Private sector in need of shot of confidence
A crisis of confidence is spreading among Chinese entrepreneurs: the future has never been so uncertain for many of them, and several assumptions that have been taken for granted over decades now seem to be on shaky ground.
Decisions made by entrepreneurs matter a lot to the country’s future. China’s economic boom has largely been rooted in the success of its private sector. Beijing admits the private economy has contributed to half of the country’s tax revenues, 60 per cent of gross domestic product, 70 per cent of technology innovations, 80 per cent of jobs and 90 per cent of business registrations.
The private sector is the source of China’s economic growth, vitality and security. But it also bears the brunt of costs stemming from the country’s immature market system, lack of private property protection, and extensive state interventions. The “dynamic zero” Covid-19 policy may be the last straw.
Messages from the Communist Party’s national congress later this month, which will include a small number of delegates from the private sector, will be vital for entrepreneurs when they devise business plans and even make personal choices.
Of course, the most pressing issue for the private economy is ascertaining when China’s zero-Covid approach will end. While the party congress is unlikely to offer any detailed review or key announcement regarding the Covid policy, it is still important for entrepreneurs to expect that the pandemic curbs will come to an end. But if Beijing doubles down on its current pandemic measures, it will deal a heavy blow to the already fragile business sentiment.
More importantly, the Communist Party’s take on the state of private business will be keenly watched. The party’s decision to grant membership to business owners two decades ago greatly boosted entrepreneurship, but the ideological disrepute attached to capitalistic pursuits has never really disappeared.
The 20th party congress should reaffirm Beijing’s support of entrepreneurship to stamp out any lingering debate on whether China should phase out “private businesses” or even “private ownership”.
As China’s headline growth rate drops below 3 per cent, the prosperity of the country is at stake. If party leaders regard economic growth as necessary to the country’s rise and a precondition for the realisation of the “Chinese dream”, they should send clear messages to shore up confidence among the country’s entrepreneurs.