In the darkest moment of the 2008 financial crisis, former Chinese premier Wen Jiabao took a lecture A group of US government officials and business executives in New York. “Trust is more precious than gold when you’re facing financial hardship,” he said.
At that time, the Chinese economy was in a slump. Now, with the situation worsening and facing one of the darkest prospects in decades, China’s leaders are learning the hard way exactly what Mr. Wen was trying to say.
Beijing announced a 31-piece set. guidelines The announcement was made on Wednesday to boost confidence in the private sector. After three years in which the government repressed private enterprise, eradicated innovation and uplifted state-owned enterprises, the document marks a near-concession by the Communist Party that its election campaign has failed spectacularly.
Stocks in mainland China and Hong Kong, where many of China’s largest private companies are listed, fell Thursday but rebounded on Friday.some entrepreneurs rushed praise official media guidelines. But others I interviewed brushed off the Party’s pep talk, which is best translated privately as “save it for the bastards.”
It is now clear that the country’s economic problems are rooted in politics. Restoring trust will require institutional changes that truly protect the entrepreneurial class and private property rights. Promises on paper will be mere words if the party adheres to the political policies of the country’s supreme leader, Xi Jinping, who has dismantled many of the policies that have revitalized China’s economy.
One tech entrepreneur said the stock market reaction was very honest. He said investors sensed how desperate the party was and how the guidelines were meaningless.
He said the core of the trust issue was that of government credibility. He said the Chinese government has lost almost all credibility over the past few years. If you really want to improve the situation, at least you can apologize for your wrongdoing. He cited documents issued by the party after the Cultural Revolution admitting some of its mistakes under Mao Zedong’s leadership from 1949 to 1976.
Others pointed to similar measures taken by the party at the time, including the rehabilitation of persecuted cadres and intellectuals. They argued that, at a minimum, the government should release outspoken entrepreneurs Ren Zhiqiang and Sun Dawu, who were arrested in the recent crackdown and are serving 18-year prison sentences.
Alternatively, another entrepreneur told me that the government might be able to reimburse the fines it imposed on his company. He saw it as a punishment for not adhering to party policy and as revenue for overstretched local governments. He said he felt he had been robbed.
None of the business owners I spoke to expected the government to take these steps. All spoke on condition of anonymity for fear of being punished by authorities.
The Communist Party has always been vigilant about the wealth, influence and organizational power of entrepreneurs. In the 1990s and 2000s, the party felt it needed a vibrant economy to rebuild its legitimacy after the Cultural Revolution and the 1989 crackdown on Tiananmen Square protesters. According to none other than the private sector, the private sector has grown to contribute over 50 percent of the country’s tax revenue, over 60 percent of economic output, and over 80 percent of urban employment. Xi in 2018.
But Mr. Xi is not a fan of the capitalist class. His economic thinking can best be summed up in his slogan.Bigger, stronger state-owned enterprises.Under Mr. Xi’s rule, private companies and entrepreneurs have come under constant attack from both the government and online commentators.
Things have gotten worse since the pandemic started. In recent years, China’s leaders have pursued the country’s largest private companies, denigrated its most prominent entrepreneurs, crippled entire industries with arbitrary regulation, and refused to change coronavirus policies at a time when many companies were in trouble.
In 2021, the commentary headlined, “Big changes are underway that everyone can feel!”was reposted Featured on many of the most important official media websites. The commentary praised the suppression of private enterprises and the policy proposal called “co-prosperity,” saying, “This is a return from the capitalist group to the masses, a shift from capital-centered to people-centered.”
But after abruptly ending its “zero-corona” policy last December, the government appears to have realized that an economy hit by both the pandemic and deteriorating relations between China and the United States and other major trading partners will need the help of the private sector to recover. The recovery has not lived up to expectations and business and consumer confidence has waned.
“Why are so many people saving money and holding back on spending? Why are ambitious entrepreneurs reluctant to plan and invest in the long term?” Liping Sun, Professor of Sociology at Tsinghua University I have written in an article last month. “It’s because they feel insecure.” He said the government needs to create a reassuring business environment for China to emerge from the recession.
What the Chinese business world is getting is a charm offensive.
“We have always seen private companies and entrepreneurs as part of us,” Mr. Xi said. Said In March, it repeated what it had done in 2018. The head of the National Development and Reform Commission, the country’s economic planning agency, said: series of meeting He worked with business leaders and pledged their support.
Then came the 31-item guidelines. Many Chinese businessmen support the government and are happy to do what it says. Still, some entrepreneurs’ comments in state media read more like pledges of loyalty to the party than genuine statements of confidence.
Pony Ma, CEO and chairman of social media and gaming giant Tencent, said: I have written“The Party Central Committee attaches great importance to the private economy and private enterprises and has always treated us as part of them,” Xi echoed. “I will stick to my role as ‘connector,’ ‘toolbox,’ and ‘assistant,'” he vowed.
Some entrepreneurs simply repeated a series of party declarations.
Li Shufu, the founder of Geely, the world’s largest automaker, Said“As private entrepreneurs, we must strengthen our confidence in development, further implement the ’88 Strategy’, implement the ‘Sweet Potato Economy’, bravely take responsibility, and promote the ‘Four Thousand Spirits’.”
Lai Misong, chairman of ZTO Express, a delivery company listed on the New York Stock Exchange, said: Said This guideline “gave him a warm feeling and inspiration”. He echoed Xi, who said in March that he would “provide support when private companies face difficulties, and provide guidance when they encounter turmoil,” and said the company will continue to thank the party and follow its lead.
Ben Chiu, a lawyer in Hong Kong and the United States, summed up the executives’ comments in a social media comment, saying, “The emperor’s outfit looks great.” Some pointed out that most of the 31 items were not new. One of the goals that attracted much attention was to “implement party membership training activities actively and carefully” in the private sector. The guidelines called on entrepreneurs to be patriotic and to defend the party’s leadership of private sector initiatives.
China’s private sector began to develop in the 1990s when the government tried to separate the Communist Party from corporations. It was never an era of justice, and there was a lot of corruption. But the government tried not to get in the way of business. It will be difficult for private companies to gain confidence no matter how many words of encouragement the party gives to them now.
Sun, a sociologist at Tsinghua, reposted in May a speech he gave in 2018: “Private companies don’t need support. They need a normal social environment regulated by the rule of law.
