Xi Jinping wants the private sector to thrive again
Summary
Within limits
Successful stockpickers need a particular set of skills—the ability to parse financial statements, decipher corporate strategies and read the market’s mood. In China they must also interpret Xi Jinping’s state of mind. Five years ago regulators began a sweeping crackdown on tech that drove Jack Ma, the founder of Alibaba, from public life. It also erased some $2trn in market value, as foreign investors fled Chinese stocks and the country’s private entrepreneurs lost faith in the Communist Party’s commitment to their success.
Now the mood is shifting back. On February 17th, when Mr Xi invited a group of tech bosses to a rare “symposium", Mr Ma was seated in the front row. The high-profile meeting sends a signal that the party wants private enterprise to thrive again—but within limits.
The symposium acknowledged that entrepreneurs have much to contribute to China’s economy. At the symposium Mr Xi shook the hand of DeepSeek’s founder, Liang Wenfeng. China’s rulers seem as impressed as everyone else by the success of the scrappy startup from Zhejiang province, which has rivalled the world’s best artificial-intelligence (AI) models at a fraction of the cost.
DeepSeek’s example has injected some liveliness into the stockmarket, lifting the share prices of tech firms listed in Hong Kong by 23% in the past month. The stocks of Alibaba and Tencent have surged in expectation of healthy ai-related demand.
The party wants to jump on this bandwagon and keep it rolling. China is still suffering from a long property slump, depressed consumer confidence and a shortfall of spending. It is stuck in its longest spell of deflation since the Asian financial crisis over a quarter of a century ago. A tech-fuelled stockmarket rally could provide some of the stimulus that has so far been lacking: a little greed to temper the anxiety.
Yet the party may also be warming to private enterprise because it now has less to fear from it. Five years ago, ambitious tech firms were busy amassing vast troves of data on citizens’ spending, borrowing and travel patterns. They knew more about the Chinese people than the party did. At the same time, they were transcending their home country, eagerly courting foreign investors and regulators. Didi, a ride-hailing giant, was so determined to list in New York on schedule in 2021 that it waved aside the misgivings of China’s data regulator.
Things are different now. China has tightened rules for overseas listings, bolstered the influence of party committees within private companies and imposed new laws on data collection and transfer. At the same time, America’s hostility to Chinese companies has driven them closer to their home market and government. If foreigners think these firms are “uninvestible", they must raise money at home. If America denies China access to vital inputs such as high-end computer chips, even private firms will join the party’s mission to achieve self-reliance.
Mr Xi’s symposium was not an empty gesture. The party is genuinely keen to revive the spirits of entrepreneurs and remove some bureaucratic obstacles to their progress. Yet Mr Xi also cautioned the tech bosses to “remember their roots" as they pursue success.
His vision for the private sector is not serving shareholders but promoting “Chinese-style modernisation". The party is happy, in other words, to offer support. But what it will not offer is freedom. Its embrace of the private sector is conditional on private capital aligning with the party’s goals.
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