Opinion | Xi’s reassurances to private sector are step in right direction

The private sector may have powered China’s economic rise, but when the economy faces rainy days, state-owned enterprises have been the first to be thrown a financial lifeline. Likewise, when Beijing tightens lending, private businesses have been the first to find the credit taps turned off. That has gone with the territory of being in the private sector in a socialist country under Communist Party rule, even though it accounts for 60 per cent of gross domestic product and 80 per cent of jobs. Financial and market crises have made no lasting difference.

But the undermining of business confidence by an escalating trade war with the United States might. It has prompted a very significant shift in Beijing’s message on the role of the private sector, with the most recent instance an unprecedented forum convened by President Xi Jinping on Thursday to hear the views of dozens of business representatives.

Xi’s morale-boosting remarks to the gathering followed repeated signals of a more proactive recognition of the role of the private sector. They included a letter from the president to business owners conveying positive sentiments about it, and an interview by state media with his economic policy tsar, Liu He, who criticised state lenders for giving preferential treatment to SOEs at the expense of private companies. Xi reportedly told one business delegate: “I am here today to boost your confidence.” And he made an explicitly inclusive reference to the private sector, which he said could only get stronger, and encouraged financial support for it.

Specifically he repudiated remarks by some people “doubting” the future role of the private economy, or arguing that state intrusion in private businesses was intended to control them.

In a further bid to shore up confidence among businessmen Xi said Beijing would protect enterprises and seek new ways to help them, including with tax cuts and bailouts.

One of the issues dividing China and the US has been the state’s role in the economy. The positive effect of Xi’s remarks was reinforced by news of what US President Donald Trump described as a good phone conversation with Xi, and negative market sentiment was dramatically reversed by tentative agreement on a bilateral summit between the two in a month, raising hopes of an early end to the trade war. Regardless of Xi’s support and the outcome of the summit, it is unrealistic to think the private sector will no longer face systemic political and ideological resistance. If it is truly to be “one of us”, to paraphrase Xi’s message, Beijing must come up with concrete measures to ensure a fairer, more competitive business environment.