China’s struggling private firms tasked with lifting nation of out economic doldrums

Call to action comes at annual gathering of China’s business leaders that serves as an influential idea-exchange forum

China’s private firms have taken an especially hard economic hit over the past year, whereas state-owned enterprises have remained mostly intact or even thrived

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Qiu Xiaoping, vice-chairman of the All-China Federation of Industry and Commerce, speaks at the opening ceremony of the Yabuli China Entrepreneurs Forum in Heilongjiang province. Photo: Handout

Published: 9:15pm, 13 Jun 2022

With China’s economic headwinds intensifying amid rising internal and external uncertainties, the country’s private sector has been tasked with rebooting the economy, despite having borne most of the pain of the current economic downturn.

During last week’s Yabuli China Entrepreneurs Forum – one of the most influential idea-exchange platforms for business leaders in China – private firms were urged to “cultivate new opportunities in the midst of crisis” and “make positive contributions toward stabilising the country’s economy”.

“Private entrepreneurs should further unify their thoughts and actions into the scientific judgment of the Party Central Committee on the current situation and the decision-making and deployment of economic work,” Qiu Xiaoping, vice-chairman of the All-China Federation of Industry and Commerce, a government-controlled business association, said at the opening ceremony of the annual forum held on Friday and Saturday in Heilongjiang province.

“[Private entrepreneurs] should make efforts to stabilise and expand employment positions … and play a better role as the main force in stabilising and securing the overall employment situation,” Qiu said.

A major engine of China’s rapid economic development in the past 40 years, the private sector is responsible for more than half of the country’s tax revenue; 60 per cent of its gross domestic product, fixed-asset investment and foreign direct investment; and more than 80 per cent of urban employment.

But as the economic pressure has been mounting in the country since the second half of last year, private firms have been hit especially hard in the midst of regulatory crackdowns, rising commodity prices and repeated lockdowns under the country’s “dynamic zero-Covid” policy.

In contrast, state-owned enterprises (SOEs) have remained largely intact, or have even thrived.

In the first quarter of the year, SOE profits rose while those of private enterprises declined, with the losses rising sharply, according to Wang Xiaolu, deputy director of the National Economic Research Institute think tank.

Now many businesses have lingering fears. Even though they can open today, they don’t know if they will be able to open tomorrow

Zhang Jun, Fudan University