Advertisement
AbacusXi’s sudden embrace of private firms can’t solve China’s economic problems
- This is no conversion to free market principles
- With the state sector overleveraged, the Chinese president is looking elsewhere for a growth boost – but the idea just doesn’t add up
4-MIN READ4-MIN
In the last few weeks, China’s leaders seem to have rediscovered their enthusiasm for private enterprise.
Last month, President Xi Jinping pledged “unwavering” state support for private businesses, reinforcing his message days later at a widely reported meeting between government bigwigs and private business bosses.
This newfound official interest in the health of private companies appears to abruptly reverse the official attitude of recent years, summed up by the oft-repeated phrase “the state advances, the private sector retreats”.
Advertisement
So why the sudden conversion? It’s certainly not that Xi and his cohorts have been reading Milton Friedman, seen the light, and ditched their statist ideology in favour of free market principles.
Rather, the change has been forced on them by adverse economic conditions. With China’s economy already slowing, and now facing the additional threat of a protracted trade war with the United States, Beijing is anxious to juice up – or at least stabilise – economic growth.
Advertisement
In the past, the government would have ordered the state sector to ramp up investment, or eased its restrictions on house-buyers to get a boost from rising property prices and accelerated construction.
Advertisement
Select Voice
Select Speed
1.00x