China’s private economy, a vital driver of the nation’s growth, faces challenges and uncertainties amid the aftermath of the pandemic and regulatory campaigns that affected major private firms. In response, China’s leadership has unveiled strong commitments and specific policies to enhance support for private enterprises, recognizing their crucial role in economic development.
With over 50 million registered private firms—most of them small—the private sector contributes more than 60% of China’s GDP, over 70% of technological innovation, and more than 80% of urban employment. However, the pandemic severely impacted these businesses, and government regulatory actions targeting platform companies, property developers, and private tutoring firms added to the strain.
Recent data from the Peterson Institute for International Economics indicates that the private sector’s share, measured by market capitalization, fell below 40% in the first half of 2023, down from a peak of 55.4% in mid-2021. Economist Nicholas Lardy observed that annual investment in private-sector firms peaked in 2015, with the state-owned share increasing each year since.
In July, the State Council acknowledged the “urgent need” to “boost confidence in the outlook for the private economy,” announcing a comprehensive 31-point plan to support private enterprises. The plan includes measures to remove market-entry barriers via negative lists, eliminate policies hindering market unification and fair competition, and establish a legal environment that ensures equal treatment and protection of private entrepreneurs’ rights. Additionally, the government aims to improve tax incentives, reduce fees, address entrepreneurs’ concerns, and elevate their political status by involving them in legislative and advisory bodies.
Despite these initiatives, skepticism persists among entrepreneurs. Reports from Western media, such as The Wall Street Journal and Associated Press, highlight that private business owners remain cautious, awaiting concrete actions to accompany the government’s assurances.
Addressing these concerns, Premier Li Qiang has actively engaged with the private sector, visiting leading private businesses and hosting forums with entrepreneurs and economists. Li emphasizes the government’s commitment to supporting private enterprises and takes these interactions seriously.
Communist Party of China (CPC) General Secretary Xi Jinping has also underscored the importance of private businesses in creating wealth and promoting common prosperity. He affirmed that private enterprises are essential in both generating and fairly distributing wealth. To demonstrate his support, Xi visited Yiwu in Zhejiang Province, home to the world’s largest wholesale market for small commodities and a symbol of Chinese entrepreneurship.
As the government moves to implement its supportive policies, the private sector watches closely. Many entrepreneurs express cautious optimism but emphasize the need for tangible actions to rebuild confidence.
Reference(s):
cgtn.com
