Entrepreneurs feel Xi’s tight grip
GUO Junwen was a successful property developer in southwestern China when authorities threw him behind bars three years ago on charges involving land use and seized his business.
Now free, Guo – who still disputes the charges – says police are refusing to return money they still owe him under Chinese law.
“They said, ‘We have no choice, old Guo’,” Guo said in a telephone interview from the Indonesian island of Batam, where he lives part-time. “‘We have no fight against you, but this is what the higher-ups want’.”
China’s relationship with entrepreneurs like Guo, already complicated, has become strained. The Communist Party, which suppressed private enterprise after taking power in 1949, officially welcomed them to join its ranks early last decade, recognising that the country needed private business to power growth and innovation.
But the state is now asserting its authority over private business in new ways. President Xi Jinping has pushed for strengthening state-owned enterprises and has called on businesspeople to maintain loyalty to the party. His government has set clear restrictions for outbound investment and directed private firms to take stakes in those that are state owned. It is pushing some tech firms to give it stakes and board seats.
“They are getting nervous about how powerful these companies are becoming,” said Gary Rieschel, founder of Qiming Venture Partners, a Seattlebased venture capital company that invests in Chinese startups. Citing China’s two biggest internet companies, he added, “You look at the most valuable companies in the world, and after Amazon, Google and Facebook, you then have Tencent and Alibaba.”
China is showing signs that it is aware of unease in the private sector, which could become a problem as the country looks for new ways to grow. In an unusual move in September, China’s top leaders sought to assure entrepreneurs that it would support and protect their rights, a statement that cheered Guo.
“The central government’s policy is very positive,” Guo said. “But what is key is the issue of enforcement. The gap between the central government and local governments is still quite large.”
The government has also made it easier for small businesses to get loans and stepped up the country’s once-weak intellectual property laws. In a speech at the opening of the Communist Party Congress last Wednesday, Xi said the party would “inspire and protect the spirit of entrepreneurship”.
Private businesses have become a major driver of China’s development. They underpin its thriving internet scene and its growing consumer culture. Economists say China should give private businesses a greater role in a country that still relies on state-run industries.
At the same time, China’s tycoons have become a powerful constituency. The country now has 647 billionaires in US dollar terms, according to the Hurun Report, which tracks China wealth.
Analysts say state intervention has resulted in entrepreneurs’ losing confidence in China’s future. Private-sector investment has been weak, and many ty- coons have parked their money abroad.
Many others choose to simply lie low. “The savvy entrepreneurs have already worked out which way the wind is blowing,” said Rupert Hoogewerf, Hurun’s chairman.
Mo Shaoping, a human rights lawyer who represents Guo Junwen, said many of his entrepreneur clients were insecure. Looming over them is the fear that the government might make them pay for their “original sin” – crimes including bribery and fraud related to actions they took before China more clearly codified what is legal and what is not.
Mo is sceptical about the government’s claim to protect entrepreneurs, citing the lack of enforcement of private property rights. “In reality, the implementation of it has been terrible,” he said. “It’s equivalent to wastepaper.”
Guo was one of China’s new generation of entrepreneurs. In 1990, he toured the United States and was struck by its trappings of middle-class comfort. After that trip, he set up a computer company.
To register it, Guo had to go to 28 government departments to get his documents stamped with official seals, he said. He struggled to get bank loans at a time when the government was lending mostly to state-owned companies.
He set up a real estate company in 1993 and moved into hotel management four years later, owning four hotels across China. His company, Chongqing Xiya Industrial Group, employed more than 3,000 people.
He also built ties to government officials, but he felt he could not bridge the deep mistrust.
“Some officials who encounter entrepreneurs avoid us like we are the god of plague,” Guo said.”