The official documents released after the conclusion of the 20th Third Plenum of the Chinese Communist Party indicate that private enterprises seem to have gained some authority, while state-owned enterprises are to continue to “strengthen, optimize, and expand.” Less than a week after the meeting, the stock markets in China and Hong Kong experienced another sharp drop, reflecting market pessimism. Experts believe that the Third Plenum, touted as “deepening reform,” is actually further promoting the “advance of state-owned and retreat of private enterprises,” with private enterprises facing increased supervision, making it difficult for the market to regain confidence.
According to Xinhua News Agency’s dispatch, the Third Plenum put forward over 300 “reform” measures, with the related decrees on deepening reforms asserting the commitment to the so-called “two unwavering points”: consolidating and developing the public sector economy, encouraging, supporting, and guiding the development of the non-public sector economy, among others. The documents also emphasized the need to “promote state-owned capital and state-owned enterprises to become stronger, better and bigger,” and to push state-owned capital towards areas related to “national security, the lifeline of national economy,” and the “emerging strategic industries.”
Regarding private enterprises, the documents stated that a law to promote the private economy would be formulated, aimed at eliminating market access barriers, “promoting fair access in competitive areas of infrastructure to operators, improving long-term mechanisms for private enterprises to participate in major national projects. Supporting capable private enterprises in taking the lead in undertaking major national technological tasks, and further opening up major national research infrastructure to private enterprises.”
The documents also mentioned the need to address financing difficulties, high financing costs for private enterprises; strengthen pre- and post-supervision, regulate administrative checks involving private enterprises, among other measures.
Sun Guoxiang, Associate Professor of International Affairs and Business at Nanhua University in Taiwan, told Epoch Times that after all the discussions and reforms at the Third Plenum, state-owned enterprises are still being strengthened, while the “support” for private enterprises comes with stronger controls.
He believes that the law on promoting private enterprises being planned by the authorities may relax financing for private enterprises, but it will also come with tighter supervision. “In other words, even if private enterprises can obtain financing more easily in the future, the influence of the Communist Party within this financing will be stronger, with greater CCP elements involved.”
Sun Guoxiang stated that since Xi Jinping took office, the trend of “advancement of state-owned and retreat of private enterprises” has continued, leading to many potential problems, primarily restricting innovation and vitality, and undermining the confidence of private enterprises. The Chinese government seeks to strike a balance between state-owned and private enterprises, aiming to enhance the status of state-owned enterprises while also providing some confidence and space for private enterprises, but failing to find a balance due to the lack of true privatization in the market.
“Although the Third Plenum has outlined many decisions, the essence still lies in placing excessive restrictions on private enterprises, which are closely related to the nature of the Communist Party. If it truly wants to further deepen reform, it must reform itself,” Sun noted.
Regarding the support pledged by the CCP to capable private enterprises taking the lead in major national technological tasks, Sun Guoxiang said that these private enterprises must meet the CCP’s defined national strategic needs, surpassing the United States technically or achieving overtaking maneuvers on the world stage. However, in recent years, major private enterprises like Alibaba and Ant Group have been severely impacted by the government, as the CCP is highly concerned about large tech companies controlling big data.
“The CCP fundamentally does not believe in capitalism; it seeks political control and fears that the social influence of these large enterprises may sometimes surpass that of the CCP,” he added.
The Third Plenum emphasized “comprehensively strengthening the party’s leadership,” permeating all aspects of reforms. Sun Guoxiang pointed out that while the authorities claim to support private enterprises in leading major technological breakthroughs, their hands must also reach inside these enterprises.
Referring to the different attitudes of the CCP towards state-owned and private enterprises at the Third Plenum, Yan Jianfa, former professor of business management and director of international cooperation at the former Jianxing University of Technology in Taiwan, told Epoch Times that because the CCP’s economic path follows socialism and opposes capitalism, the reforms it talks about do not involve political reforms, diverging from the path taken by the Western world.
Yan Jianfa mentioned that the CCP’s approach has been too rough, on one hand, stealing technology from abroad and implementing so-called shifts from west to east, which has alarmed the United States. When Trump came to power, he targeted the CCP, and even after Biden assumed office, the pressure did not ease.
“Democratic societies have to distance themselves from it. Once cut off from money and technology, it becomes isolated, leading to internal strife, wasteful infrastructure projects, lack of respect for private businesses, and disregard for environmental concerns,” he emphasized.
However, the CCP has realized that its strategies are no longer viable, as the economy faces difficulties. Recently, the CCP has sought to mend ties with the United States. Yan Jianfa said that Western society has now fully understood the CCP, leaving it with little hope.
In recent years, private entrepreneurs in China have felt uneasy, either choosing to lie low or “moisten” their interests abroad. Stephen Roach, former Chairman of Morgan Stanley Asia, who once sang praises of the Chinese economy, expressed concern in an article written in June this year that the sentiment among the Chinese business community was pessimistic during meetings before the Third Plenum.
Prior to the Third Plenum, due to increasing pressures on local finances, local governments began scrutinizing corporate taxes, with several listed Chinese companies announcing investigations into tax payments dating back 30 years since mid-June. Although the authorities denied the speculation about a nationwide crackdown on tax evasion, the emergence of tax investigations across regions indicates otherwise. Netizens discussed fervently, suggesting that this pace was forcing private enterprises and job opportunities into a corner.
Sun Guoxiang remarked that the core policy of the CCP now focuses on maintaining so-called national security or the security of the CCP’s rule, and the documents released after the Third Plenum are unlikely to restore market confidence.
Yan Jianfa also noted that in recent years, private capital has continuously flowed overseas. The CCP government is now in dire need of funds, resorting to chasing money, imposing taxes, levying fines everywhere, as its power is waning, hoping that people will lend a helping hand.
“Private capitalists cannot easily trust the government’s actions. Since the crackdown on the internet industry in 2021, companies have either closed down or fled, with a new generation being unable to emerge. Foreign businesses, Taiwanese businesses, and local businesses have all fled, leading to high unemployment rates.”
Yan Jianfa believes that the authorities are now trying to woo enterprises, claiming they will open up, but no one believes them. “If Xi Jinping were to say today, ‘I restore all of Jack Ma’s assets,’ and then apologize domestically for the unjust suppression back then, allowing capitalists to resurface, the situation would be different. However, this would contradict his socialist path.”
A video of a speech by Chinese economist Xiang Songzuo from a few years ago has resurfaced on the internet. He said that private entrepreneurs’ prevailing attitude now is: “They need us is an inevitable choice, exterminating us is a noble ideal.”
Sun Guoxiang believes that the deteriorating environment for private enterprises will lead to slower economic growth, rising unemployment rates, declining innovation capabilities, increased social discontent, and intensified capital outflows. This situation did not emerge after the Third Plenum; it has been going on for a long time, and the remedies put forward now by the CCP are not genuine. Things are expected to continue to worsen in the future.
“We are currently in an accumulation process, with the CCP living off the leftovers. There is still some meat and broth in the warehouse that can be consumed. But if the meat and broth run out, collapse is imminent,” he added.
Yan Jianfa stated that Xi Jinping is increasingly tightening control over society, suppressing many dissenting voices. However, he is unable to resolve the current issues, and the situation continues to worsen, awaiting his downfall. “You will find that the rate of deterioration is fast every day. The stock market keeps falling, and the forex market is the same.”
The Third Plenum of the CCP concluded on July 18, seemingly failing to signal optimism in the economy but instead exacerbating market pessimism. On July 23, both the Chinese and Hong Kong stock markets experienced a sharp decline. The Shanghai Composite Index closed near the 2900-point mark, and on July 24, the Shanghai Composite continued to weaken, breaking below the 2900 level again, marking a new low since February 22, 2024, with the Hang Seng Index closing down by 158 points.