Communist ideology is fundamentally at odds with private ownership, but businesses bring in money and bind regime leadership.
News Analysis
The annual legislative meeting of the Chinese ruling Communist Party ended on March 11th without passing the Private Economic Promotion Act, despite much hype in official propaganda.
Experts say this indicates that Beijing doesn’t know what to do in the private sector. We know that private companies make a significant contribution to the economy by creating employment, tax revenue and innovation, but communist ideology is fundamentally at odds with private ownership.
Therefore, one of the themes of this year’s party’s annual meeting was to stimulate consumption. Moreover, the private sector plays an important role.
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According to the latest official data available in 2023, private companies accounted for about half of exports, more than half of government tax revenue, more than 60% of gross domestic product (GDP), more than 70% of innovation, more than 80% of urban employment, and more than 90% of the total number of companies.
When meeting on March 5th, Chinese Prime Minister Li Qiang emphasized the importance of creating a fair and competitive market environment for both state-owned and private companies to flourish.
The draft of the Private Economic Promotion Act was highlighted in Li’s work report. However, this groundbreaking law (the first basic law focusing specifically on the development of a private economy) did not pass during the two sessions, contrary to external expectations.
Since the drafting process began last February, several state-run media have significantly promoted the bill as a political signal for CCP’s support for the private economy. They describe it as providing private companies with a “sensitivity sensitization” and ensuring legal protections against their rights.
A few days ago, many Chinese province propaganda outlets had published an article with the headline “xi jinping: I’ve always supported private companies.”
It was in stark contrast to 2022 when the same newspaper reported XI’s instructions. Capital should not be permitted to “act recklessly” and the parties “exclude private ownership.”
This was the story of the Chinese national media at the administration’s three-year regulations in the private industry between the second half of 2020 and July 2023.
The decisive moment came when authorities canceled the initial public offering for the Jack Mars Group in November 2020. Privately owned companies in the financial technology, e-commerce, private tutors and real estate industries were subject to scrutiny and had less access to money than state-owned companies. The CCP also called for special voting rights, boards and party committees of private companies as “golden stocks” for more stringent control.
Administration actions have been widely interpreted to undermine entrepreneurs’ confidence and reflect the policy direction of “provincial advancement, private sector retreat.”
Political commentator Tan Jingian said the CCP doesn’t know what to do with China’s private industry. He added that multiple stimuli did not turn the economy around, and then appeared to revive passion for the sector as a “temporary compromise.”
“XI has to recognize the status of an entrepreneur and relax his control over their business a little because of the economic recession,” Tang told The Epoch Times. “However, the driving force behind China’s economic issues is the ideology and systems of communism, which is essentially opposed to personal ownership and the free market.”
In Tang’s view, XI still prioritizes state-owned enterprises as it requires national champions to dominate the global market and fulfill ambitious industrial policies to move towards a CCP-led world order.
US-based economist Davy J. Wong told the Epoch Times that China is sticking to a self-defeating solution. They curbed private companies by granting privileges by state-owned enterprises and supporting private companies at the same time.
Essentially, the CCP is shaking between economic development and the need for political control, he added.
Private sector products earn star status
These annual conferences are key events for the CCP to set economic policies and send a message to the Chinese people. It is also known as “two sessions” because members of two political organizations met at the same time at two meetings within a week. One is China’s rubber parliament, and the other is an advisory body made up of businessmen and celebrities.
This year, several products from private businesses have been featured as heroes to promote what Propaganda Press called “a vibrant private economy.”
Among them was the Chinese Artificial Intelligence (AI) chatbot, which made global news by demonstrating cheaper AI alternatives to US products in January, and Ne Zha 2, which achieved box office revenue of over $2 billion and ranked the sixth highest total IMAX film on March 9th.
The administration used both to promote nationalist sentiment. Both products are affected by CCP. Deepseek self-sensors to do politically correct things on the CCP party line. According to Frank Xie, a professor of business and marketing at the University of South Carolina Eiken University, the film embodies the CCP-style attacks that are featured in its signature Wolfwario diplomacy.
Ne Zha is a family mythical figure in Chinese folklore. He is known for his magical power and courage to challenge authority. However, Xie said the film promotes communist attacks and disorder, thanks to an overdramatization of hatred, lawlessness and violence.
Lead producer, Chengdu Kekedou Animation Film and Television, has long benefited from the state’s support. Chinese media reported that in 2009 the Chinese Ministry of Culture listed the company as a supporter, and by 2012 it was included in the national animation brand building and protection program and received continued support from the Sichuan government.
While Deepseek doesn’t seem to have been backed by the state, Beijing is pushing for local governments to adopt AI models.
In Shenzhen, a city adjacent to Hong Kong, over 70 AI robots have already handled hundreds of government services, including tax returns and license renewals. Hospitals in Sichuan and Guangdong are offering medical consultations on AI support.
Given the strategic values of certain private companies, Beijing’s pledge to support the private sector is essentially “selective” and collaborates with its central interests rather than benefiting a wider group of small and medium-sized businesses, said Sun Kuo-Hsiang, an associate professor of international affairs and business at a southern university in Taiwan.
In his view, CCPs have used these private companies to achieve several strategic objectives, including technological advancements, ideological exports, and strengthening discourse power at the global stage. Administration leadership describes “discourse ability” as the ability to be spoken and heard.
In the long run, Sun warns that the independence of these private companies is likely to decrease as CCPs ensure that they strengthen their control and serve profits.
“Many people have been able to move to a “semi-state owned” model as state capital has increasingly influenced decisions towards the operational direction,” he told The Epoch Times.
Sean Tseng contributed to this article.
