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Mandy Zuo

China issued a comprehensive action plan on Wednesday to support its private businesses amid a weakening economic recovery.
Despite the end of Beijing’s strict zero-Covid policy, business confidence has remained low and many firms are on the edge of closure.
Having served as the backbone for the economy as the biggest contributor to employment and innovation, the private sector has been a topic of heated debate over the past decade.
It has also previously received multiple rounds of policy support.
How is the support for private firms different this time?
The new plan, which includes 31 measures, for the first time called private companies “fresh troops in pushing forward China’s modernisation”, emphasising their strategic importance in China’s future growth.
Vowing to make them “bigger, better and stronger”, the plan rolled out a series of measures that responded directly to the major concerns shared by business owners, including difficulty in obtaining payments from governments and state-owned companies (SOEs).
China’s economic backbone, private firms decry lack of parity in policy support
The most comprehensive policy package issued since President Xi Jinping started his third presidential term in March, the plan also called for a more tolerant environment for private firms and more social respect for entrepreneurship and innovation.
There should be an atmosphere of “encouraging innovation and tolerating failure”, it said.
Is the new plan for private firms going to work?
While business leaders, including Tencent’s Pony Ma and Xiaomi’s Lei Jun, welcomed the plan, others expressed concern whether all the measures could be implemented.
In an article published by state television on Wednesday, Ma said the measures were clear and “highly targeted”, and that they “have stabilised expectations for realising high-quality development”.


But smaller industry players are worried the plan is just paying lip service, as despite plenty of government pledges to boost the private economy over the years, issues such as unfair competition from SOEs, less access to funding, excessive government supervision and a lack of legal protection, have continued to trouble private companies.
Aside from impact from the coronavirus pandemic, many private firms, including platform companies, property developers and private tutoring services, have also suffered from Beijing’s regulatory crackdown.
Will the new plan allow private firms more freedom?
While promising tolerance and urging social understanding for the private sector, Beijing has been tightening its grip on businesses, with phrases related to the Communist Party appearing 11 times in the plan.
It vowed to “actively and prudently” develop party members among private companies, strengthen education about socialist values and “explore new ways” to build the party.
As growth falters, China’s private sector struggles, and jobs take a hit
Having emerged as a global power, largely due to the freeing up of private businesses over four decades ago, China allowed entrepreneurs to become party members in 2001 to recognise their stronger role.
And any private company with more than three party members is obliged to set up a party cell, according to the Communist Party Charter.
How differently are private sector and state-owned companies coping?
It has been argued that China’s SOEs are advancing, while the private sector has been retreating since the 2000s.
Private firms’ anxiety about their fate reached a peak in 2018 when a viral post online urged them to “leave the stage” as their “task of assisting the state-owned economy in achieving its rapid development” had been fulfilled.
Despite denials from the authorities in the following years, private companies are yet to enjoy a level playing field, encounter stricter market entry and are regarded as being riskier when trying to obtain bank loans.
Chinese authorities approve new guidelines for private firms
In the post-Covid climate, state giants are faring better than their private counterparts. In the first half of the year, fixed-asset investment by private firms fell 0.2 per cent from the previous year, in sharp contrast with the rise of 8.1 per cent among their state-owned rivals.
Profits for private industrial enterprises with an annual revenue of at least 20 million yuan (US$2.8 million) fell by 21.3 per cent in the first five months of the year, compared with a drop of 17.7 per cent by SOEs.
What measures have been taken over the past decades to support private firms?

1980 The first business licence is issued to private entrepreneurs in Wenzhou, a city in Zhejiang province, which later became a hub for the private sector.


1998 An amendment to the Constitution sets the legal status for the private economy.


2001 Private entrepreneurs are encouraged to join the Communist Party.


2005 China issues 36 measures to promote the private sector, the first major document to remove obstacles, but implementation proves difficult.


2010 Beijing issues a new directive encouraging private investment, the so-called new 36 items.

Weak private sector is holding back China’s economic recovery, adviser warns

2016 President Xi Jinping reiterates Beijing’s firm stance to support the development of the private economy at a meeting with delegates to the Chinese People’s Political Consultative Conference.


2018 Xi urges more support for private firms and aims for a bigger private economy to push for quality growth of the overall economy.


2019 The central government releases two directives in two months to boost private businesses and improve financial services.


2022 After a crackdown on major platform companies, as well as after-school tutoring companies since 2020, Xi tells the central economic work conference that he has always supported private companies in an effort to raise confidence for the post-Covid recovery.



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Will China’s private firms fly higher, freer under new action plan as Beijing calls for ‘fresh troops’?

Despite the end of Beijing’s strict zero-Covid policy, business confidence has remained low and many firms are on the edge of closure. Photo: AFP

Despite the end of Beijing’s strict zero-Covid policy, business confidence has remained low and many firms are on the edge of closure. Photo: Xinhua

China’s 31-point plan vows private firms, like state brethren, will be ‘bigger, better and stronger’

Beijing has unveiled a 31-point action plan to give China’s economy and private businesses a shot in the arm. Photo: EPA-EFE

Beijing has unveiled a 31-point action plan to give China’s economy and private businesses a shot in the arm. Photo: Bloomberg

China’s economic slowdown to have ‘global repercussions’ beyond trade, hinder current account recovery, IMF says

Weaker than market expectations, China’s economy grew by 6.3 per cent in the second quarter, year on year. Photo: Reuters

Weaker than market expectations, China’s economy grew by 6.3 per cent in the second quarter, year on year. Photo: AFP

From GDP to youth unemployment, 6 takeaways from China’s economic data in June

China’s economic growth missed expectations in the second quarter of 2023, while monthly data also released on Monday indicated faltering private confidence, record high youth unemployment and overhanging risk in property market. Photo: Reuters

China’s economic growth missed expectations in the second quarter of 2023, while monthly data also released on Monday indicated faltering private confidence, record high youth unemployment and overhanging risk in property market. Photo: AFP

China GDP: disappointing second-quarter growth tests Beijing’s ammunition to fix uneven economic recovery

China has set a modest growth target for 2023 at around 5 per cent. Photo: Reuters

China steps in with vocational school overhaul and 11 ‘key tasks’ to help boost self-sufficiency and tech prowess

China is setting out to build hundreds of new vocational schools by 2025. Photo: Getty Images

A vocational trainer (right) teaches a student how to operate a machine tool at a technical college in China’s Guangdong province. Photo: Xinhua

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China has more than 47 million registered private firms, a vast majority of which are small players, and more than 100 million self-employed businesses
Beijing unveiled its comprehensive new 31-point plan on Wednesday, days after worrisome economic growth failed to reassure the market


Beijing unveiled its comprehensive new 31-point plan to invigorate its economy, including a long-awaited action plan to shore up the ailing private sector, days after worrisome economic growth failed to reassure the market.


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