In the darkest moments of the 2008 financial crisis, former Chinese Premier Wen Jiabao gave a lecture to a group of US government officials and businessmen in New York. “In the face of economic difficulties,” he said, “trust is more precious than gold.”
The Chinese economy then faltered. Today it sputters, facing its worst outlook in decades, and China’s leaders are learning the hard way just what Mr. Wen meant.
Beijing unveiled a 31-point set of guidelines on Wednesday to bolster private sector confidence. After three years of the government cracking down on private companies, stamping out innovation and elevating state-owned enterprises, the document represents a near-admission by the Communist Party that its campaign failed spectacularly.
Stocks on the mainland and in Hong Kong, where many of China’s largest private companies are listed, fell on Thursday but rallied on Friday. Some entrepreneurs rushed to praise the guidelines in official media. But privately, others I interviewed dismissed the party’s pep talk in words best translated as, “Save it for the suckers.”
It is now clear that the country’s economic problems are rooted in politics. Restoring confidence requires systemic changes that provide real protection for the entrepreneurial class and private property. If the party adheres to the political agenda of the country’s foremost leader, Xi Jinping, who has dismantled many of the policies that unleashed China’s economy, its promises on paper will remain mere words.
The stock market response has been very fair, said one tech entrepreneur. Investors felt how desperate the party is, he said, and how pointless the guidelines are.
At its core, he said, the issue of trust is one of government credibility. Beijing has lost almost all of its credibility in recent years, he said. If it really wants to remedy the situation, it can at least apologize for its misdeeds. He cited a document issued by the party after the Cultural Revolution in which it admitted some of its mistakes under Mao Zedong’s leadership from 1949 to 1976.
Other people pointed to similar steps the party was taking at the time, such as rehabilitating persecuted cadres and intellectuals. They said the government should at least release Ren Zhiqiang and Sun Dawu, outspoken entrepreneurs serving 18 years in prison following their arrests in the recent crackdown.
Or, another entrepreneur told me, the government could pay back the fines it imposed on his company, which he said served as punishment for not following the party line and as revenue for an overburdened local government. He said he felt he had been robbed.
None of the entrepreneurs I spoke to expect the government to take any of these steps. All spoke on condition of anonymity for fear of punishment by authorities.
The Communist Party has always been wary of the wealth, influence and organizational skills of entrepreneurs. In the 1990s and 2000s, the party felt it needed a vibrant economy to rebuild its legitimacy after the Cultural Revolution and the crackdown on Tiananmen Square protesters in 1989. The private sector was growing, contributing more than 50 percent of the country’s tax revenue, 60 percent of economic output and 80 percent of urban employment, according to none other than Mr. Xi in 2018.
But Mr. Xi is not a fan of the capitalist class. His economic thinking can best be summed up in his slogan: “Bigger and stronger state-owned enterprises.” Under Mr Xi, private companies and entrepreneurs are under constant attack from both the government and online commentators.
The situation has worsened since the start of the pandemic. In recent years, China’s leadership went after the country’s largest private enterprises, slandering its most celebrated entrepreneurs, decimating entire industries with arbitrary regulation and refusing to budge on Covid policies when many companies struggled.
In 2021, one commenter headlined, “Everyone is feeling it, a profound transformation is underway!” was reposted on many of the major official media websites. The commentary praised the suppression of the private sector and the policy proposal known as “common prosperity”, saying: “This is a return of capital groups to the masses, and a transformation from a capital-oriented approach to a people-oriented approach.”
But after abruptly ending its “zero Covid” policy last December, the government seemed to realize it needed the private sector to revive the economy, which was suffering from both the pandemic and China’s deteriorating relations with the United States and other key trading partners. The recovery has not lived up to expectations and business and consumer confidence has fallen.
“Why do many people save money and cut back on expenses? Why are ambitious entrepreneurs reluctant to make long-term planning and investments?” Sun Liping, a sociology professor at Tsinghua University, wrote in an article last month. “It’s because they’re uncomfortable.” He said that for China to emerge from its malaise, the government must create a business environment that can provide reassurance.
What the Chinese business community is getting is a charm offensive.
“We have always considered private companies and entrepreneurs as part of ours,” said Mr. Xi in March, repeating himself from 2018. The head of the National Development and Reform Commission, the country’s economic planning agency, held a series of meetings with business leaders and pledged support.
Then came the guidelines with 31 points. Most Chinese business people support the government and like to follow what it says. Yet some businessmen’s comments on state media read more like pledges of loyalty to the party than authentic expressions of confidence.
Pony Ma, chief executive and chairman of the social media and gaming giant Tencent, wrote: “The party’s central committee attaches great importance to the private economy and private enterprise, and has always treated us as part of their own company,” Mr. Xi. He pledged to “stick to our role as ‘connector’, ‘toolbox’ and ‘assistant’.”
Some entrepreneurs simply repeated a series of party statements.
Li Shufu, founder of Geely, one of the world’s largest automakers, said: “As a private entrepreneur, we must strengthen our confidence in development, further implement the ‘eight-eight strategy’, implement the ‘sweet potato economy’, take courageous responsibility and carry on the ‘four thousand minds’.” The jargon all came from Mr Xi’s instructions on how to develop the economy of Zhejiang province, where Geely is headquartered.
Lai Meisong, the chairman of ZTO Express, a delivery company listed on the New York Stock Exchange, said the guidelines “made him feel warm and inspired”. His company will remain grateful to the party and follow the party’s lead, he said, echoing Mr Xi, who said in March: “When private enterprises encounter difficulties, we provide support, and when they encounter confusion, we provide guidance.”
Ben Qiu, a lawyer who practices law in Hong Kong and the United States, summed up the executives’ comments in a social media comment: “The emperor’s clothes look fantastic.” Some people commented that most of the 31 points were not new. One goal that attracted much attention was to “actively and prudently carry out the work of developing party members” in the private sector. The guidelines asked entrepreneurs to be patriotic and to uphold the party’s leadership over private sector work.
China’s private sector began to develop in the 1990s when the government attempted to separate the Communist Party from the corporate sector. It was not a fair time by any means – there was a lot of corruption. But the government tried to avoid the companies. No matter how many words of support the party offers now, it will be hard for the private sector to have confidence.
Mr. Sun, the Tsinghua sociologist, reposted in May a speech he gave in 2018: “Private companies don’t need support. They need a normal social environment”, regulated by the rule of law.