In the context of China’s economy progressively declining, the number of prosecutions targeting private company executives by the Chinese Communist Party (CCP) judicial organs has significantly increased in the first half of this year. Analysts believe that this may be a way for local governments to seek funds. Some also speculate that the CCP’s crackdown on private enterprises aims to coerce owners into surrendering their equity.
So far this year, the CCP judicial organs have launched a special “Protecting Enterprises” campaign citing reasons such as “stability of social expectations” and “boosting market confidence,” resulting in a substantial increase in the prosecution of private company executives.
According to state media reports, the CCP judicial organs have prosecuted 62,000 individuals for crimes disrupting market economic order, marking a 36.5% year-on-year increase. The number of individuals prosecuted for enterprise-related crimes such as embezzlement, fund misappropriation, and bribery utilizing their positions as “key personnel” in private enterprises has risen by 41.1% to 5,827.
Columnist and political commentator Wang He believes that in the face of financial difficulties at the local level, this could be seen as local governments seeking funds from private enterprises.
Wang remarked to Epoch Times, “Currently, local governments have no money, so who do they turn to for funds? They can only go after enterprises for money. When going after enterprises for funds, economic crimes committed by enterprises are the best excuse. In the past, it was about fostering, leveraging, and killing, but now it’s just about killing. There’s simply no room for fostering or leveraging anymore, they are forced to resort to killing. In order for the CCP to overcome this hurdle, they have to kill. Therefore, the environment for private enterprises in China right now is actually very grim. Originally, China’s economic market is an iceberg, and with the involvement of local governments, it becomes an even larger iceberg that is much harder to navigate.”
Regarding whether these private enterprises themselves have issues, Wang He expressed that the CCP’s system is distorted, and strictly speaking, many companies are not clean. “There’s no way to be clean in China. If you’re clean, how can you run a business? Can your business still thrive? So, this is a very complex matter.”
Former Chinese entrepreneur residing in the United States, Hu Liren, believes that the CCP’s repression of private enterprises serves a more crucial purpose, making it difficult for these private enterprises to survive, ultimately forcing owners to relinquish their shares.
On August 4th, Hu Liren told Epoch Times that the CCP uses various means and pretexts to target private enterprises, ultimately aiming to compel these companies’ owners to eventually hand over their equity. He stated, “The confiscation of equity in private enterprises is now an open fact. The direction is privatization.”
After the passing of the founder and chairman of the renowned Chinese food and beverage conglomerate Wahaha, Zong Qinghou, his daughter Zong Furong resigned from her positions as vice-chairman and general manager of Wahaha Group 145 days later in mid-July.
In her resignation letter circulating online, Zong Furong cited questioning by the Shangcheng District Government in Hangzhou and some shareholders of Hangzhou Wahaha Group regarding the soundness of the company’s operations following her father’s passing, causing her inability to continue fulfilling her management responsibilities for Wahaha Group and its holding companies. Hence, she decided to step down from her positions.
The equity structure of Wahaha reveals that Hangzhou Shangcheng District Government’s subsidiary Hangzhou Shangcheng District Culture Commerce & Travel Development Co., Ltd. is the largest shareholder, holding 46% of the shares, Zong Qinghou holds 29.40%, and Wahaha Group Staff Shareholding Association holds 24.60%. Although Zong Qinghou is only the second-largest shareholder, when combined with the staff shareholding proportion, it surpasses the largest shareholder.
Hu Liren commented that by relinquishing management rights, Zong Furong loses her voice within the company, indicating that all company directions are now determined by the local government, implying that the enterprise is now under the control of the Communist Party.
On December 30 last year, the People’s Bank of China approved the transformation of Ant Group’s Alibaba Network Technology Co., Ltd. to have “no actual controller,” signifying that Alibaba’s founder Jack Ma has lost control, and the company is under full administration by the CCP.
Ant Group’s parent company, Alibaba Group, underwent changes in its equity structure previously. Jack Ma’s voting rights were reduced from 53.46% to 6.208%, effectively removing him from the position of the actual controller of Ant Group.
In November 2020, Ant Group’s listing on the Hong Kong Stock Exchange entered its countdown, but was abruptly halted by official order. Subsequently, Ant Group underwent investigations, fines, and rectifications.
Hu Liren mentioned that many private entrepreneurs are mentally prepared to voluntarily give up their equity to secure a way out. “No one is thinking about creating a century-old business anymore. That thought is gone. Many bosses in China no longer have that kind of ambition. They’re living day by day, trying to move as much capital as they can out. That’s how everyone thinks.”
Numerous Chinese private entrepreneurs have suffered persecution, with their assets being seized by the authorities.
Referred to as the “Conscience Entrepreneur of China,” Sun Dawu, who was previously arrested for rights defense, was sentenced to 18 years in 2021. Nearly 30 of his family members and company executives were arrested.
Sun Dawu’s Dawu Group was once one of China’s top 500 private enterprises, valued at over 5 billion yuan (about 700 million US dollars), but was valued by the authorities at only 686 million yuan (95 million US dollars), and “auctioned” to a company that had been newly established for three days. This company is suspected to be a “white glove” for a local CCP government.
To protect their own interests, over a dozen Chinese private entrepreneurs in exile abroad declared the establishment of the “China Private Entrepreneurs’ Rights Protection Alliance” in Canada in March this year.
The alliance’s chairman, Sun Jinliang, stated at the founding ceremony that in the past decade, Chinese private enterprises have been severely impacted. Countless entrepreneurs and their families have been persecuted, yet such widespread persecution has not received sufficient attention in the international community. They will disclose the true extent of the persecution suffered by Chinese private entrepreneurs and their families, seeking justice through international law and other means.
However, the CCP officialdom occasionally exhibits an attitude of protecting private enterprises.
In March last year, the Hainan Provincial Government issued a document titled “Several Measures to Support the Development of the Private Economy,” emphasizing the creation of a fair and just legal environment and the implementation of the criminal justice policy of “fewer arrests, cautious prosecutions, and detentions.” Regarding individuals involved in criminal cases related to private enterprises, they stipulated that those who can avoid arrest should not be arrested, those who can avoid prosecution should not be prosecuted, those who can avoid actual imprisonment should not be sentenced, and those who can be released from custody promptly.
In July last year, the State Council of the CCP issued the “Opinions on Promoting the Growth and Development of Private Enterprises,” stating that efforts will continue to optimize the environment for private enterprise development, enhance policy support, and reinforce legal protections, among other aspects.
In September last year, the National Development and Reform Commission of the CCP specifically established the “Bureau for the Development of Private Enterprises.”
Wang He commented that China’s economy is currently facing challenges, relying on the private economy for support, hence the CCP adopts a dual approach towards private enterprises. On one hand, they verbally claim to protect private enterprises and provide them with a conducive environment, while on the other hand, they target them through economic crimes to seize control of some private enterprises for their own benefit.
Wang He stated that whatever the CCP does, it will always wave a flag, appearing lofty and noble, but the true content and process of their operations are another matter entirely.
A popular saying on the internet goes: “Eliminating you is a noble ideal, utilizing you is a reluctant choice.” Wang He believes that this phrase might encapsulate the CCP’s true stance towards private enterprises.