The Chinese government has started to “restore” the private economy by promising not to discriminate between private and state-owned companies. This is to revive private companies to rebound the sluggish economy.
According to Chinese media such as the state-run China Daily on the 20th, the Communist Party of China and the State Council announced a comprehensive support policy for private companies through an opinion on promoting private economic development and growth the previous day. The main point is that “state-owned, private, and foreign-invested companies should be viewed equally and treated equally.” It is interpreted as meaning that it will redistribute government support that was focused on state-owned companies.
Private companies are encouraged day after day due to anxiety over the ‘economic downturn’
China’s revival of private companies has been remarkable in recent years. Premier Li Chang of the State Council, who is in charge of China’s economic policy, presided over a meeting of Internet platform companies on the 12th and said, “We need to establish a regular communication channel with the government and platform companies to understand the difficulties and demands of companies in a timely manner.” It is a message that it will listen to the difficulties of so-called big tech companies that have been subject to regulations by the Chinese government over the past few years, such as Alibaba, Meituan, and Didi Chuxing.
The Chinese government’s move is based on anxiety over the economy downturn. Last month, the producer price index (PPI), which reflects the manufacturing economy, fell 5.4% year-on-year, and the consumer price index (CPI), which shows domestic demand, recorded 0%, raising concerns over deflation. The recently announced economic growth rate in the second quarter of this year was only 6.3%, far below the market forecast of 7%.
However, it remains to be seen whether China’s decision to take advantage of private companies will lead to practical deregulation. China has tightened regulations on big tech by imposing fines of trillions of won on Alibaba, China’s leading IT giant, in 2020. The lukewarm response from overseas investors is largely due to concerns that China can tighten regulations at any time.