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Chinese authorities make an attempt to reach out to jittery private sector

China and its private sector: what lies ahead?

As uncertainty hit the Chinese private sector after the authorities went on an offensive targeting several tech giants, Vice Premier Liu He made an all-out effort to win back the confidence of the business community. China, the first country to have managed to put its economy back on the growth path, needs the private sector even more at this crucial juncture amid latent challenges posed not only by the aftermath of the pandemic but also due to the shifting geopolitical and global economic contours.

"China's policy to support the private sector hasn't changed, and won't change in the future," the Global Times quoted Liu as saying at the opening ceremony of the China International Digital Economy Expo 2021 held in Shijiazhuang.

Also read: E-comm giant Alibaba commits 100 bn yuan to support Xi’s ‘common prosperity’ drive

After the clampdown on the homegrown tech giants including Alibaba Group, Tencent Holdings and the private sector education companies, Beijing recently said that it now plans to focus on the country’s private equity and venture capital funds and stop them from launching “public offerings disguised as private placements and fight embezzlement of assets,” reported Bloomberg.

Even as Chinese public sector continues to stand tall, the private sector accounts for over 80 per cent of the total employment in the urban areas.

China’s unemployment rate in the urban areas stood at 5.1 per cent in July. “It has been consistent at around 5 per cent for a few years now..barring the sharp increase in 2020, when the country was hit by the pandemic,” an analyst said, adding that this is becoming a “huge challenge and a handicap” for the Xi Jinping administration.

While the urban unemployment rate has come down from January 2021—it was 5.4 per cent, according to data portal Statista—it has shown some increase from May onwards.

Though the spate of action taken against several private sector companies was aimed at tightening regulatory measures, as Global Times put it, uncertainty and anxiety level have surged among the private sector players and investors. That apart, Xi’s ‘common prosperity’ drive too is also being seen as a deviation from the earlier ethos of wealth creation. 

Also read: China cracks down on ride-hailing giant Didi, accuses firm of leaking data to US

“China will help the private sector play a bigger role in stabilizing growth and employment, adjusting structures, and encouraging innovation, Liu said, stressing the importance of protecting fair competition, and opposing monopolies in further developing the digital economy,” the Chinese government’s mouthpiece said while blaming the foreign media for calling it a crackdown.

“Though China has created a conducive business environment, it essentially needs managers and not entrepreneurs. The larger message for businesses is that they need to exercise extreme caution,” Shakti Sinha, director, Atal Bihari Vajpayee Institute of Policy Research and International Studies, MS University earlier told India Narrative.