Weapons Of The Rich. Strategic Action Of Private Entrepreneurs In Contemporary China. Thomas Heberer

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СКАЧАТЬ Industry and Commerce of Anhui Province and a member of the People’s Political Consultative Conference called for assisting the private sector to overcome the ‘three difficulties’ facing this sector: lack of capital, shortage of manpower, and insufficient support of local governments to initiate and finance innovations.⁴⁷ In his speech at the World Economic Forum in Davos in 2014, Prime Minister Li Keqiang announced the above-mentioned promotion of ‘mass entrepreneurship and mass innovation’ to boost the Chinese economy and entrepreneurial innovation,⁴⁸ which was followed in 2015 by the promulgation of the ‘Opinion of the State Council on Some Issues and Measures for Boosting Mass Entrepreneurship’ (Guowuyuan, 2015). In mid-2017, the Chinese State Council adopted detailed guidelines for promoting ‘mass entrepreneurship’ in order to open up new avenues of employment, optimize China’s economic structure, and foster sustained growth. According to these guidelines the state shall facilitate business registration procedures, set up new credit channels and financial services for start-ups and promising enterprises, nurture collaboration between enterprises and research institutes in order to assist private enterprises in identifying and employing skilled workers and professionals, open new industries for private investment, and enact measures to strengthen the protection of property rights, intellectual property, and the legal status of private businesses (Guowuyuan, 2017). Prime Minister Li Keqiang reiterated the same points in September 2018, emphasizing the need to ‘intensify mass entrepreneurship’ and further facilitate businesses start-ups.⁴⁹ This would suggest that private investment and the role of private enterprises in generating economic growth and new job opportunities had become increasingly urgent. The fact that Li had to repeat the official line announced in 2017 revealed how difficult it was to implement new private sector policies.

      To support private enterprise development, in early 2018, the ‘Central Political and Legal Work Conference’, organized by the powerful ‘Central Political and Legal Work Commission’ (Zhongyang zhengfawei) under the Central Committee of the CCP, called for taking further measures to protect individual property rights to make private entrepreneurs feel safer in their business operations and to trigger entrepreneurial innovation. Concurrently, Guo Shengkun, head of the commission and member of the Political Bureau of the CCP, emphasized the need to handle the legal cases of entrepreneurs properly in accordance with the law. In fact, several court verdicts based on false accusations and flawed trials in recent years had been abrogated and the respective victims rehabilitated.⁵⁰ This has made observers speculate on the beginning of a new era in state–business relations.⁵¹

      Indeed, there is evidence that the Chinese leadership is facilitating private sector investment and development, for instance, in the defense industry, which is so far closely monopolized by public sector investment. This should foster more competition, trigger innovation, and reduce costs since the private sector may offer lower prices for defense and more dual-use products than SOEs are usually able to provide (Nouwens and Béraud-Sudreau, 2018). In fact, the Chinese leadership has shown a lot of trust in the private sector’s ability to spur innovation, which is badly needed in order to accomplish the party state’s modernization objectives.

      Arguably, the party state believes that the high-tech sector is paramount to materializing China’s ‘China 2025’ development blueprint, according to which China intends to become the world’s leading nation in ten high-tech industries by the year 2025. A study at the MERICS Institute in Berlin has highlighted that without the private sector, particularly small and medium high-tech enterprises, it will be hard to achieve this goal. Likewise, the Chinese leadership has identified SMEs as critical for its 2025 objectives. Generally, private enterprises should help to improve the performance of state-owned firms, if necessary by ‘mega-mergers’ between them. In addition, party organizations in private enterprises shall assist entrepreneurs to pursue technological upgrading and innovation (Zenglein and Holzmann, 2019).

       Challenges of Private Sector Development

      Despite all assurances by the central leadership, the private sector is still not treated on an equal footing with the public sector. For instance, as was reported in 2018 in the context of China’s debt-cutting efforts, private companies are perishing due to bond defaults, whereas state-owned firms, in spite of heavy debts amounting to more than 70 percent of China’s total corporate debt, are surviving due to massive state subsidies. This shows that, even now, the party state has not yet come to a conclusion on what kind of mechanisms must be implemented to solve the tremendous cash flow problems of Chinese enterprises. The recent crackdown on shadow banking and ‘illegal borrowing’ has only aggravated this problem (Tang, 2018).

      In June 2018, the Central Committee of the CCP and the State Council ordered that polluting enterprises should be technically upgraded, transferred to other areas in interior China, or simply be closed (Zhonggong Zhongyang Guowuyuan, 2018). All administrative levels were ordered to take immediate steps to implement this directive, and implementation would become an indicator of cadre performance evaluation. In August 2018, entrepreneurs and business associations complained that a large number of small and medium enterprises (the overwhelming majority of them private) were ordered to stop production or had even been closed. They pointed to the economic importance of the private sector and argued that they were interested in solving the environmental problems of their enterprises themselves. However, nobody would give technical advice or come up with transparent criteria or standards for those technologies considered environmentally friendly or not. The out-come of this would be that local authorities arbitrarily closed down companies, a large number of workers became unemployed, and social stability was negatively impacted.⁵²

      The rigid implementation of environmental policies restricts the private sector significantly. Obviously, the party state targets polluting industries, i.e. the more traditional sectors of the Chinese economy, to cease production. At the same time, it fosters high-tech enterprises to push for a modern, innovation-oriented private sector. The discussion on the future development of the private sector was also fueled by an investigative report published in 2016 which predicted that more than 95 percent of China’s private enterprises were going to vanish within the next 5 years, particularly those founded during the 1970s and 1980s. These entrepreneurs, it was argued, wanted to make money but were unwilling to learn how to be innovative. According to the report, the number of private enterprises running losses had increased tremendously, from 41,000 in 2011 to 59,000 in 2015 alone (Shui, 2016).⁵³

      In fact, the slowdown of China’s economic growth hit the private sector particularly hard, primarily small- and medium-sized enterprises. In order to support this important pillar of the Chinese economy, which also suffered due to a systemic credit crunch and high tax rates, a State Council executive meeting in August 2018 chaired by Premier Li Keqiang decided that smaller enterprises should enjoy better access to affordable loans. It was argued that financial institutions should be incentivized to be more supportive of smaller businesses, and regulatory oversight should be improved to ensure that credit services are made available for small- and medium-sized private companies. At the same time, it was suggested that taxes for these enterprises should be reduced. Li explained that small businesses play a critical role in creating jobs and that the well-known problems of credit access have to be solved as soon as possible (Guowuyuan, 2018). A few days later the ‘State Leading Group for Promoting the Development of Small and Medium Enterprises’ (Guowuyuan cujin zhong xiao qiye fazhan gongzuo lingdao xiaozu) admitted that small- and medium-sized enterprises in particular are still discriminated against in favor of SOEs and that the ‘Law on Promoting Medium and Small-sized Enterprises’ (Zhong xiao qiye cujin fa) promulgated in 2017 had so far not been properly implemented. A package of measures to solve the most urgent problems of private companies concerning access to bank loans and excessive taxes was then brought on track (Caxin Zhoukan, 2018).⁵⁴ To underscore the government’s determination to improve the credit situation for small and medium enterprises Li Keqiang visited the Nantong branch of the Bank of Jiangsu in November 2018, praising it as a model for providing such enterprises with low-interest loans.⁵⁵ A meeting of the Standing Committee of the State Council in December 2018 reiterated this determination.⁵⁶

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