China's economic recovery
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
President Xi Jinping visits a business in Sichuan province last week to “learn about its independent innovation”, according to state media. Photo: Xinhua

China vows private firms will receive ‘equal treatment’ in charm offensive to prop up struggling sector

  • Regulatory crackdowns and zero-Covid controls have had an outsized impact on the nation’s private firms, and investors remain wary amid an uncertain outlook
  • ‘If June continues along the same lines, we will witness a record level of low confidence,’ economics professor warns

In a bid to entice struggling private businesses to invest more to heal the ailing economy, central authorities are vowing to do all they can to support such investments, according to a Wednesday meeting of China’s cabinet, chaired by Premier Li Keqiang.

And authorities once again reiterated a pledge to support the “healthy development” of the platform economy, while pledging to back private capital for start-up investments.

This comes as the private sector is still reeling from the outsized impact of regulatory crackdowns and zero-Covid controls.

“More forceful and effective measures should be adopted to strengthen confidence and anchor expectations. Support will be given to projects with private investment in accordance with laws and regulations,” Li was quoted as saying by Xinhua.

“It is imperative to work unswervingly both to consolidate and develop the public sector and to encourage, support and guide the development of the non-public sector.”

China’s private firms told to stabilise economy ‘in the midst of crisis’

“Private investors will receive equal treatment in bidding” for approved construction projects related to transport and water-resources management; all localities must protect the lawful rights and interests of private investors and earnestly honour their policy commitments; and financial institutions should support private investment via refinancing or loan renewals, the State Council said.

That offered more insight into what the Chinese government will do to restore the investment sentiment of entrepreneurs, as Beijing is stepping up its charm offensive to pull together the jittery private sector.

The party mouthpiece, People’s Daily, re-emphasised a message that “the private economy should only be stronger, not weakened”, in a commentary on Tuesday.

The article echoed sentiment that emerged from President Xi Jinping’s visit to a private optoelectronic manufacturer during his trip to the Sichuan province last week – the aim of which was “to learn about its independent innovation, job generation and local efforts to support the private sector”, according to Xinhua.


Tightened regulations among key trends shaping China’s internet in 2021

Tightened regulations among key trends shaping China’s internet in 2021

The regulatory storms have also shown some signs of easing recently.

However, the olive branches come at a time when a wide range of private companies – including Big Tech platforms, high-profile property developers and off-campus tutoring firms – have fallen to a low ebb after Beijing’s efforts to rein in monopolistic practices and the “ disorderly expansion of capital” since the second half of 2020.

Disruptions brought by the draconian coronavirus-containment measures, especially the two-month lockdown of Shanghai, have cut deep for many private firms.

All that, in turn, has increased the challenges facing the world’s second-largest economy, as the private sector accounts for about 60 per cent of China’s entire gross domestic output and 80 per cent of the nation’s urban jobs.

[The business community] feels that the space seems to be getting narrower and narrower, and everyone has to lower their expectations
Jia Kang

Li Daokui, a former adviser to China’s central bank, said the current poor sentiment among private investors is not good for China’s long-term economic development.

It is crucial for China to stabilise employment in the near term, and internet companies should be given special attention, since they are large contributors to jobs, Li Daokui said at a virtual forum on Tuesday.

Jia Kang, former head of the finance ministry’s research institute, said the country should protect property rights, provide a fair and just competitive environment, and respect entrepreneurship to reassure the private sector.

“I have contacted a lot of friends in the business community. Everyone feels that the space seems to be getting narrower and narrower, and everyone has to lower their expectations more and more, which is an issue worthy of our attention,” he said at the Yabuli China Entrepreneurs Forum on Saturday.

The business conditions index, which was developed by the Cheung Kong Graduate School of Business and surveys small and medium-sized firms in the private sector, fell to 37.34 in May.

A reading below 50 indicates that a majority of private businesses are pessimistic about current conditions, meaning sentiment still has a long way to recovery.

“If June continues along the same lines, we will witness a record level of low confidence,” Li Wei, a professor of economics at the graduate school, said last week.

The sub-index gauging confidence in investment prospects over the next six months also declined to 48.6 in May from 55.7 in April, hitting the third-lowest point since the data set was launched in 2011.