China’s New Economic Support Policy Impedes Private Sector: Experts

Trucks loaded with coal queueing at a port in Lianyungang, in China's eastern Jiangsu Province, on May 24, 2023. STR/AFP via Getty Images

China’s State Council released a plan on July 19 to boost the private sector in a bid to develop a “modern China.” But experts believe the initiative won’t be able to strengthen China’s sluggish economy.

The document highlighted eight specific missions and 31 points to promote the development and growth of the private economy.

The state planner’s directive was widely circulated in major Chinese media and financial news platforms.

CCP’s Control

Cai Shenkun, a well-known Chinese economist and blogger, told the Chinese language edition of The Epoch Times that the document focused more on the leadership of the Chinese Communist Party (CCP) than the economy’s needs. “Under such premise, all policies would mean no practical significance,” said Mr. Cai.

The No. 1 goal or “overall requirement” is for the private sector to follow the ideology of “Xi Jinping Thought,” which centers on socialism with Chinese characteristics, he said.

Furthermore, one of the missions is to “uphold and strengthen the Party’s leadership and its supervision of the private sectors.”

“The CCP never learned that in a real economy, the government shouldn’t interfere with the market whether it goes up or down, it’s normal ... but the CCP continues to abuse the nation, the people, and the economy.

“Let the market freely perform. It will function when the CCP backs down,” said Mr. Cai.

Political commentator and economist Li Hengqing said Chinese leader Xi Jinping, despite his pledge to support the private economy, “has been suppressing the private sector for more than 10 years since he took office.”

“The private enterprises have been deceived too many times. During the past 70 years under the CCP’s rule, it never ceased plundering the properties of those private entrepreneurs and self-employed,” said Mr. Li.

He said that even though Beijing claimed that it supports the private sector and its development, everyone knows that the CCP’s policies change frequently.

Mr. Li believes the Chinese economy will continue going downhill within five to ten years. “No one will believe the claim [that the economy is doing well]. People won’t invest [in the Chinese market] like they did during the reform and opening up in the ‘80s,” he said.

The Market’s Reaction

The CCP’s new plan rattled the Chinese stock market. The A-share Shanghai Composite Index and Shenzhen Composite Index fell by 0.92 percent and 1.06 percent, respectively, on July 20. China’s three major indexes (Shanghai Composite, Shenzhen Component Index, and ChiNext Index) continued to fall on July 23.

On July 20, although Hong Kong’s Hang Seng Index rose as much as 1.39 percent in the intraday session, it dropped 0.13 percent at the close. The Hang Seng Technology Index fell 1.24 percent. The net outflow of funds from the Hong Kong stock market through the Hong Kong Stock Connect was 11.345 billion yuan (about $1.59 billion), and the net sale was 13.834 billion yuan (about $1.94 billion). The Hang Seng Index hovered around 19,000, and market experts expect it to fluctuate by less than 500 points this week.

Huang Shicong, a Taiwanese financial expert, said the market reflected the reaction of private enterprises and foreign investors.

Private enterprises can expect to be suppressed by authorities at any time, and Chinese regulators could target foreign firms at the behest of Beijing, especially since the newly revised anti-espionage law came to effect on July 1, warned Mr. Huang.

Chinese entrepreneur Sun Dawu is at a feed warehouse in his Dawu Group in Hebei Province, China, on Sept. 24, 2019. Noel Celis/AFP via Getty Images

He used Sun Dawu as an example. Mr. Sun, one of China’s prominent rural entrepreneurs and a vocal critic of the CCP, received an 18-year prison sentence in 2021 for “picking quarrels and provoking troubles,” a charge often used by the CCP to target dissidents.

“If he [Sun Dawu] stays in prison, it indicates that the suppression of the entire [private] economy has not ceased, and politics still dominates all,” said Mr. Huang.

He also said that with the new plan, Beijing might relax its control over the private sector, but it’s hard to trust the CCP. “If the CCP deceived you for the first time, you can forget it. But if you were deceived for a second or third time, then you must be out of your mind [for allowing it].”

International Relations

Mr. Huang said the revised Chinese anti-espionage law made foreign investors nervous.

Consequently, he said Taiwanese firms, for example, will gradually leave China and move production to the United States or other major countries that are part of the global supply chains. “They will move the manufacturing out of China. If China contributed 60 to 70 percent of its production capacity, now it will drop to 30 to 40 percent or even lower.”

Economist Davy Jun Huang agreed that international relations would significantly impact the Chinese economy.

He told The Epoch Times that 80 percent of Chinese economic growth in the past relied on policies. “Now, it’s reversed. The majority [of economic development] would rely on the international economy, global relations, and foreign capitals, and only 20 percent on policies,” he said.

According to Mr. Jun Huang, China’s economic structure has changed with the withdrawal of foreign capital. He believes the effect of a more robust private sector combined with state-owned enterprises on strengthening the economy will be small.

“If China fails to improve its stance in the international market, the international relations, and the utilization rate of foreign capital, it would be hard to achieve the economic output as expected,” he said.

Fang Xiao, Haizhong Ning, and Luo Ya contributed to this report.