The Chinese government offers love, but entrepreneurs don’t buy it

In the darkest moments of the financial crisis in 2008, former Chinese Premier Wen Jiabao a lecture A group of US government officials and business executives in New York. “In the face of economic difficulties, trust is more precious than gold,” he said.

The Chinese economy was then reeling. Today, he teeters, facing the dimest prospects in decades, and China’s leaders learn the hard way exactly what Mr. Wen meant.

Beijing unveiled a set of 31 points of Guidelines on Wednesday to boost private sector confidence. After three years in which the government cracked down on private business, eliminating innovation and the value of state-owned businesses, the document represents a near-concession by the Communist Party that its campaign failed spectacularly.

Stocks fell on the mainland and in Hong Kong, where many of China’s largest private companies are registered, on Thursday but regained ground on Friday. Some businessmen rushed to to praise Guidelines in official media. In private, however, others I interviewed dismissed the party pep talk with words that might be better translated as, “Save it for the afflicted.”

It is now clear that the country’s economic problems are rooted in politics. Restoring trust requires systemic changes that provide real protection for entrepreneurs and private property. If the party adheres to the political agenda of the country’s supreme leader, Xi Jinping, who has dismantled many of the policies that have unleashed China’s economy, its promises on paper will remain mere words.

One tech entrepreneur said the stock market’s reaction has been very candid. He said investors sensed how desperate the party was, and how meaningless the guidelines were.

In essence, he said, the question of trust is a question of the government’s credibility. He said Beijing had lost almost all of its credibility in the past few years. If she really wanted to remedy the situation, she could at least apologize for her mistakes. He cited a document issued by the party after the Cultural Revolution admitting some of its mistakes under the leadership of Mao Zedong from 1949 to 1976.

Others pointed to similar steps taken by the party at the time, such as rehabilitating oppressed cadres and intellectuals. At the very least, they said, the government should release Ren Zhiqiang and Sun Dao, the enterprising entrepreneurs who are serving 18 years in prison after being arrested in the latest crackdown.

Or, as another businessman told me, the government could reinstate the fines it levied on his company, which he thought were punishment for not toeing the party line and as revenue for an overstretched local government. He said he felt robbed.

None of the business owners I spoke to expected the government to take any of these steps. They all spoke on condition of anonymity for fear of retribution from the authorities.

The Communist Party has always been wary of the wealth, influence, and organizational skills of entrepreneurs. In the 1990s and 2000s, the party felt it needed a vibrant economy to rebuild its legitimacy after the Cultural Revolution and its crackdown on protesters in Tiananmen Square in 1989. The private sector has grown to contribute more than 50 percent of the country’s tax revenue, 60 percent of economic output, and 80 percent of urban employment, according to one. Mr. Shi in 2018.

But Mr. Xi is not a fan of the capitalist class. His economic thinking is best summed up by his motto “The largest and most powerful state-owned company.Under Mr. Xi, private companies and entrepreneurs have come under constant attack from the government and online commentators.

The situation has deteriorated since the beginning of the epidemic. In the past few years, China’s leadership has hunted down the country’s largest private companies, denigrated its most high-profile entrepreneurs, destroyed entire industries through wanton regulation, and refused to budge on Covid policies when many companies were struggling.

In 2021, a comment appeared titled “Everyone can feel it, a profound transformation is underway!” He was Reposted On many of the most important official media sites. The commentary praised the suppression of the private sector and a policy proposal known as “shared prosperity,” and said, “This is a return from groups of capital to the masses, a shift from a capital-focused approach to a people-centered approach.”

But after abruptly ending its “zero Covid” policies last December, the government seemed to realize it needed the private sector to help revive the economy, which has been battered by the pandemic and China’s deteriorating relations with the United States and other major trading partners. The recovery failed to meet expectations and business and consumer confidence fell.

“Why do so many people save money and cut back on spending? Why do ambitious entrepreneurs hesitate to plan and invest for the long term? Sun Liping, professor of sociology at Tsinghua University books In an article last month. “It’s because they feel uncomfortable.” For China to emerge from its slump, he said, the government needs to create a business environment that can provide reassurance.

What the business community in China is getting is a glamor attack.

“We have always considered private companies and entrepreneurs to be part of our ownership,” Mr. Xi He said In March, repeating the same from 2018. The chairman of the National Development and Reform Commission, the country’s economic planning agency, held a ceremony series to meetings With business leaders, pledging support.

Then came the 31-point guidelines. Most Chinese businessmen support the government and willingly follow what it says. However, comments made by some entrepreneurs on state media sound more like pledges of loyalty to the party than genuine expressions of confidence.

Bonnie Ma, CEO and President of social media and gaming giant Tencent, books“The CPC Central Committee attaches great importance to the private economy and private enterprises and has always treated us as part of its own,” echoing Xi. He pledged to “come to our role as ‘conductor’, ‘toolbox’ and ‘assistant’.”

Some entrepreneurs simply repeated a series of partisan statements.

Li Shufu, founder of Geely, one of the world’s largest automakers, He said“As a private entrepreneur, we must strengthen our confidence in development, continue to implement the “eight-eight strategy”, implement the “sweet potato economy”, take responsibility with courage, and carry forward the “four thousand souls.” The terms were all from Mr. Xi’s instructions on how to develop the economy of Zhejiang Province, where Geely is headquartered.

Lai Meisong, President of ZTO Express, a New York Stock Exchange-listed delivery company, He said The guidelines made him “feel warm and inspired”. He said his company will remain grateful to the party and follow its guidance, echoing what Mr. Xi said in March, “When private companies encounter difficulties, we provide support, and when they encounter confusion, we provide guidance.”

Ben Qiu, a lawyer who practices law in Hong Kong and the United States, summed up the executives’ comments in a comment on social media: “The Emperor’s clothes look great.” Some people noticed that most of the 31 points were not new. One of the goals that attracted a lot of attention was to “actively and prudently carry out the work of developing Party members” in the private sector. The guidelines asked entrepreneurs to be patriotic and support the party’s leadership of private sector work.

The private sector in China began to develop in the 1990s when the government attempted to separate the Communist Party from the business sector. This was by no means a righteous time – there was just too much corruption. But the government has tried to stay out of the way of the companies. No matter how many words of support the party puts forth now, it will be difficult for the private sector to feel confident.

Mr. Sun, a Tsinghua sociologist, republished a speech he gave in 2018: “Private enterprises do not need support. They need a normal social environment” regulated by the rule of law.