In the darkest moments of the financial crisis in 2008, former Chinese Premier Wen Jiabao lectured a group of U.S. government officials and business executives in New York. “In the face of economic difficulties,” he said, “confidence is more precious than gold.”
The Chinese economy then was teetering. Today it’s sputtering, facing the dimmest prospects in decades, and China’s leaders are learning the hard way exactly what Mr. Wen meant.
Beijing unveiled a 31-point set of guidelines on Wednesday to bolster the confidence of the private sector. After three years in which the government cracked down on private companies, stamped out innovation and exalted state-owned businesses, the document represents a near-concession by the Communist Party that its campaign failed spectacularly.
Stocks on the mainland and in Hong Kong, where many of China’s biggest private enterprises are listed, fell on Thursday but regained their footing on Friday. Some entrepreneurs rushed to praise the guidelines in official media. But in private, others I interviewed dismissed the party’s pep talk in words that can be best translated as, “Save it for the suckers.”
By now it’s obvious that the country’s economic problems are rooted in politics. Restoring confidence would require systemic changes that offer real protection of the entrepreneur class and private ownership. If the party adheres to the political agenda of the country’s paramount leader, Xi Jinping, who has dismantled many of the policies that unleashed China’s economy, its promises on paper will remain just words.
The stock markets’ reaction was very honest, one tech entrepreneur said. Investors sensed how desperate the party is, he said, and how meaningless the guidelines are.
At its core, he said, the issue of confidence is a matter of government credibility. Beijing has lost nearly all its credibility in the past few years, he said. If it really wants to remedy the situation, it can at least apologize for its wrongdoings. He cited a document that the party issued after the Cultural Revolution admitting some of its mistakes under Mao Zedong’s leadership from 1949 to 1976.
Other people pointed to similar steps the party took then, such as rehabilitating persecuted cadres and intellectuals. At the very least, they said, the government should release Ren Zhiqiang and Sun Dawu, outspoken entrepreneurs who are serving 18-year prison sentences after their arrests in the recent crackdown.
Or, another entrepreneur told me, the government could return the fines it imposed on his company, which he believed served as punishment for not toeing the party line and as revenue for an overextended local government. He said he felt that he had been robbed.
None of the business owners I talked to expects the government to take any of these steps. They all spoke on condition of anonymity for fear of punishment by the 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 that it needed a vibrant economy to rebuild its legitimacy after the Cultural Revolution and the 1989 crackdown on the Tiananmen Square protesters. The private sector grew to contribute more than 50 percent of the country’s tax revenues, 60 percent of economic output and 80 percent of urban employment, according to none other than Mr. Xi in 2018.
But Mr. Xi is no fan of the capitalist class. His economic thinking can be best summed up in his slogan, “Bigger and stronger state-owned enterprises.” Under Mr. Xi, private companies and entrepreneurs have been under constant attack from both the government and online commentators.
The situation deteriorated since the start of the pandemic. In the past few years, China’s leadership went after the country’s biggest private enterprises, vilified its most celebrated entrepreneurs, decimated entire industries with arbitrary regulation, and refused to budge on Covid policies when many businesses were struggling.
In 2021, a commentary headlined, “Everyone can feel it, a profound transformation is underway!” was reposted on many of the most important official media websites. Praising the suppression of the private sector and the policy proposal known as “common prosperity,” the commentary said, “This is a return from capital groups to the masses, and a transformation from a capital-centered approach to a people-centered approach.”
But after ending its “zero Covid” policies abruptly last December, the government seemed to have realized that it needed the private sector to help revive the economy, which suffered from both the pandemic and China’s deteriorating relations with the United States and other key trading partners. The rebound has failed to meet expectations and business and consumer confidence has tanked.
“Why are many people saving money and cutting back on spending? Why are ambitious entrepreneurs reluctant to make long-term planning and investment?” Sun Liping, a sociology professor at Tsinghua University wrote in an article last month. “It’s because they feel uneasy.” He said that for China to get out of its slump, the government needs to create a business environment that can provide reassurance.
What China’s business community is getting is a charm offensive.
“We have always regarded private enterprises and entrepreneurs as part of our own,” Mr. Xi said 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, pledging support.
Then came the 31-point guidelines. Most Chinese businesspeople support the government and willingly follow what it says. Still, the comments from some entrepreneurs 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 enterprises and has always treated us as part of their own,” echoing Mr. Xi. He pledged to “adhere to our role as a ‘connector,’ ‘toolbox,’ and ‘assistant.”
Some entrepreneurs simply repeated a series of party pronouncements.
Li Shufu, founder of Geely, one of the world’s biggest 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 responsibility bravely, and carry forward the ‘Four Thousand Spirits.’” The jargon was all from Mr. Xi’s instructions on how to develop the economy of Zhejiang province, where Geely has its headquarters.
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 guidance, he said, echoing Mr. Xi, who said in March, “When private enterprises face difficulties, we provide support, and when they encounter confusion, we offer 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 fabulous.” Some people noted that most of the 31 points were not new. One goal that attracted a lot of 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 the work of the private sector.
China’s private sector started developing in the 1990s when the government tried to separate the Communist Party from business. It was not an all righteous time by any means — there was a lot of corruption. But the government tried to stay out of the way of the companies. No matter how many supportive words the party offers now, it will be hard for the private sector to feel confident.
Mr. Sun, the Tsinghua sociologist, reposted in May a speech he gave in 2018: “Private enterprises don’t need support. They need a normal social environment” regulated by the rule of law.