Beijing’s policymakers need to ditch outdated doctrines and introduce new theories to accommodate the private economy in China, according to a prominent economist, as part of important moves to settle the fragile nerves of entrepreneurs and rebuild their confidence.
Private investment in China has defied Beijing’s efforts after it rolled out a 31-point package in July and remained in contraction in the first 10 months of the year.
“We sorely need new guiding theories to spell out and ram home the nature and contributions of the private sector, its role in the common prosperity drive and how it relates to the state sector,” said Teng Tai, a member of a think tank under the semi-official All-China Federation of Industry and Commerce.
“The Chinese economy will surely flourish if private firms can thrive,” Teng added in a column published on Chinese news portal Sina last week.
Reviving investor confidence, including both private entrepreneurs and foreign-funded companies, should be a key task for China’s leadership, who are set to convene at the central economic work conference – typically held in December in Beijing – to map out the economic and policy direction for the coming year.
Authorities have pledged “unwavering support” for private firms and vowed to make them “bigger, better and stronger” to match the backing enjoyed by state-owned enterprises.
Beijing often highlights the importance of the private sector, which accounts for half of China’s fixed-asset investment and government tax revenues, as well as 60 per cent of its gross domestic product and 80 per cent of its urban jobs.
But private businesses, including internet platforms, tutoring services, as well as the gaming and property sectors, were hit hard by regulatory campaigns in the past several years.
There were also calls from former officials, economists and key opinion leaders for the elimination of private ownership, which had initially thrived in 2018.
Beijing, though, should update its theories concerning the economy and ownership to institutionalise guarantees and protections and instil optimism in the private economy, said Teng.
He warned against a “textbook-bound mindset”, including using Marxist methods and words such as “exploiter” to label China’s private entrepreneurs.
New theories are, Teng added, pivotal in dispelling misgivings and misunderstandings, and should recognise the legitimate wealth that private entrepreneurs have amassed via their management skills, capital investment, innovation and risk-taking.
All businesses should be treated equally in our socialist market economy
Teng Tai
He added the public should be guided to respect the contributions and fortunes of the private sector.
“All businesses should be treated equally in our socialist market economy,” said Teng, who is also the director of the Beijing-based Wanb Institute.
July’s plan, seen as Beijing’s strongest message ever to China’s private sector, included reassurances of increased theoretical study, as well as publicity, to guide the public to “correctly understand and respect” the wealth of private entrepreneurs.
It also vowed to fight incorrect notions that belittled or denied the role of the sector, although private businesses have remained unconvinced.
In September, a private economy development bureau was also created under the National Development and Reform Commission (NDRC) to shoulder the responsibility of coordinating a raft of new support policies.
And on Monday, a 25-point policy package was announced by eight financial regulators and business chambers to help private businesses obtain more and easier funding.
The document was co-issued by the People’s Bank of China, National Administration of Financial Regulation, China Securities Regulatory Commission, State Administration of Foreign Exchange, the NDRC, Ministry of Industry and Information Technology, Ministry of Finance and All-China Federation of Industry and Commerce.
It promised to increase the proportion of loans for private enterprises and proactively tailor financial services to the needs of the industrial and supply chains.
The government must articulate the role of the private sector
Yang Weimin
It also vowed to ensure “continuous funding services” for private enterprises, warning against “blindly stopping, suppressing, withdrawing or cutting off loans”.
Private businesses encountering difficulties but with competitive products, projects or technologies would also be provided with more advanced funding, the document added.
Private developers are also ensured “stable credit and funding channels, including loans and bonds”.
Yang Weimin, a long-term aide to former economic tsar Liu He at the Office of the Central Financial and Economic Affairs Leading Group, had earlier echoed the calls for more policy support.
“The government must articulate the role of the private sector and abide by the law to create stable expectations for businesses to thrive,” he said in an interview with mainland media outlet Caixin in October.
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