China’s wary private sector takes wait-and-see attitude after Beijing pledges ‘unwavering support’

Despite a flurry of recent promises from Beijing, entrepreneurs have been left guessing about how much support the private sector can actually count on – and whether the government will go so far as to address long-running concerns about unfair competition with state firms.

China’s top leaders devoted large parts of their central economic work conference readout earlier this month to pledge “unwavering support” for the private economy, which accounts for more than 80 per cent of urban jobs and contributes to over 60 per cent of gross domestic product (GDP).

Analysts say authorities must immediately act on the pledges before they ring hollow. The rapid spread of Covid-19 in China following the abandonment of zero-Covid has added urgency, with many contact-intensive businesses facing a potentially ruinous stress test in the coming months.

“Despite the strong signal sent out from the [central economic work conference], reaction was pretty weak … The main reason is because they want to see how many substantial measures will be rolled out,” said Mao Zhenhua, co-head of Renmin University’s institute of economic research.

The year-end promises from the government come amid predictions of mounting challenges in 2023, with analysts tipping a global recession as the effects of high inflation and interest rates are felt.

Market expectations are for a GDP growth target of at least 5 per cent next year, meaning all sectors of the economy – but particularly the highly productive private sector – must be firing on all cylinders.

China’s private economy has grown from almost nothing in the late 1970s to its biggest source of employment today. More than 405 million people work for private companies or were self-employed in 2019, equivalent to about 29 per cent of the population.