Can China’s leaders restore confidence to private businesses?

China’s private sector, the driving force behind the country’s economic miracle over the last 40 years, is struggling amid the Chinese government’s campaign to reduce national debt and the trade war with the United States. This is the first story in a series that will detail the challenges private firms face and outline the government’s attempts to address them.

Some would say that Chinese President Xi Jinping rediscovered the private sector in his country this year out of necessity.

Facing a rapidly slowing economy because of the trade war with the United States, Xi and senior leaders of the ruling Communist Party have put on an unusually friendly face for the country’s private businesses since the summer, publicly acknowledging their struggles and promising to help.

But it remains to be seen whether the government will take the necessary steps needed to revive business confidence.

What is clear is that Xi and his government need the private sector, which accounts for about 60 per cent of country’s economic activity and 80 per cent of its jobs.

Without a strong private sector providing a stable economic foundation, Xi’s dream of a resurgent China could fade away.

Many private sector businesses were already struggling before the start of the US trade war earlier this year, weighed down by higher costs for rent, labour, raw materials and taxes. But the tit-for-tat tariff dispute made those problems more acute by hitting demand for Chinese-made products.

As the extent of the economic damage caused by the trade war became clear over the summer, the government rolled out a series of policy initiatives designed to help private sector businesses, particularly the smaller firms that have struggled the most.

So far, however, these initiatives do not appear to have had the intended effect.