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Xi Jinping

Xi says it’s wrong to ‘bad mouth’ China’s state firms... but country needs private sector as well

Chinese president says state-owned enterprises should grow stronger, better and larger, but that reforms show private enterprises could ‘boost their confidence’

PUBLISHED : Friday, 28 September, 2018, 11:03am
UPDATED : Friday, 28 September, 2018, 10:47pm

President Xi Jinping has vowed to continue to strengthen China’s state-owned enterprises, while at the same time assuring the private sector it has the Communist Party’s “unswerving support”, amid widespread concerns about the fate of the country’s private companies.

“Our SOEs should continue to become stronger, better and larger,” Xi said during a visit to a state-owned petrochemical company in the northeastern Liaoning province on Thursday, Xinhua reported late that night.

“All statements and arguments saying we don’t need SOEs any more or we should diminish SOEs are wrong and one-sided,” he told workers at Liaoyang Petrochemical, a subsidiary refinery of oil-and-gas giant China National Petroleum Corporation.

“Any thoughts or comments that doubt or bad-mouth SOEs are wrong,” he said.

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During another stop at a private manufacturer, however, Xi stressed the party’s “care and support” for the private sector since the country’s reform and opening-up.

“Many of the reform measures nowadays are about how to further develop the private economy – private enterprises should boost their confidence on this point,” he said when visiting the workshop of China Zhongwang Holdings, one of the country’s largest producers of aluminium alloy products.

“The party’s guidelines and policies are beneficial to the development of private enterprises,” he said, pledging to provide a “good legal environment” and improve the business climate for them.

Photos released by state media show Xi was accompanied by vice-premier Liu He, the president’s top economic adviser and trusted aide.

Beijing’s tilt towards state-owned enterprises raises doubts about future of private sector in Chinese economy

Xi’s comments came amid rising doubts in China about the party’s commitment to encouraging the private sector to flourish, which has helped the country emerge as the world’s second-largest economy.

Although Beijing has talked up the need to support small and medium-sized private companies and vowed to let the market play a “decisive role” in the economy, the government has encouraged state-owned enterprises (SOEs) to accumulate more resources and clout.

This has come at the expense of private companies, and has opened up a debate about Chinese economic policy and its priorities.

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The debate came to a head earlier in the month, when a self-proclaimed financial expert wrote a short essay online arguing that China’s private sector had “completed its historic mission” in assisting the leap forward of SOEs and should be phased out.

The post, by investment banker Wu Xiaoping, spread like wildfire through social media before it was eventually deleted, sparking heated discussion of whether Beijing was in the process of marginalising the private sector.

Private companies form the backbone of the Chinese economy, accounting for 60 per cent of its gross domestic product and 80 per cent of jobs in urban areas. But they are having an increasingly tough time as SOEs become larger and stronger, especially since Xi came to power in 2012.