Bloomberg New Economy title: Panic in Beijing
By: Chris Anstey
Date: 22 July 2023
“For years, Xi Jinping has browbeaten China’s big private-sector companies as he increased Communist Party control of the economy, all while codifying the primacy of national-security. Now it seems he’s surprised at the result.
With private-sector investment contracting in spite of the post-pandemic reopening, foreign capital inflows declining and more than one-in-five people aged 16 to 24 struggling to find a job, China’s leader and his lieutenants have launched a massive messaging campaign.
The message? We didn’t really mean it.
In recent weeks, there’s been a raft of party and government statements and pledges and meetings with executives (foreign and domestic) to assure them that China is open for business. Analysts at China consultancy Trivium observed on Thursday, “Beijing has devoted more attention to supporting private businesses this year than at any time we can remember since the founding of the People’s Republic.”
While it would be foolish to dismiss a campaign so clear and concerted, there’s arguably a fundamental flaw. There’s no escaping that China under Xi decisively abandoned the “reform and opening up” credo of the late Deng Xiaoping. The party has given itself an ever-bigger role in the economy, and the space for private discourse and decision-making has shrunk. That’s become crystal clear to the business world, making a return to the good old days hardly realistic—no matter what Xi says now.
The reassuring communications directed at the business community reached a crescendo on Wednesday, when both the Communist Party and the national government issued a rare joint statement titled “Promoting the Development and Growth of the Private Economy.”
There were pledges to break down market-access barriers, speed up licensing approvals, treat enterprises of all ownership types “equally” and support “qualified” private firms’ moves to raise capital. Leaders also promised to respect “property rights of private enterprises.”
So far, so free-market. But, as China politics expert Bill Bishop wrote in his Sinocism newsletter this week, “it is understandable if some private entrepreneurs remain wary, given both the history of the Party’s treatment of private business and some of the language in the document.”
There are a number of elements that a fully independent private-sector firm might worry about, including a charge to “give full play to the role of party organizations in private enterprises.”
Section 29 seems particularly problematic:
“Uphold and strengthen the leadership of the party. Adhere to the Party Central Committee’s centralized and unified leadership of the private economic work, and implement the Party’s leadership in all aspects of the work process.”
The missive to “improve the ideological and political construction mechanism for private economic personnel” also seems at odds with a truly independent non-state sector.
The document also made clear that private-sector activities ought to be occurring under the rubric of national goals. The leadership will “guide private enterprises to enthusiastically participate in glorious causes” and to engage in things including the support of “national defense construction.”
In other words, even in the highest-level call for invigorating private enterprise, the language is riddled with Leninist-style insistence of ultimate party control.
A rush of supportive comments from Chinese business leaders only showcased how they must align with the leadership.
The head of tech giant Tencent Holdings Ltd., Ma Huateng (or Pony Ma), wrote a rare opinion article in state media echoing Beijing’s statements. Li Shufu, the billionaire founder of Zhejiang Geely Holding Group Co., and Zong Qinghou, the chairman of leading beverage company Hanzhou Wahaha Group Co., were among those endorsing Beijing’s pledges.
Xi’s past language about private business leaders illustrates his thinking about where they fit in his economy. In remarks in July 2020, he praised historical contributors, including Rong Yiren and Wang Guangying, along with Lu Zuofu.
Bishop explains that the first two “donated” their businesses to the Communist government, while the third was a shipping-industry industrialist who ended up committing suicide after deciding to return to the mainland following the Communist victory.
Hardly inspiring examples for executives whose focus is making money.
This marks an entirely different approach to Deng’s reform and opening up credo of the 1980s and 1990s, when he was credited for declaring “to get rich is glorious” and downplayed the importance of undesirable elements of opening up by saying “when you open a window, flies come in.”
Even if business confidence gets a lift with Xi’s latest burst of rhetoric, “with power now heavily concentrated at the top of the Party, there is little to prevent private firms from being targeted again down the road,” Julian Evans-Pritchard, head of China economics at Capital Economics, wrote Friday.
“We doubt this marks a fundamental shift in the way that the leadership views the role of private firms in China’s state-led “socialist market economy,” he concluded.”
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