At the worst of the 2008 financial crisis, former Chinese Premier Wen Jiabao speech A group of US government officials and business executives in New York. “In the face of economic difficulties,” he said, “confidence is more precious than gold.”
At that time China’s economy was faltering. Today it is faltering, facing its bleakest prospects in decades, and China’s leaders are learning the hard way about Mr. Wen’s intentions.
Beijing unveils 31-point set guidelines Wednesday to boost the confidence of the private sector. After three years when the government cracked down on private companies, stifled innovation and stifled state-owned businesses, the document represents an almost concession from the Communist Party that its campaign had failed spectacularly.
Stocks in the mainland and Hong Kong, where many of China’s biggest private enterprises are listed, fell on Thursday but recovered on Friday. some entrepreneurs rushed praise Guidelines in official media. But in private, others I interviewed dismissed the party’s euphoric talk in words that can best be translated as, “Save it for the useless people.”
By now it is clear that the economic problems of the country have their roots in politics. Restoring trust will require systemic changes that provide real protection for the entrepreneurial class and private ownership. If the party follows the political agenda of the country’s paramount leader, Xi Jinping, who has dismantled many of the policies that got China’s economy back on track, its promises on paper will remain mere words.
The stock markets’ response was very honest, said one tech entrepreneur. Investors realized how desperate the party was and how futile the guidelines were, he said.
At its core, the issue of trust is a matter of credibility of the government, he said. Beijing has lost almost all of its credibility over the years, he said. If he really wants to rectify the situation, he can at least apologize for his wrongdoings. He cited a document the party issued after the Cultural Revolution acknowledging some of its mistakes under Mao Zedong’s leadership from 1949 to 1976.
Others pointed to similar steps taken by the party then, such as the rehabilitation of persecuted activists and intellectuals. At the very least, the government should release outspoken entrepreneurs Ren Zhiqiang and Sun Dao, who are serving 18 years in prison after being arrested in the most recent crackdown, he said.
Or, another entrepreneur told me, the government could roll back fines imposed on his company, believing it to serve as punishment for not toeing the party line and as revenue for overstretched local government. He said that he felt that he had been robbed.
None of the business owners I spoke to expect the government to take any of these steps. All of them spoke on condition of anonymity for fear of being punished by the authorities.
The Communist Party has always been wary of the wealth, influence and organizational skills of entrepreneurs. In the 1990s and 2000s, the party felt it needed a vibrant economy to rebuild its legitimacy after the Cultural Revolution and crackdown on Tiananmen Square protesters in 1989. The private sector contributed more than 50 per cent to the country’s tax revenue, 60 per cent to economic output and 80 per cent to urban employment, according to none other than mr xi In 2018.
But Mr. Xi is no fan of the bourgeoisie. His economic thinking can be best summed up in his slogan, “Large and strong state-owned enterprises.Under Mr. Xi’s leadership, private companies and entrepreneurs are under constant attack from both the government and online commentators.
The situation worsened since the start of the pandemic. Over the past few years, China’s leadership has gone after the country’s largest private enterprises, humiliated its most famous entrepreneurs, destroyed entire industries with arbitrary regulation, and refused to budge from COVID policies when many businesses were struggling.
In 2021, a comment was titled, “Everyone can feel it, a profound change is underway!” Was posted again on many of the most important official media websites. Praising the policy proposal known as the suppression of the private sector and “general prosperity”, the commentary said, “It is a return from capital clusters to the public, and a change from a capital-centred approach to a people-centred approach.”
But after abruptly ending its “zero Covid” policies last December, the government realized it needed the private sector to help revive the economy, which had suffered both from the pandemic and China’s deteriorating relations with the United States and other major trading partners. The rebound has failed to live up to expectations and business and consumer confidence has plummeted.
“Why are so many people saving money and cutting back on spending? Why are aspiring entrepreneurs reluctant to make long term plans and investments? Sun Liping, Professor of Sociology at Tsinghua University wrote In an article last month. “It’s because they feel uncomfortable.” He said that to get China out of recession, the government needs to create a business environment that can provide assurance.
What China’s business community is getting is a fascinating offensive.
Mr. Xi said, “We have always regarded private enterprises and entrepreneurs as our share.” Said In March, repeating myself from 2018. The head of the country’s economic planning agency, the National Development and Reform Commission, held a meeting. series Of meeting With business leaders, pledging support.
Then came the 31-point guidelines. Most Chinese businessmen support the government and willingly follow what it says. Still, some entrepreneurs’ comments on state media sound more like a pledge of loyalty to the party than an authentic expression of faith.
Pony Ma, chief executive and chairman of social media and gaming giant Tencent, wrote, “The Central Committee of the Party attaches great importance to the private economy and private enterprises and has always regarded us as its part,” Mr. Xi reiterated. They pledged to uphold our role as “connector,” “toolbox,” and “helper.”
Some entrepreneurs repeated a series of party announcements.
Li Shufu, founder of Geely, one of the world’s largest automakers, Said“As a private entrepreneur, we must strengthen our faith in development, carry forward the ‘Eight-Eight Strategy’, implement the ‘Sweet Potato Economy’, bravely take responsibility, and carry forward the ‘Four Thousand Spirits’.” The jargon was from Mr Xi’s instructions on how to develop the economy of Zhejiang province, where Geely is headquartered.
Lai Meisong, president of ZTO Express, a delivery company listed on the New York Stock Exchange, Said The guidelines made him “feel warm and inspired.” His company would be grateful to the party and follow its guidance, he said, repeating Mr. Xi, who said in March, “When private enterprises encounter difficulties, we provide support, and when they encounter confusion, we provide guidance.”
Ben Qiu, a lawyer who practices law in Hong Kong and the United States, summarized the officials’ comments in a social media comment: “The emperor’s clothes look fabulous.” Some noted that most of the 31 points were not new. One goal that attracted much attention was to “actively and judiciously carry out the task of developing party members” in the private sector. The guidelines asked entrepreneurs to be patriotic and uphold the party’s leadership on private sector work.
The development of China’s private sector began in the 1990s when the government tried to separate the Communist Party from business. It was by no means an entirely righteous time – there was too much corruption. But the government tried to stay out of the way of the companies. Now, no matter how many supportive words the party says, it will be difficult for the private sector to feel confident.
Tsinghua sociologist Mr. Sun reposted his May 2018 speech: “Private enterprises do not need support. They need a normal social environment regulated by the rule of law.