Will Beijing truly 'reconcile' with Chinese private enterprises in 2023?

Even as China was ushering in the Year of the Rabbit, an online stir shook up the rather dull public opinion space. Set alit by the question of revitalising the private sector, the discussion was further fuelled by verbal sparring between economist-online celebrity Ren Zeping and internet personality Sima Nan, also known as a "professional villain" (职业坏人).

A day before Chinese New Year's Eve on 20 January, Ren posted on his Weibo account, urging the Chinese government to lock up the "villains" bent on eliminating private enterprises, as they damaged the ecology of a healthy market economy, created public anxiety and violated the country's general policy trajectory.

Former editor-in-chief of Global Times Hu Xijin jumped in to douse the fire but was rebuffed by Ren, who told him to stiffen his spine and not try to make a name for himself in the "frisbee fetching" (叼盘, a derogatory nickname given to Hu for bootlicking) world.

Sima, on the other hand, was adept at navigating this "warzone". First, rather than retaliating immediately, he reposted articles that exposed Ren's sore points, including Ren's former appointment as chief economist of the indebted Evergrande Group, and the fact that he had earned a high salary and represented interest groups.

After a quick "warm-up", Ren fired his shots, essentially lambasting Sima, alleging that the "whole internet knows that Sima jiatou (夹头, referring to an accident in the US where Sima's head got caught in the escalator) is the villain representative who destroys the confidence of the private sector". After that, Sima hit back saying that he was going to sue Ren. By the fourth day of Chinese New Year, financial writer Wu Xiaobo joined the "war" supporting Ren, proclaiming that they would never be on the side of the jiatous.

Just when things appeared to be coming to a head, the situation took a turn and the harshest Weibo posts on both sides were taken down. Based on how things ended, Ren seems to have gained the upper hand as his 20 January Weibo post still stands and he continues to speak up for the private sector.

On the other hand, Sima's rebuttals have all been removed, in an appearance of conceding defeat. But Sima is not going away quietly; he has turned to his personal YouTube channel (blocked in China) to defend himself and to continue to question, as he has done for the last two years, Lenovo's alleged cheap sale of state-owned assets.

Calm has returned to China's public opinion space. But thinking back, the war of words indeed sent some interesting signals: while the authorities have no wish to see the private sector debate intensify or to trigger a new left-right battle, Sima might really be next in the firing line.

The authorities will never admit this, but the rare reining in of Sima, even partial censorship, actually echoes Ren's call in a way - the "villains" Ren spoke of are essentially left-wing populists. The outcome of the sparrings proves that the authorities do not want the public opinion space to seem too "left".

This is the general atmosphere in China now. In fact, after the Central Economic Work Conference (CEWC) in December last year, China has been shifting its focus back to economic construction. The CEWC set the tone to boost confidence and improve public expectations, and support the growth of the private sector - these are all the priorities of China's economic work in 2023.

Simply put, efforts to right the economy cannot be put off any longer. Signs of China's economic slowdown are everywhere - its economy grew only 3% in the whole of last year, less than half of 2021. China's exports in December 2022 fell 9.9% year-on-year, and 1.2 percentage points lower than the previous quarter.

Funds are drying up for local governments, the market feels lost and anxious, and the growth of the private sector economy is at a record low. Figures show that fixed asset investments in 2022 grew 5.1% year-on-year, with private sector fixed asset investments growing just 0.9%, showing that private companies are bruised and battered with nothing left for investments; they are "lying flat", with some making a "run" (润, run) for it.

There are many reasons behind all this. Strict Covid controls have stifled economic activity as the Omicron variant ran rampant; the government's cleaning up and clamping down on technology companies and the education sector have dealt a hard blow to confidence among private companies; China-US hostilities have added to China's economic difficulties.

Internationally, businessmen and politicians are more concerned about geopolitics than economics, and are less optimistic about China. To make things worse, the Chinese population has contracted for the first time in 61 years.

China needs to revitalise its private sector economy in order to drive economic growth. Given this context, some have said 2023 will be the year when policies and private companies "reconcile". Since December last year, some local officials and agencies have tried to get friendly with private companies. For example, new Zhejiang party secretary Yi Lianhong visited Alibaba last month; Lenovo CEO Yang Yuanqing - beleaguered by Sima - attended the World Economic Forum in Davos just this month; Lenovo executive vice-president Liu Jun was invited to attend and speak at a conference of scientists and entrepreneurs in Tianjin.

Looking at the mid- to long term, there is enormous potential in China's huge market that is difficult to disregard. But to restore entrepreneurs' confidence in the short term, it is far from enough to just create popular hype and have officials put on a show of reconciling with companies. Besides, one can see at a glance that the hype is not carried through - in the "New Year war of words", there is no consensus on where private companies stand.

So, what else can China do to boost confidence? The CEWC said that "legal and institutional arrangements must be made to ensure the equal treatment of private enterprises and SOEs". This point can be implemented in a real sense; perhaps there will be some action at this year's Two Sessions (Lianghui).

One more point: many people are still not clear about China's considerations and policymaking process in deciding to relax Covid controls last year, and want a clearer explanation. While what happened to Jack Ma and tech company giants are far removed from most people, Covid control measures affect everyone and show clearly how politics affects each person. If major policy changes happen without warning and there is no proper explanation after, people will have a lingering sense of uncertainty, and it will take longer to restore confidence.

This article was first published in Lianhe Zaobao as "拿什么重振中国民企的信心？".

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