On February 17, during a meeting with prominent executives from large Chinese tech companies in the private sector, President Xi Jinping’s speech indicated that the nation’s economic downturn has compelled authorities to cease their campaign against the private sector in China. This shift signifies a significant failure of President Xi’s concept of "the socialist system with Chinese characteristics," wherein socialism was meant to oversee and direct the expansion of private capital within the country.
Notably, besides President Xi himself, the main highlight of the gathering was Jack Ma, one of the co-founders of Alibaba and the richest business magnate in China. He had been out of the spotlight for several months following his remarks criticizing Chinese regulators and financial systems during an event in Shanghai on October 2020. Other prominent figures at this meeting included the CEOs of BYD—an electric vehicle company—and Tencent, owner of WeChat; along with the chairman of CATL, a leading battery developer. Additionally, representatives from smartphone makers Huawei and Xiaomi also attended.
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They represented the best of the tech industry in China, a sector that had faced intense scrutiny several years prior when President Xi led initiatives to tighten governmental oversight. He characterized the sector as chaotic and destabilizing despite its rapid growth, even amid stringent regulations imposed on other sectors.
With the United States aiming to prevent China from obtaining cutting-edge technologies, President Xi appears to be recognizing new opportunities. During the meeting, he assured private-sector delegates that the government will "truly safeguard the lawful rights of private businesses and entrepreneurs." He stated, "This is an opportune moment for most private enterprises and entrepreneurs to demonstrate their capabilities," and acknowledged plans to let them "become prosperous initially, thereby advancing shared wealth creation."
If China wishes to maintain its competitive edge against the United States, it must back its leading tech companies in the private sector. In reality, this situation highlights that in areas requiring advanced technological innovation, governmental control within a socialist system isn’t enough; instead, it’s essential to have the innovative drive brought about by the private sector.
Under the red eyes of mandarins of the Chinese Communist Party (CCP), aspirations have been frowned upon. CCP leaders were wary of personal wealth and inequality in wealth distribution. Following President Xi’s call for “common prosperity,” billionaires in sectors from real estate to technology to finance had been at the receiving end of the crackdown. They had been asked to endure hardship and strive for the prosperity of China.
One of the main aspects of the clampdown initiated in late 2020 involved antitrust measures and penalties along with increased oversight of how tech firms collect and use data, driven by an excessive focus on data protection and national safety. With the concept of shared prosperity, businesses have been obligated to participate in charitable activities and support governmental initiatives. Numerous tech corporations found themselves compelled to accept government-appointed members onto their boards. As a result, this move significantly undermined the trust of private business owners.
Deeply rooted in the strict Communist ideology of Mao Zedong, President Xi Jinping has overturned the policies initiated by Deng Xiaoping in the late 1970s, which aimed at stimulating economic growth through unbridled free-market forces. Under his leadership, China's growth rate has significantly slowed down. Following the conclusion of the recent National People’s Congress in China, the targeted yearly growth rate was set as low as five percent. This indicates that the "socialist system with Chinese characteristics" hasn’t lived up to expectations.
The tone of Premier Li Qiang's report at the National People’s Congress contrasts with President Xi Jinping's evaluation during a brainstorming session of the CCP in April 2022, where he stated that China has "endeavored to develop a new paradigm with the domestic market as the primary focus." In contrast, Premier Li's statement asserts: “We will actively promote foreign investments.”
Efforts are underway to attract back foreign investors who have become wary of operating in China. Previously, employees working at international firms within the country faced questioning, harassment, and even arrest when conducting routine activities such as market research prior to launching new products, all due to an overemphasis on data protection and national security during recent regulatory actions. The report continues with assurances stating, "We will guarantee equal treatment for foreign-invested businesses concerning access to resources, license approvals, standard-setting processes, and participation in government purchasing."
The strategy promoted by President Xi Jinping to manage capitalist expansion under governmental oversight as a means to achieve fairer income distribution hasn’t come into fruition. According to recent research, affluent people within China continue to amass greater riches, thereby exacerbating disparities in wealth across the nation. In 2024, the aggregate net worth of approximately 5.12 million Chinese households possessing assets exceeding six million yuan stood at around 150 trillion yuan. Among these, the most prosperous 130,000 families represented half of this sum—a percentage increase from 56% recorded in 2023. Moreover, China’s national Gini Coefficient registered at 0.467 in 2022; here, a score of zero would denote perfect equality regarding income distribution, whereas a figure approaching one indicates extreme inequity wherein an entire population might be supported solely by a solitary earner.
President Xi’s assessment during the 38th collective study session of the Politburo of the CPC Central Committee regarding the sound growth of capital in China on April 30, 2022, has turned out to be inaccurate based on later events. The concept he referred to as "a socialist market economy" appears paradoxical because a true market economy relies on unimpeded market dynamics for success, something difficult to achieve within a strictly controlled socialist framework.
In this study session, he accurately identified that "non-public capital" (which refers to private capital) should have free rein in fostering advancements in science and technology. However, he realized that private capital would fail to achieve his desired outcome of contributing to the construction of a modern socialist nation. President Xi Jinping’s firm stance on regulating and constraining the inherently profit-driven essence of capital represents a significant obstacle for such enterprises. Recently, President Xi’s efforts to attract back private capital within the tech industry suggest that engaging with Marxist economic theorists' calls to address the theoretical and practical aspects of managing capital under socialism might prove futile. They may find themselves wasting valuable effort trying to reconcile these concepts with what he terms a "socialist system with Chinese characteristics." This framework envisions private companies aiding common prosperity but lacks viability according to him. AA Online Desk