China is much freer and more open than you think!

By Boss Gu, rewritten in English by Mr. Y

Hello everyone, I am boss Gu.

I'm not an intellectual hiding in a study. I am a businessman. It has been over twenty years since I started my business in 2004. I was 29 at the time. I call myself boss Gu because I have been really a boss for many years.

I have written millions of words in three years, most of which are criticisms of China’s lack of marketization currently. But today, I want to talk about my understanding of the Chinese market based on my own experience as a businessman.

My understanding of China does not come from the economic theory that I am passionate about now, but from my experience in doing business for many years. Most of the public intellectuals haven’t entered different corners of Chinese society. Their criticisms are based solely on various negative news.

And I have been to every province in China except Tibet. I have visited more than 300 cities for business activities, and I have worked in all four top-tier cities of China.

I don't have a high degree of education, and I was a poor student. I just went to an average college. I have never worked in any large company. My management ability is limited, and I am not very diligent either. Therefore, for many years, my company has been a small and medium-sized enterprise, and most of the people I have dealt with were also small and medium-sized bosses.

Years of business experience allow me to tell from just one sentence whether the other party is trustworthy and whether they are playing some tricks. Because in the circle of small and medium-sized enterprises, risks are everywhere. The variety of risks reflects another characteristic of the Chinese market, that is, for a long time, Chinese market in many fields has been the laissez-faire advocated by the Austrian School.

My main business is a consulting company, and I have served various businesses.

One of the major categories is medical beauty companies. This type of business originated from several friends of mine. They started with a few people running the business in an office and developed into a medical beauty giant with more than a dozen hospitals under its umbrella. I also became their advisor.

Figure 1. Plastic surgery in China; a public-domain photograph from Pixabay.com

In this area which used to be an area where frauds were rampant, anything could happen. I have participated in many conferences in the industry, and there were many companies with high time preference (pursuing short-term profits).

They sold all kinds of goods in the market at will, set prices at will, and charged the price at will, no one cared.

I even witnessed a negotiation between a company and a supplier. They were planning to launch a gold wire beauty treatment, which was to implant a thin metal thread into the face to prevent facial sagging, because it was very popular at the time. The owner of this company was just a high school graduate, while the supplier was the boss of a hardware factory who graduated from middle school. Two people who knew nothing about medical cosmetology were discussing how to make a gold wire beauty product that would be implanted into the human face, wasn't this ridiculous?

Because at that time, a few medical metal wires that were even not gold wires could be sold for tens of thousands to hundreds of thousands RMB. Products like this were attracting investment in various five-star hotels and attracting customers in various beauty salons across the country.

In the entire Beauty profession market, there was no market supervision, no tax, and no regulation. I didn't know if this boss made it or not at the end, what I do knew was that in one case, a woman had inflammation after having gold wire implanted, and she had to uncover her entire face and have the wires picked out one by one.

Today, I still have many friends working in this industry. Many people said that they had washed their hands and gone ashore. However, more people still argued that it was because of the implementation of regulations; in fact, the statement was not completely correct.

I have participated in countless meetings where bosses made business decisions. As a consultant, I have noticed that the time preference of bosses was getting lower day by day.

Most of them came from poor backgrounds. When they entered the market, they only thought about how to make money quickly. But after they had a certain income, they began to think about how to make their income sustainable and stable.

Most bosses would conclude that in order to achieve long-term profitability and stability, they must win the reputation among customers. My friends started to build medical beauty hospitals, and their adventurous spirit was much stronger than most people.

With only 2 million RMB on hand, and without any credit loans or investments, he dared to invest in building a hospital with a total investment of 10 to 20 million RMB, making money while attracting investment.

In the early days, doctors were not skilled enough, and there were medical accidents from time to time. Once, the customer had a high fever for dozens of days after surgery. The boss accompanied the patient in person. Finally, the boss spent 5 million RMB to treat this patient but only charged 300K for the initial cosmetic surgery. The bosses wished to pay for the high medical bills even if then they could not afford the salary of their employees, just to make the customer speak good words of them.

This was how they worked in the market, and the result was exactly what they expected. After the customer recovered, she brought them millions of RMB into business.

Now their team of doctors has even become the most professional plastic surgeons in top-tier cities. One year, their doctor saved a patient during surgery and even received a commendation from the local health authority, which showed how superb their doctor's medical skills were.

The doctors the bosses hired had a monthly income of up to 200 K to 300 K RMB, and they pursued quality and reputation. I have visited the offices of at least thirty beauty hospital bosses, and the topics discussed were similar: first, how to increase revenue and make customers spend money; second, how to maintain quality without causing trouble; third, how to maintain reputation and let customers recommend you.

When I talked about this experience, I meant that in a free market, chaos would eventually be replaced by order. Market participants adjusted themselves not under the pressure of supervision, but because they wanted to pursue long-term and greater profits. Catering to consumers was then necessary.

Competition in this industry is extremely fierce now. My boss friends have opened more than a dozen hospitals, many of which are losing money, and have even closed four or five hospitals. However, the hospital with the best doctors and the best service quality still has very good profits.

I have dealt with many companies in the Pearl River Delta. For a long time, small and medium-sized enterprises did not pay much tax. They just used private accounts to receive payments.

Figure 2. A bustling street market on Fa Yuen Street, Mong Kok, Kowloon, Hong Kong, China. Each city in China has street market like this, and each street consists of numerous SME (Small and Medium Enterprise); these streets are usually still crowded late at night.

In some industrial chains, such as the furniture industry in Shunde (Note: the second largest city in the Pearl River Delta), many products did not have a single tax stamp from the raw materials to the customer terminal.

This was not a single industry, but many industries, and many companies, from upstream to downstream, did not issue a single tax invoice. All industry transactions were private transfers.

Milei said that the tax was robbery. From the perspective of many small and medium-sized enterprises in China, they had not paid any taxes in the past 20 years or so. I know a lot of self-employed business owners because I once served as the CEO of a US listed company in China and planned to import an American women's health product into China.

In order to establish stable sales channels, this listed company wanted to acquire beauty salons with stable customer bases in first- and second-tier cities in China.

After I sent business personnel to convene hundreds of beauty salon owners with a monthly turnover of more than half million RMB in the Yangtze Delta to hold a promotion meeting, one of my American colleagues was surprised to find out that the owners of these beauty salons had never paid taxes!

So much so that we even weren’t sure whether their turnover was true or false. In the US, which has extremely strict taxation, it was unimaginable that this kind of thing would ever happen. He asked me why there was no tax in China?

I told him that it’s not that there was no tax, but a little bit. They just needed to give the local tax department a small amount of money. Nobody cared about their specific turnover and how much tax they should pay according to the tax law.

When he learned more about their business, he was even more surprised because all the products in these beauty salons never had any so-called government approval or industry certificates.

What he asked next really surprised me then: "does China have no government? There are so many regulations in the US, how could you ignore them?"

This was in 2008, and I had not yet known Austrian theory. My answer was that China was not as standardized and civilized as the US.

I still clearly remember that this American colleague named Chris, who was a musician and mountaineer. We once had a New Year’s Eve carnival at the Shangri-La Hotel in Shenzhen. His passionate performance was something I will never forget.

Together with him, I received investigators from the U.S. Securities and Exchange Commission (SEC). The final assessment was that it was unimaginable to merge these irregularly operated beauty salons into a listed US company. After the project ended, I returned to my own business.

Figure 3. The US has an extremely strict while complex tax system (https://www.law.nyu.edu/news/SCHENK_NPR)

I was in Guangzhou in 2002, and ten years later, I returned to Guangzhou to start a business alone.

For me, opening a company was very simple at that time. I just rented an office, paid an agency 1,000 RMB to handle company procedures, bought a few computers, registered an account on a recruitment website and recruited a few people, and then started business.

Except small cities, in first- and second-tier cities, I never met even a single public servant. Because my business was too small, no one cared about me.

A peer friend of mine has a consulting company in Shenzhen that has been in business for more than 20 years. He has never seen a public official come to his company and has never had to deal with any public servant. No one paid attention to him.

When asked how to file taxes, he said he didn't know and that an external company handled it for him. Because the tax amount was extremely low, it was not a matter of concern to him at all. Compared with the tax, he always got angry at the employees for forgetting to turn off the air conditioner because the electricity bill was even higher.

My current company also outsources accounting, which costs 200 RMB a month; the client of my company is the SME owners.

In the boss circle, for a long time everyone talked about what someone did and made a fortune, or was there any opportunity in a certain field? Most of the SME owners have no official connections or resources, so they just checked various market signals every day to analyze business opportunities.

You can hardly heard the voice that taxes were too high, and regulations were too strict.

However, the year before last year (2021), an old friend of mine, a cosmetics owner who started out as a stall owner in Guangzhou Beauty City and later built a 50,000 m2 factory, called me and told me that he was moving out of Guangzhou.

Due to environmental protection regulations, he moved to a place in Guizhou, a remote province in China. A year later, he was imprisoned. Because of a dispute with a local partner, his partner found a local connection and sent him to prison. He stayed in custody for several months and ended up losing 20 million RMB, and the factory built in Guizhou was given to others.

I don't understand what happened, I just heard what he said. But I think that by investing more than 50 million RMB in local production, he must be pursuing a long-term goal, and it’s unlikely that he will do something inappropriate for quick success.

Complaints about regulation have begun to increase in SME circles.

But this is still a minority. Most of the entrepreneurs I know still mainly talk about how to do live broadcasts, how to break out of the circle, whether to develop the boss’ IP, whether to engage in cross-border e-commerce, is Temu a real opportunity?

They don't talk about politics and rarely care about national affairs. They just care about how to make money.

Although entrepreneurs have been infringed by local governments from time to time, this is still a very unlikely event for tens of millions of entrepreneurs, and most people don’t worry about this kind of bad luck happening to them.

I only published the articles I wrote in my new account, and never sent them to my entrepreneurial friends, because although they are in the market, their concepts are not that advanced.

I can understand their ideas. For example, they will forward some patriotic or collectivist themes. I can understand their patriotism because they have been benefited from the business environment in China. Therefore, there is no need for me to conflict with my clients on this issue, which is unwise because these businessmen don't care about political ideology at all.

Since the Double Reduction Policy was introduced, I have met many sad and angry small business owners.

In the field of education and training, it turned out that the market was extremely fragmented, and the competition was extremely fierce. However, many small business owners and Self-employed teachers could still earn a stable income in this market. The income of most small business owners was limited because large companies were so powerful that most enterprises could barely survive. The grief and anger of small business owners was that hardware investment was a considerable expense, while the losses caused by the shutdown were so big. The Self-employed teachers could continue to teach, but the bosses could only bear losses and had slim chances of entering different businesses.

A tutoring boss who I have known for many years changed his career to work as a canteen manager in a factory to make a living. He earned a salary of 8,000 RMB a month, barely making ends meet.

This wave of blows was huge.

What was even more frightening was the trumpet sound of the so-called “China’s Golden Tax System Phase IV” coming. Because there were many signs that the Laissez-faire era may be gone forever. A friend of mine received millions of RMB through WeChat for a long time, and his bank card was frozen as a result.

Figure 4. The China’s Golden Tax System Phase IV makes it no longer feasible for private tax avoidance in China.

And many bosses who have received money through private accounts for a long time worried about their past being traced. Because the money received was only turnover, not profit. If you pay the personal income tax based on that, you will lose everything. Moreover, income tax was not considered at all previously, and no one cared either. If interests and penalties were accumulated, the money earned over the years might not even be enough to pay the taxes.

In the past two years, I have met many companies. Initially they all said that they wanted to formalize their finances, but the effect was not good, because even for SME that had been exempted from some value-added tax, the total income tax and dividend tax is still as high as nearly 40% of the revenue. At the same time, procurement costs have increased by 10% and employee management costs have increased by 30%. If companies fully comply with tax laws, they will most likely suffer losses.

Some bosses said that the company was working for the employees, so why not just closed the company and went out to work to earn some money or use the savings to make some safe investments?

The increasing cost of human resources has made bosses afraid of starting a business.

It’s not that many government officials are looking for trouble with them, but systematic methods of using the current labor laws to cheat bosses have been circulated online. A group of unscrupulous lawyers began to teach people how to take advantage of the rules offline.

This has become a big problem. A client of mine faced huge losses last year and wanted to lay off employees. However, he found that he couldn't even pay his employees compensation with the money he had, so he started engaging in various bargaining games with his employees.

At this time, the power of regulation began to emerge.

Nevertheless, if we look at the world, China is still more open and free to small and medium-sized enterprises than anywhere else in the world. This laissez-faire policy is the root cause of China's rapid economic booming in the last forty years since 1978.

If “rule by law” is understood as control, and the market is regulated by administrative power instead of market power, then with China's existing legal system and tax laws, I can predict that it will be impossible to restore the previous economic booming.

Public intellectuals never cared about these; they never cherished these real freedoms. What they wanted is to have their preferences met, that was, to participate in politics, so they denied the existence of these freedoms.

After Yang Gailan died, they asked the government to take on the responsibility of poverty alleviation; the air was polluted, they asked the government to regulate emissions from all enterprises; some people couldn't afford to see doctor, they asked the government to increase taxes and implement free medical care, and they spread rumors about food insecurity for a long time., and they demanded the introduction of more stringent regulations on land control. Amid a climate of taxation political correctness, they lavishly praise the taxation of internet celebrities.

In their minds, civilization is exemplified by the United States, where everyone must pay taxes.

We were once in the freest economy in the world. China's prosperity was the result of laissez-faire economic policies. It's a pity that few people cherished it.

I once wondered that if China would have a Milei one day in a few decades, saying that we were free once before.

Figure 5. Leviathan would destroy people's normal life

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This English translation is adapted from the original work with the permission of the author.

Translation © 2025 Mr . Y. All translation rights reserved.

This original article “中国，比你想象中要自由开放得多”, first published at https://baijiahao.baidu.com/s?id=1788963599229423156&wfr=spider&for=pc

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