Global Courant 2023-04-29 11:30:07
The private sector and foreign investors have become increasingly skeptical about doing business in China since Covid-19. The risks of closures, travel restrictions, disruptions to normal operations and supply chains, and liquidity shortages posed by China’s zero-Covid policy have considerable shaken their trust.
China has engaged in a multiple regulatory action on a wide range of industries, from platform economics to online finance to real estate. The crackdown signals that Beijing values loyalty of the private sector and financial stability over growth and access to capital. Beijing’s advocacy of “common prosperity” and opposition to “unlimited economic growth” has only increased business concerns regarding China’s aggressive redistributive policies.
The increasing antagonism and decoupling between China and the West and China’s decision to developself-sufficiency in technology and science” have led to enormous uncertainties for business operations and damaged business confidence. Many have wondered if China has one state-oriented and inward-looking economic development strategy and whether the reform and opening up era has taken place come to an end.
With China’s termination zero Covid policy at the end of 2022 and the recent announcement of a new line-up of top government leaders, 2023 is a critical year for China to recover to trust. China will have to show the world that in the post-pandemic era it still places a premium on opening up and pro-business policies, particularly for the private sector.
Chinese leaders have reiterated their determination to open up the country. The 2022 report of the 20th National Party Congress of the Chinese Communist Party emphasizes that China will “remain determined to reform and open up”, “promote high-level opening up”, and “facilitate the healthy development of the non-public sector”.
Speaking at the first plenary session of the new State Council term, China’s new Premier Li Qiang told his colleagues that promoting opening up, strengthening the private sector and attracting more foreign investment will help their top priorities.
Li stressed the importance of the private sector in improving China’s manufacturing visit the facilities of Build Your Dreams, one of the country’s largest electric vehicle manufacturers and a private company, on his first trip outside Beijing after becoming Prime Minister.
China’s newly elected Premier Li Qiang takes an oath after being elected at the Fourth Plenary Session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, China, on March 11, 2023. Image: Pool/Twitter/Screengrab
During this trip he also met a number of heads of large companies. Among these heads was the CEO of Xiaomi, one of China’s largest smartphone manufacturers and a private company in China.
At the meeting, Li promised a business-friendly environment. In addition to sending a message to the domestic private sector, the Chinese government has used international conferences to reassure foreign investors. For example, Chinese President Xi Jinping sent an unprecedented congratulatory letter to this year’s China Development Forum, reiterating that opening up is China’s fundamental national policy.
During the Forum, both Li and the Chinese Vice President Han Zheng meeting with CEOs of numerous multinational companies and promised to promote high-quality opening. Li stated clearly in his opening speech at the annual meeting of the Boao Forum of Asia that China will continue to increase market access with new measures and improve the business environment for state-owned enterprises (SOEs), private Chinese companies and foreign companies.
China has taken a government-wide approach to address private sector concerns. Xi emphasizes that the operation of state-owned enterprises must follow the market. This could be interpreted as meaning that state-owned companies should not enjoy privileges and have to compete in the market. The central government has measures taken to alleviate on the regulatory crackdowns on companies.
For example, it granted to publish licensed 44 foreign games for domestic release and approved more than a hundred new video game licenses for domestic companies and Didi Chuxinga domestic ride-hailing company, has been allowed to register new users.
Central government ministries and local governments have taken steps to promote domestic private sector development and expand opening. In conjunction with provincial governments, the Department of Commerce has established the “The year of investment in China” to attract more foreign investment through exhibitions and forums.
The provincial governments of Hebei, Shaanxi, Hainan and Hunan have issued policies to support the development of the private economy. Their measures include reducing government intervention in the operation of the private sector, providing financial and credit support to private companies through multiple channels, and allocating cash to outstanding private companies.
A Chinese worker at a spinning mill in Xingtai City, Hebei Province. Photo: Xinhua
Provincial leaders have also traveled abroad to attract foreign investment and widen the opening of their respective provinces. For example, Party Secretary Liu Ning of Guangxi traveled to Vietnam, Singapore and Malaysia March and April 2023signing of contracts worth a total of 89.1 billion RMB (US$12.9 billion).
The Chinese government has sent a clear signal of its full commitment to opening up and improving the business environmentespecially for the private sector. In the post-pandemic era, it is almost impossible for China to overturn its openness and support for the private sector.
It would be prohibitively expensive for Chinese leaders to withdraw support from the private sector after making statements at high-profile international events. The path dependence of China’s outward-looking economy also means that any actions against opening or developing private sectors would have enormous negative effects, not only in the economy, but also in politics and society.
Xirui Li is a PhD candidate at S Rajaratnam School of International Studies, Nanyang Technological University, and a Research Fellow at Intellisia Institute, Guangzhou.
This article was originally published by East Asia Forum and has been republished under a Creative Commons license.
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