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Xi Jinping’s stock market populism

China’s Communist Party can’t rule a country in which half the population orders food from restaurants and the other half delivers it. And it can’t keep its credibility unless Chinese families see the Gaokao – the university entrance examination – as a great equalizer of opportunity.

That is the common element in Beijing’s dual shock to tech stocks over the weekend: A requirement by Chinese regulators for food delivery firms to keep drivers’ incomes above the statutory minimum wage, and a sweeping ban against private tutoring services.

All prospective college entrants in China are equal, but some are more equal than others: The median Chinese family spends a full year’s income on private tuition to prepare for the Gaokao, but an affluent family can further improve the odds that its princeling will place into one of the country’s prestige universities.

By the end of 2020, China’s stock market looked remarkably like America’s. A handful of Internet giants dominated equity market returns and capitalization. At their peak valuation in February 2021, the combined market capitalizations of Alibaba and Tencent, China’s two largest public tech companies, had reached $1.3 trillion, equivalent to 13% of the Shanghai Composite Index valuation.