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China economy

Xi Jinping promises to protect China’s private businesses to ensure a ‘better tomorrow’

  • Chinese president moves to soothe companies’ fears amid wavering economic growth
  • Open letter published in state media contains some of his warmest words about private enterprises
PUBLISHED : Sunday, 21 October, 2018, 7:20pm
UPDATED : Sunday, 21 October, 2018, 11:33pm

Chinese President Xi Jinping has written an open letter to the country’s private business owners, saying Beijing will continue to value and protect them to ensure a “better tomorrow”.

In an apparent move to boost the confidence of China’ capitalists at a time when economic growth has slowed to the lowest level since 2009, Xi said Beijing fully recognised the role of private enterprises and the ruling Chinese Communist Party would continue to bless their development.

The letter, published by Xinhua on Sunday, said the private sector’s historic contribution to the country’s development was “indelible” and “should not be doubted”.

“Any words or acts to negate or weaken private economy are wrong,” Xi wrote.

“It is always a policy of the Central Committee of the Communist Party to support private business development, and this will be unwavering,” he continued.

The letter contained some of Xi’s warmest remarks about China’s private companies.

Although they enjoy the same legal status as state-owned enterprises, in practice they are often treated as second-class corporate citizens when it comes to obtaining support from the state banking system, while the state sector is often given preferential treatment by the government.

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Last month on a tour of the country’s northeastern rust-belt region, Xi offered similar support to state-owned enterprises, saying attempts to “bad mouth” China’s state sector were wrong, but adding that the government would continue to support private businesses.

On Friday, Vice-Premier Liu He, Xi’s top economic adviser, told state media that discrimination against private borrowers was not uncommon at state-owned financial institutions.

“Some staff believe that it’s always safe to lend to state-owned enterprises but it’s politically risky to lend money to private businesses – they would rather be doing nothing than committing any political mistakes,” Xinhua quoted him as saying. “Such views and practices are completely wrong.”

A recent debate among online commentators and academics about whether China’s private businesses are still cherished by the authorities, or are even necessary for the country’s economy future, have caused jitters among the country’s private business owners.

But Xi wrote in the open letter that they need only worry about their own businesses.

“You should focus on innovation and … jointly making a better tomorrow,” he wrote, adding they could “make a greater contribution to the great rejuvenation of the Chinese nation”.

Xinhua’s report said the president was praising businesses involved in poverty alleviation campaigns – one of Xi’s three key economic priorities, along with financial risk control and cutting pollution.

Private firms have long had an uneasy relationship with the Chinese Communist Party, stemming from the latter’s long history of hostility towards capitalism.

After the communists took power in 1949, they absorbed and bought out private business ownership in a process named “socialist transformation”.

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But measures targeting private enterprises escalated, peaking during the Cultural Revolution when assets were confiscated and business owners purged.

The reform and opening-up process started by former paramount leader Deng Xiaoping in 1978 allowed the private economy to thrive on peripheries of the state-owned economy.

Four decades later, Chinese private economy contributes over 50 per cent of China’s tax revenue, 60 per cent of its gross domestic product, 70 per cent of technological innovation, 80 per cent of urban employment, and 90 per cent of newly created jobs and business entities, according to Beijing’s own statistics.

Xi’s comments come against a backdrop of slowing economic growth.

Headline GDP growth slowed to 6.5 per cent in the third quarter, the lowest reading since the first quarter of 2009, according to official data released last week.

Meanwhile fixed-asset investment, a key diver of growth, slowed to 5.4 per cent in the first nine months of the year.

But investments from the private sector grew by 8.7 per cent, compared with just 1.2 per cent from the state sector in the same period.