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From Disciplinarian to Cheerleader: Why China Is Changing Its Tone on Business

China’s leader, Xi Jinping, used his annual New Year’s Eve address in 2021 to laud the patriotic achievements of the Chinese people. In a year marked by crackdowns on tech companies, curbs on borrowing by the country’s property firms, and a refusal to budge on restrictive Covid policies, Mr. Xi made no direct mention of the economy or business.To get more China finance news 2023, you can visit shine news official website.

In the first minute of his most recent address, Mr. Xi extolled the country’s economy, still the world’s second largest, and explained that China had cut taxes and fees as well as introducing measures “to ease the burden on businesses.” A few weeks earlier at a meeting to lay out policy objectives for 2023, Mr. Xi and other top leaders expressed the need to bolster the economy and pledged support for the private sector.

“The Chinese economy enjoys strong resilience, tremendous potential and great vitality. The fundamentals sustaining its long-term growth have remained strong,” Mr. Xi said in the address, while urging the Chinese people to “stay confident.”

Taking their cues from the top, Chinese officials in recent weeks have been embracing the kind of business-friendly language that has been absent in recent years. With the same fervor that it once defended the necessity of all-out war against Covid, China is waging a campaign to persuade businesses that it is prioritizing economic growth.
Mr. Xi’s hallmark initiatives of only a few years ago are starting to be reversed. After recently forcing Jack Ma, China’s most famous tech tycoon, to relinquish control of a prized asset, there are signs that Big Tech may be finally be emerging from the regulatory doghouse.

As when China suddenly reversed course on its “zero Covid” strategy a month ago, this latest about-face is acknowledgment of the fragile state of the nation’s economy. Growth is at its slowest rate in decades, hampered by a property market in crisis, a lack of promising jobs for young people, consumer confidence shaken by years of rigid Covid policies and depleted local government coffers.
In recent years, China had abandoned a pro-business market overhaul in favor of a more state-controlled economy, in which business interests were secondary to the goals of the Chinese Communist Party. China’s handling of the pandemic, and the growing ideological influence on its economic policies, have caused many business people to question whether the country remains a reliable place to operate. Companies like Apple have been looking with greater urgency to diversify outside China.

After reining in the influence of powerful internet conglomerates through aggressive regulation, China’s central bank said this week that it was relaxing the oversight of technology companies. Through a series of measures starting last month, China has progressively rolled back restrictions on heavy borrowing by property developers and has indicated plans to continue doing so.

China’s finance minister, Liu Kun, told state media that the country planned to spend heavily in 2023 to support an economic recovery through a mixture of stimulus spending, subsidies and tax cuts.“There’s a lack of trust right now, and that’s not going to go away,” said Duncan Clark, the chairman of BDA, a Beijing-based investment advisory firm. He said businesses now assumed a greater risk with operating in China than they had in the past.

Xiang Songzuo, a Chinese economist and a former official at the People’s Bank of China, said he did not think that fundamentally there had been a major change in the Chinese leaders’ approach to business, but that their language had softened because of the sluggish economy.

In the current economy, China needs private firms to invest more, hire more and pay more in taxes. As a result, the tone has changed to “reassure and pacify them,” Mr. Xiang said. But tension remains because China wants to maintain control over private companies and will not entrust oversight purely to the markets or existing laws.