Xi gets serious on boosting private sector as China economy slumps

SHANGHAI – Chinese President Xi Jinping finally appears to be extending an olive branch to private businesses battered in recent years by regulatory crackdowns and the world’s most restrictive Covid-19 policies.

Officials have made a series of high-profile actions designed to telegraph the Chinese government’s backing for private firms, as the nation’s post-pandemic recovery risks being caught in a confidence trap. The Chinese leader has vowed to treat foreign investors better and called for greater opening up in recent weeks.

That mission has seen top officials roll out the red carpet for Elon Musk and other executives, draw a line under a tech crackdown that tanked the world’s biggest initial public offering, and even visit US-based Bain & Company’s Shanghai office in an apparent end to immediate worries about a probe into consultancies that spooked global investors.

The positive moves in the technology sector spurred a 3.8 per cent jump on Thursday in the Hang Seng Tech Index, which is now on track for its best week this year.

China’s outreach comes as the nation’s post-pandemic recovery loses steam. The nation’s property market is showing signs of weakness, exports are shrinking and deflationary risks loom. Without “the lure of a rapidly growing economy,” China’s is finding it difficult to attract Western business, said Diana Choyleva, chief economist at Enodo Economics.

“Deflationary signs add to the impression of a troubled economy, making it harder for Beijing to recruit foreign capital to its efforts to counter US power,” she added.

Perhaps China’s clearest signal of a shift in attitude toward the private sector was the praise heaped this week on tech companies, which have seen billions in market value wiped out due to Xi’s regulatory crackdown.

Chinese Premier Li Qiang called Internet firms the “trailblazers of the era” in a meeting on Wednesday with senior executives from Alibaba Group Holding and ByteDance. Meanwhile, the nation’s top economic planning agency praised major online platforms for supporting the nation’s technological innovation.

China’s efforts to convince investors the tech sector is open for business will be hampered by recent moves to insert Communist Party officials on boards and reduce big firms’ market shares, said Andrew Collier, a managing director at Orient Capital Research.

“Investors know there are sharp limits on growth for tech firms and, therefore, investing in them is highly risky,” he said. “There will be some opportunities for new listings and short-term trading options but the overall sector is no longer as attractive as it once was.”

Still, the recent gestures at least imply authorities want to help create more jobs, bolster the real economy and drive the country’s competitive edge internationally, said Willer Chen, an analyst at Forsyth Barr Asia.

Renewed exchanges

China has already removed one major barrier to international business exchanges: Covid-19 controls that closed borders for three years. Members of China’s powerful Politburo met with Mr Musk and Jamie Dimon, chief executive officer of JPMorgan Chase & Co, in May, signaling that the return of such executives is welcome.

Business delegations from Japan and France have also visited this year, while the chief executive officers of Intel and Mastercard, as well as senior representatives from Western Digital and Qualcomm, are in China this week, according to an agenda seen by Bloomberg News.

Mr Xi himself greeted US billionaire Bill Gates in Beijing last month calling him “the first American friend I’ve met in Beijing this year.” That warm message contrasted with the tougher meetings the Chinese leader and other officials had with US Secretary of State Antony Blinken days later.

The world’s largest economies are locked in a trade war that’s seen both sides impose export controls. A survey by the American Chamber of Commerce in China earlier this year found that the Asian giant is no longer a top three investment priority for a majority of US firms, as geopolitical tensions simmer.

There are some early signs frictions are easing. US Treasury Secretary Janet Yellen said her meetings with Chinese officials in Beijing last week had put ties on a “surer footing.” Still, Ms Yellen told her counterparts in Beijing that “coercive” and “punitive” actions against US firms in China were a major concern for businesses.

Comments are closed.