Opinion | Why China needs to shore up confidence in its own entrepreneurs after giving the red-carpet treatment to Gates and Musk
- China has achieved progress in persuading foreign investors to stay, or to even double down on their investments in some cases
- The country’s most enterprising and ambitious group of people, who once braved hardship to start companies, have begun to throw in the towel
The Chinese government has warmly welcomed visiting foreign entrepreneurs and business executives in the past weeks. Beijing is sending a clear message to the world, through people like Elon Musk and Bill Gates, that China is back in business and any attempt to decouple from China is “doomed to fail”.
The high-profile reception given to big-name investors is understandable as Beijing has to push back on decoupling, or “de-risking”, campaigns designed out of geopolitical and ideological motives, and China has achieved progress in persuading foreign investors to stay or to even double down on their investments. After all, few multinationals can easily give up a vast single market of 1.4 billion people.
However, while foreign investors have shown interest and confidence in China, life for Chinese private entrepreneurs remains miserable these days. Some are hiding, some are fleeing, and others are witnessing the unravelling of their business empires. Despite repeated reassurances from authorities that the private economy is an important part of the national economy, and that it will receive equal treatment alongside state-owned enterprises, the reality is harsh for China’s capitalists.
China’s official data shows that the private sector is bearing the brunt of the country’s economic slowdown, and in turn, lacklustre confidence from private firms is undermining growth prospects. Fixed-asset investments by the private sector, a measure of business confidence, fell 0.1 per cent in the first five months of this year from a year ago, when many parts of the country were under draconian Covid-19 controls.
By comparison, investments from the state sector increased 8.4 per cent, while investments by foreign businesses in China increased 5.2 per cent. In terms of profitability, combined profits for Chinese private businesses shrank 22.5 per cent in the first four months, a steeper drop than the state sector.