China’s ‘rattled’ private firms with little confidence await signs, reassurances that some fear will not come

From its zero-Covid policy and heavy-handed regulations to deteriorating international relations in a weakened global environment, China faces a ‘storm’ like it’s never seen

Hard-hit entrepreneurs are stumbling through the dark, investor nerves are frayed, and all they can do is wait for what might come out of this week’s party congress

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Many of China’s struggling entrepreneurs appear to be stumbling through the dark, desperate for a glimmer of hope in fraught economic times. Illustration: Brian Wang

Published: 12:00am, 18 Oct 2022Updated: 9:25am, 18 Oct 2022

Wu Hai has been warning about the struggles faced by China’s private businesses for years, and he seems to have Beijing’s ear.

The founder of karaoke chain Mei KTV, Wu complained about the country’s business environment in an open letter to state leaders that was posted on social media in 2015. He was surprised when it prompted an official invitation to explain his suggestions to a select audience at the Zhongnanhai leadership compound in Beijing amid efforts to encourage start-ups and innovation.

Another post by Wu went viral in February 2020, during the early days of the coronavirus. Citing a cash-flow crisis that had left him with only enough money to sustain his business operations for just over two months, Wu appealed for immediate government support for small businesses. That appeal was followed by massive tax cuts and the loosening of borrowing terms from banks.

Today, Wu has his sights set on the Omicron variant of the virus, which has compelled many Chinese cities to restrict people’s movements to curb its rapid spread. Investor morale has plunged, and for many, no light can be seen at the end of the tunnel.

“China is now facing a ‘perfect storm’, with unexpected hits from four directions – the pandemic, deteriorating China-US relations, a weak global economy and strong regulation in an unfavourable economic environment,” Wu wrote on his WeChat account on October 9.

A vicious cycle has ensued, with hard-hit entrepreneurs becoming more reluctant to invest amid high levels of business uncertainty, he said.

“The erosion of confidence is the biggest challenge facing China,” Wu warned.