlying the
necessities for CBIRC for the sustainability of the Ponzi scheme, which
determines the incentives for manufacturers in price wars and dumping. There is
a difference to the room for manipulation before and after the currency
digitization trends without and with a backend design. Albeit the internet
control methods of the PRC regime in the spirit of laws violate fundamental
human rights, the motivations, apart from the motivation in ideology control
sphere, are driven by the interests in effective currency control [12]. During
my research, I witnessed and was victimized by obtaining evidence on the said
motivational operations, cashing in credits to debit by satellite-operated
internet fraud, at the intersecting moment between the Trade War and COVID-19
pandemic when the global evaluation of Chinese goods was going down, which
indirectly proves that the CPC high officials could have known about COVID-19
months before the whistle-blower’s signals and fears of the information and
World Health Organization’s issuance of global public health emergency that can
slow down global economy [13,14].
Figure 3: Degrees of Freedom for the Ponzi scheme.
Consumer behaviour
changes — lipstick effect
Under the rent-seeking influences seen in Figure 2 and
the cashflow seen in Figure 1, the buyers’ currency holdings are determined to
shrink and a seller’s market cannot be shaped — this, however, will not be
conducted in the market mechanisms for the disrupted macro money indicators and
flows. The buyers naturally will behave in a buyer’s market expectation,
especially that Alibaba and other internet “retailing” need to maintain the
misperception to hold the buyer base in the platforms. The sellers will be
incentivized to expect a seller’s market for the middleman’s incentive in
business profits from advertising and financial advantages from supplies. In
time with the macro economy and sustained mismatched expectations in micro economy,
lipstick effect is bound to take toll with stagflation. The effects are shaped
by the competition presumptions of the market, and currently the more and more
complex designs in the Taobao affiliated applications and other Chinese
internet giants are encouraging the phenomenon of lipstick effect by giving
money to customers. After Jack Ma’s mass import efforts before retirement.
The research falsifies PRC as an emerging market, and
the “Made in China 2025” initiative was only Xi’s attempt in preventing the
Ponzi scheme from crumbling down. With the tired finance in macro money
issuance, the internet giants in PRC have been attempting to keep the M2 pool
with the cash rewards to customers. The behaviours of the internet platforms
imply their collective power over the offshore realm and interests for RMB
appreciation. This will further incentivize PRC’s global purchase behaviours.
Even without rent-seeking, the sovereign Ponzi scheme and the internet
companies’ interests have been aligned. Traditional monetary issuance traces
and manipulations needed physical movements of notes and strict adherence to
inter-banking regulations. Digital currency doesn’t necessarily have to be
cryptocurrency, and the issuance of digital RMB can extend the sphere of the
Ponzi scheme more effectively with the internet companies’ current operational
incentives. Donald Trump’s previous policies of “Made in America” and “Make
America Great Again” would exactly satisfy the expansion necessities of the
Ponzi cycle sphere for PRC and CPC’s responsive strategies. Export controls are
only focused on high-end products but not the commodity market and mass market.
Microeconomic solutions to the legitimacy issues of fiat money can never
resolve the macroeconomic issues resulted from political legitimacy problems.
The global community’s room for foreign policies are limited with PRC’s
Permanent Five member status in the United Nations multilaterally, and the
military expansionism developments marginally in bilateral contexts. In a pandemic
and post-pandemic context, reshuffling and redefinition of the PLA is an
opportunity in democratization. As economic justice cannot be achieved without
democratization, which is not equivalent to the logic that democratization
ensures economic justice, the only best way to deconstruct a dictatorial order
is to deconstruct its militant organization. Nash equilibrium for the
rent-seeking power competition cannot be reached without the involvement of
military power, and the military’s economic interests have been driving the
power competition. In the shaping of the dumping strategies, I have also
observed that in the oligarchic order in telecommunication in PRC, dumping also
exists on Taobao.com. It is inferred that these power come from the PLA for financial
interests from the military backends behind the oligarchic telecommunication
industry.
I have perceived deliberative pricing to be the key
solution to the dumping strategies with consequences in the currency and
macro-monetary realm, and currently delivering the message through performance
art. The fake brand issues that have been going on with the Chinese internet
giants are only a phenomenon of the dumping strategies in selling low quality
products for higher prices under the dumping environment. Accounting is the
only path to the physical evidence. In the media outlet of the U.S.-China economic
and financial working groups decided on September 22, 2023 between PBOC and
Treasury Secretary Janet Yellen, the Chinese outlet specifically addressed the
IMF’s evaluation of global growth, and not a single word on the World Bank,
with the Chinese Commerce Minister Wang, Wentao saying to “seek solutions on
trade and investment issues” [15,16]. This may explain the fact that current,
the Chinese banks have mandated the bank counters not to offer funds pooling
services to the individual customers, which in theory are in the interests of
the PBOC, and remain the service only to the companies and the Chinese internet
giants. This with the IMF statistical incorrectness can be indicative to the
cooperation aspect of the power competition between the PBOC and the oligarchic
internet equivalent to the power interdependence theory in international
relations. The delivery costs in the PRC internet purchasing are substantially
low, and the field research has also noticed that the Alibaba chain has been
involved in the further negotiation prices between the sellers and the delivery
companies, based on the fact that when the buys’ rights are violated, taobao.
Com’s rules are that the buyers need to pay for the delivery costs first and
the sellers will compensate the costs later. The customization of this rule is
predicted to later benefit the interests currently being violated of the
delivery service side of the physical associations on the double-sided
duplicate contract, and prolonging the quantities and time of M2 held by the
middleman controlling the contracts. The PLA’s possible current involvement in
the dumping environment is not indicative enough in its possible future roles,
but indicative enough that the PLA is not a winner in the interests. For the
Ponzi scheme based on the sovereign controls in the stead of investor
relations, realpolitik considerations are not only the basis, but also the
delivery for the dumping strategies for the oligarchies’ non-productive
operations. Logistics and realpolitik are homogenous in the designed Ponzi and
dictatorial chain. With the dictatorial power in the bureaucratic and
hierarchical order of military based on death for any defiance, the combined
control on social mobility and autonomous currency flows are the sources for obstructing
any attempts in accountant evaluation on the real economic performances. With
the civil-military fusion mandates of the PRC and PLA, the strengthened
totalitarianism only evidences that without a military based on appropriate
missions and autonomy, the civil society and the economic and financial orders
cannot be truly restored, with the two sharing substantially the same
situation. The autonomous first response to the COVID-19 pandemic by part of
the PLA implies that there is room for the PLA’s independence [13].
It is noticeable that the degrees of freedom seen in
Figure 3 is interdependent with the tax structures adopted worldwide on both
the supply and demand sides. The narratives of global economic growth are not
adequately reflected in the lowering of the Gini Index and the Value-Added Tax
(VAT) is not out of the causal chain. Albeit employee salaries are deducted
before calculating VAT in company financial accounting, double-taxing the
demand side has still been the case with sales tax before gross revenues. This
further incentivizes the dumping strategies from the supply side considering
the consumers’ actual purchasing power after tax and the tax-enclosed market
places. The financial model of Ant Group and the tax models together contribute
to the Nash equilibrium of the Chinese and global economy with the digitization
and internet trends, and PRC is only one of the most prominent case.
Another less obvious beneficiary from the macromoney
schemes is the oligarchic telecommunication industry in PRC. The military civil
fusion strategies of PRC aim to obfuscate militant goals in the global market
with civil economy, and to disguise its operations in violation of the Geneva
Conventions. The latter has been a tradition of the CPC in dealing with economy
and business matters, and rent-seeking is only an understatement in presenting
the scientific evidences.
The Ponzi scheme does not necessarily have to not
involve product delivery, and the element of the time value of currencies is
more fundamental to it. To mirror the economic and financial sovereign based
Ponzi scheme, I have initiated a performance art project with the internet and
cryptocurrency apparatus, in order to balance between the rationale and the
perceptions in the societal environment. Scan the barcode below for more
information and participation.
I thank my friend who wishes to remain anonymous for
the collaboration in the performance art project more than a decade after our
first collaboration in my first video art project on non-proliferation.
Gratitudes to the curator Qing Sonnenberg encouraging my continued art creation
by invitations to his exhibition projects, even though it is still undergoing
academic debates whether this specific project is suitable to be included in
the ongoing “Immersive" - Live Art Tour 8 in Grace Exhibition Space in New
York after my failed personal appearance [17]. Last but not least, I thank my
uncle, whose name I’d rather not mentioned here for discretion, whose leisure music
playing of the theme song from the North Korean film “The Flower Girl” (1972)
inspired the humour out of the relevant works. The vacation in their retirement
home after my last grandparent’s decease was an immense healing experience.
The research and the performance art are not funded by
any persons or entities from the public and private sectors.
No conflict of interests is perceived by the author,
except for the current event of the U.S.-China finance and economy working group
operations.
Qualitative data from the surveys of the field
research are available upon request to the corresponding author.