Here they are, the seeds of the Chinese decline: the princelings, sons and daughters of the Communist Party senior officials. They are creating a new sort of financial system, definitely unsustainable. According to a long analysis on The Financial Times, the princelings dominate the fundamental private equity sector, encouraged – of course – by the government. In the financial industry, said the head of a foreign bank in Beijing: “foreigners and other skilled Chinese are being shut out by a string of princelings and other very well-connected people trying to dominate the market”.

This is an important development. It allows to better understand this country. The Chinese economic system is generally defined as a state-led model of capitalism. This is not correct: it is a single party-led model of capitalism. A common idea about autocratic states born in the XX century, tells that in communist, Nazis, fascist political systems the powers of the state grow indefinitely. However, according Michel Foucault, the French philosopher and historian of ideas, in the Nazis Germany the state is in decline: “The essentials of the authority fell upon the party, to the detriment of the state”. The same can be said about the communist regime in Soviet Union, or in China – where the National People’s Congress, the Parliament, meets for about two weeks each year – and, to a lesser extent, about the Italian fascism.

Which is the difference? In a (ideal type of) state, the relationship between officials is formal, in a party it is inevitably shaped by personal power. A state-led economy can therefore be slowed down by bureaucracy, a single party-led economy can become an extreme form of ‘relationship capitalism’, that hamper growth even when it is pro-business (but anti-competitive) as in Europe. The main problem, for developing countries, is to overcome the limits of their oligarchic or state-led economic models. In the future China will possibly have an oligarchic, party-led, relationship economic system. It could get stuck.