China’s private sector should be on a par with state-owned industry, leading economist tells high-profile Beijing forum

Misconception that ‘the private economy is not the foundation of the ruling party’s rule’ should be clarified, Tsinghua University’s Li Daokui says
All economies that operate by law, private or state-owned, are a basis for the ruling party to govern, Li tells Tsinghua PBCSF Chief Economists Forum

China economy

He Huifengin Guangdong

Published: 9:00am, 7 May 2023

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China’s private economy should be treated on a par with the state-owned sector as a cornerstone of the ruling Communist Party, a leading Chinese economist has suggested.

According to Li Daokui, director of the Academic Centre for Chinese Economic Practice and Thinking at Tsinghua University, the common misunderstanding that “the private economy is not the foundation of the ruling party’s rule”, should be clarified.

When the public keeps hearing that the ruling party is based on a state-owned economy, it creates a big problem, Li told the annual Tsinghua PBCSF Chief Economists Forum in Beijing.

“In fact, all economies that operate by law, whether private or state-owned, are a basis for the ruling party to govern,” Li said, as he stressed the importance of boosting the confidence of private business.

Li Daokui has called for more measures to boost consumer confidence in China. Photo: SCMP

Private firms account for more than 50 per cent of China’s tax revenue, 60 per cent of its gross domestic product, 70 per cent of technological innovation, 80 per cent of urban employment, and 90 per cent of market entities, according to official data.

However, private businesses have been under enormous pressure in recent times – including nearly three years of strict coronavirus controls, as well as regulatory action against the property sector, platform companies and private tutoring.

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Li also referred to recent proposals to set up a regulatory body to oversee the private sector, on the lines of China’s state-assets watchdog, the State-owned Assets Supervision and Administration Commission.

The handling of many issues could become easier and better if the two bodies were equally important, he said.

The current core issue for China is to stabilise the economy and ensure growth, Li noted. Therefore, it was important for the government to regulate the market while performing its own duties, he told the high-profile forum.

It was important to understand that the domestic economy had yet to recover fully, even though the tourism sector bounced back significantly during the just-concluded Labour Day long holiday, he pointed out.

“One indicator needs great attention, that is, the current indication for China’s CPI and PPI is weak.”

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China’s economic indices have struggled amid a rocky rebound. In March, the consumer price index (CPI) rose at its slowest pace in 18 months, while the producer price index (PPI) fell 2.5 per cent year on year, the fastest pace since June 2020.

Li called for more measures to boost consumer confidence, instead of just relying on major construction projects to drive growth.

Citing the example of the 1 billion yuan (US$144.7 million) in consumption coupons given out in Shanghai last year, Li said surveys found the coupons leveraged another 4 billion yuan of additional consumption, of which 30 per cent contributed to local tax revenues.