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.
As growth falters, China’s private sector struggles, and jobs take a hit
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.
Behind these figures is a worrying trend in the world’s second largest economy. The country’s most enterprising and ambitious group of people, who once braved “thousands of hardships and bitterness” to start their companies, have begun to throw in the towel. The “animal spirit” that once underpinned a vibrant economy is dying out. In affluent places like Zhejiang or Guangdong, it is not uncommon to see first generation business founders who have accumulated enough wealth try to persuade their sons and daughters to find low-paying, stable jobs in the government, or even to live abroad.
For them, the growing difficulty of running a private business is one thing, but the more important factor is that it is no longer considered “glorious” to get rich in China. In fact, it is dangerous to be rich, and being too rich can be a curse. Online verbal abuse against some Chinese entrepreneurs has become so rampant that China’s cyberspace administration had to set specific rules to restrict attacks on the country’s business leaders. In China’s tech sector, a by-product of Beijing’s regulatory campaigns has been to hush the country’s entrepreneurs.
