China Warms to Private Business — But for How Long?

Political winds favor China's private sector. This mood might last for a while.

- Lim Min Zhang

"Confidence is more valuable than gold," Mr Liu Yonghao, founder and chairman of New Hope, the biggest animal feed producer in China, said.

He was among executives who took center stage at a top-level meeting with Chinese President Xi Jinping, alongside those from Huawei, BYD and other industry giants — indicative of China's current focus on high-tech fields, innovation and industrial upgrading.

Chinese media described the powwow on Feb 17 as a dingxinwan — a "reassurance pill."

Although meant as praise for the Communist Party, the remarks also highlight the turbulence experienced by private businesses in China over the past decade under Mr. Xi. It is not one for the faint-hearted.

Since assuming power in 2012, Mr. Xi has systematically tightened the party's control over the private sector. Regulatory crackdowns on industries from tech and finance to tutoring and gaming have spooked businesses.

Even as a series of recent moves — from setting up a private economy bureau to reviewing a private economy promotion law — could put some wind back into the sails of China's private sector, more so than ever, Chinese businesses must align themselves with the party's goals in order to thrive.

CLIPPED WINGS

Scepticism over whether the meeting signals a shift is understandable. Since the pandemic struck, Chinese businesses have been on tenterhooks, as business interests have generally given way to national priorities and overdue corrections were made.

Major industries faced crackdowns that curbed expansion and dampened investor confidence.

In 2020, regulators tightened the screws on the over-leveraged real estate market that had contributed some 30 percent of GDP growth, spelling the beginning of the end for the Evergrande Group, which went from being China's biggest property developer to among its worst debtors. The property slump has been a continued drag on the broader Chinese economy.