As Xi Jinping pledges support for China’s private and state-owned enterprises, time is ripe for Hong Kong to find economic sweet spot
President’s recent remarks meant to cool debate on fate of private sector send clear signal for city while US-China trade war rolls on
It’s the National Day “golden week” again on the mainland, and a potential bumper season for tourism in Hong Kong.
But many Hongkongers may not be aware that a heated national debate on the fate of the private sector has been quietly cooled down by a guarantee from President Xi Jinping, without which the spending mood among some mainlanders – especially those in private business – could be seriously affected during this holiday period.
The story began with an article titled “Going into exile in ancestors’ land” going viral over the past two weeks. It was said to have been written by the founder of a mainland finance digital platform, touching on the difficulties and unfair treatment the private sector was facing in comparison with state-owned enterprises under the central government’s ongoing deleveraging efforts.
Stressing that both private and state-owned enterprises contributed to the country, the author questioned why the former were being forced into “exile” in this land of common ancestry.
It quoted the tragic fates of two patriotic figures from ancient Chinese history: Qu Yuan of the Chu state during the Warring States Period; and Wu Zixu of the Spring and Autumn period. Both are role models of loyalty for Chinese people.
This sentimental yet highly critical piece drew a subtle analogy that private businesses could face a tragic end if the government ignored their loyalty and importance.
History has it that Qu jumped into a river to kill himself to show his love for the country after his views were repeatedly rejected by the king; Wu was made to commit suicide, regardless of his many other contributions, because of his disagreement with his king on the country’s future strategies.
Wu’s body was dumped into the Qiantang River that passes through today’s Anhui and Zhejiang provinces. Both figures are immortalised in the Dragon Boat Festival, during which people traditionally throw rice dumplings into rivers to send them food.
The article in question was soon taken down by major mainland online portals, but the disappointments and grievances of the private sector it depicted were too profound to be ignored.
So when Xi recently inspected northeastern Liaoning province, a major industrial base of the country, it was very telling to see him visit the state-owned Liaoning branch of PetroChina as well as the listed private enterprise China Zhongwang Group, which is the world’s second-largest aluminium manufacturer.
Xi made two points: “We unswervingly develop the public-ownership economy; we unswervingly encourage, support, guide and protect the private-sector economy.” Any criticism against state-owned enterprises “is incorrect”, he added.
We don’t know if Xi was indirectly reacting to the complaints raised in the “exile” article, but official media reflected it as a weighty message and claimed there was no need to argue about the importance of the private economy.
Without a doubt, the supportive signal to the private sector is more than necessary, given the escalation of the US-China trade war: 90 per cent of enterprises are privately owned on the mainland, according to unofficial estimates.
Hong Kong, under its separate capitalist system, does not face the headache of having to deal with two different types of ownership, but the city has to be alert to any policy controversy and adjustment across the border. That is because Hong Kong is bound to suffer collateral damage, not just from the US imposing punitive tariffs on Chinese products, but any economic uncertainty on the mainland as well.
Over the decades, ownership reform has been an uphill economic and political battle for the country, and the debate over the pros and cons of state-owned and private enterprises is not going to end easily.
Xi’s pledge serves as a clear indicator for Hong Kong to feel and assess the latest economic pulse on the mainland at this challenging time, and to find the right positioning for the city 40 years after China’s reform and opening up.