Latest Research

Li Ke'aobo: Bolstering confidence in private sector’s growth and development of utmost importance


This interview was originally published July 24, 2023, in Chinese by China Business Journal ( Reported and written by Meng Qingwei. Edited by Hao Cheng. Proofread by Yan Jingning. Translated by ACCEPT. To view the original article, click here. 

For a long time now, the private sector of China’s economy has played an active role in stabilizing growth, promoting innovation, expanding employment and improving people’s livelihood, having since become an intrinsic component of the country’s economic system and an important force for advancing sustained and healthy economic development. 

During the most recent period of time, however, the business environment underpinning the development of the private sector has witnessed several changes, with many private enterprises encountering a number of setbacks and challenges, which in turn has had a definite impact on people’s confidence in the sector’s continued development. Hence, there is an urgent need to improve multiple basic institutional arrangements and introduce a series of constructive measures, while encouraging the adoption of a variety of approaches and practices, in this way providing a greater boost to overall confidence and spurring the high-quality development of the private economy. 

On July 19, 2023, the “Opinions of the Communist Party of China Central Committee and the State Council on Promoting the Development and Growth of the Private Economy” (hereafter referred to as the “Opinions”) was officially released. The policy document put forward a total of 31 provisions across eight chapters, demonstrating the firm determination of the Communist Party of China (CPC) Central Committee and the State Council to continue adhering to the principle of the “two unwaverings” and sustained support for the development and growth of the private economy. 

By establishing high-level guidelines, the “Opinions” outlined six areas for carrying out key tasks: continuously optimizing the business environment for the development of the private economy; increasing the strength of policy support for the private economy; strengthening the rule of law to provide a legal guarantee for the development of the private economy; focusing efforts on promoting the high-quality development of the private economy; encouraging the vigorous cultivation of human capital in the private sector; and continuously forging a social climate receptive to supporting the development of the private economy. 

At a press conference held at the State Council Information Office on July 20, the vice chairman of the National Development and Reform Commission, Li Chunlin, noted that one of the primary goals of the “Opinions” is to introduce robust measures capable of shoring up confidence in the private sector’s sustained growth and development. 

It is worth noting that the Opinions not only contain many new recommendations, but in its opening section also makes an important affirmation on the positioning of the private sector in the broader economy, namely: the private economy is a vital new force for promoting Chinese-style modernization, an essential foundation for pursuing high-quality development, and a crucial source of strength for accelerating the building of China into a great modern socialist country in all respects on the journey to realizing its Second Centennial Goal. 


What is the likely impetus and practical circumstances that led to the release of the “Opinions”? What are the current difficulties that confront the private sector and private enterprises in China? What is the relationship between this policy document and the “two unwaverings”? What kind of signal does the “Opinions” convey in terms of its new proposals? On July 20, a reporter from China Business Journal conducted a special interview with Li Ke’aobo to pinpoint some of the answers to these questions. Li is the executive deputy director of the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) at Tsinghua University. 

Widespread anxiety, subdued decision-making now characteristic of private entrepreneurs 


China Business Journal: The release of the “Opinions” has attracted a significant amount of attention. How do you regard the timing and significance of this policy document and its announcement? 

Li Ke’aobo: The release of the “Opinions” reflects the high degree of attention that the CPC Central Committee and the State Council continue to place on the development of the private economy, and at the same time offers up a timely response to the present challenges being experienced by the private sector and companies operating in the sector.  


After the COVID-19 pandemic came to an end, the rate of recovery for investment and consumer demand in China has been lower than expectations, while the international environment in terms of technology and trade has also continued to deteriorate at an accelerated pace. Under these circumstances, private companies are currently feeling the pinch much more so than state-owned enterprises. This is reflected in the statistical data, such as the rapid divergence between state-owned investment versus private investment this year. In the first half of the year, the growth rate for state-owned investment had risen by about 10%, while the growth rate for private investment remained in the negative. 


We need to avoid the significant risk of a broader deterioration in macroeconomic growth due to a slowdown in investment among private enterprises, so one could say that the issuance of this policy document is well timed. 

China Business News: For some time now, the business environment for the development of the private economy has been undergoing a change. In your opinion, what are the main issues and challenges for the continued development of the private economy? 

Li Ke’aobo: When it comes to the current dilemma facing the private economy, I think one concern is the general frame of mind and psychological outlook for private entrepreneurs moving forward, while another concern involves the obstacles encountered by businesses in their actual day-to-day operations.  

In the domain of public opinion over the past two or three years, some “self-media” accounts have repeatedly attacked private entrepreneurs after misinterpreting the policies of the central government. For instance, there was the emergence of discussion surrounding the discourse on the "private economy receding from the market” in 2018; and then in 2021, there was criticism directed at some private enterprises implicated in the “original sin” of losing state-owned assets over the course of previous reforms, all of which contributed to a growing collective feeling of anxiety among private entrepreneurs. 


Another aspect that is affecting the mindset of private entrepreneurs is that private companies have now more or less been put into a “stranglehold” by Europe and the United States, while the current trend towards China-US technology decoupling has become more and more pronounced. And so, these anxieties have led them to adopt a perceptively more conservative tendency in their investment decisions. 

In addition, the online platform economy and real estate industry were once the two most dynamic sectors in China's private economy, but in the past two or three years, these two areas have been impacted by the roll out of stronger regulatory policies. These policies have provided inadequate consultation with businesses on the trendline and orientation for regulatory changes, which has created uncertainties for companies regarding their future expectations, as well as giving rise to a comparatively conservative direction in their decision-making processes. 


It is precisely these factors that have brought about the current state of underinvestment by private enterprises, which in turn has generated an insufficient amount of employment. As a matter of fact, more than 80% of the employment opportunities for China's urban workforce are created by the private sector, with private enterprises representing more than 90% of all entities in the economy actively operating a business. 

At the same time, private businesses are also faced with a series of problems when it comes to their own operations, such as private enterprises in China generally being situated along the downstream segment of the industry chain, as well as a relative surplus in their production capacities, highly fierce competition, and relatively limited profitability. It is under this dilemma that private enterprises find themselves struggling with strains to their outlook and operations, injecting added uncertainty into their thinking. 

China Business Journal: The report of the 18th National Congress of the CPC put forward the principle of the “two unwaverings,” emphasizing the need to unswervingly consolidate and develop the public sector of the economy, while unswervingly encouraging, supporting and guiding the development of the non-public sectors. How then would you evaluate the relationship between the Opinions and the “two unwaverings”? 

Li Ke’aobo: I consider the "Opinions" to be an extension and continued implementation of the spirit of the “two unwaverings,” in addition to representing a further refinement. At the same time, compared with the “Opinions of the Central Committee of the Communist Party of China and the State Council on Creating a Better Environment to Support the Reform and Development of Private Enterprises” (also known as the “28 Articles of Support for the Private Economy”) issued in December 2019, the latest "Opinions" offer a more concrete set of recommendations as well as responding to a set of new issues that have recently emerged in the private sector of the economy.  

New recommendations: Responding to concerns and clarifying the direction for encouraging forward-looking momentum 

China Business Journal: The "Opinions" have put in place 31 provisions in eight chapters. Based on your own observations, what fresh proposals do the "Opinions" introduce? What kinds of signals do they hint at? 

Li Ke’aobo: Regarding the new recommendations outlined in the "Opinions," I think they can be explained in two ways: the first is to respond to the issues encountered by private enterprises over the past more than three years. For example, the "Opinions" explicitly encourage private enterprises to liquidate idle assets and tap into surplus budgetary funds; that is, help should be actively provided to those enterprises in financial distress that are still viable and otherwise worth saving. This proposal, as one would imagine, refers to various measures targeted towards companies operating in the real estate industry.  

The "Opinions" also set out to enhance communication on policies while providing a direction to guide future expectations. It implements a program for adjusting policies affecting enterprises in accordance with laws and regulations, and establishes a reasonable transition period based on actual circumstances. I anticipate that this policy document will moreover help resolve many of the practical challenges now facing private enterprises. 

In addition, there are several proposals to address some of the misunderstandings that have appeared in society regarding the private economy. According to the "Opinions," it is correct to view as legitimate the wealth obtained by individuals operating in the private economy within the bounds of laws and regulations. This entails firmly resisting, promptly refuting and clarifying any erroneous remarks and practices that bring into question the basic socialist economic system or discredit and undermine the private economy, including responding to and dispelling concerns in a timely manner. 

I think this proposal is a positive response to the misconceptions that arose after the central government advanced the goal of “achieving common prosperity,” with many people having the idea that private entrepreneurs would have to hand over their personal wealth. 

Moreover, the “Opinions” point out the need to foster greater respect in the arena of public opinion for the private economy’s innovativeness and entrepreneurialism. It seeks to establish a climate of opinion and a social milieu that encourages innovation and tolerates failure, as well as rendering understanding, forbearance and assistance to those law-abiding individuals engaged in the private sector who experience impacts from any missteps or setbacks. I too consider this to be a tremendously important factor for the private economy’s growth and development. 


On another topic, the “Opinions” place very specific requirements on the future direction of the private economy in terms of its vigorous expansion. The first point is to throw more support behind improving capabilities for scientific and technological innovation, encouraging private enterprises to continue increasing their investments into research and development in accordance with national strategies and industry trends, while carrying out core research tackling key technological problems, and actively undertaking major national projects in the fields of science and technology in compliance with the country’s regulations. 

At the same time, the policy document suggests increasing the scale of government procurement for the latest innovative products, as well as taking advantage of insurance compensation guarantees for major technical equipment while supporting private enterprises with the iterative adoption of the latest state-of-the-art products. It encourages private enterprises to strengthen their basic cutting-edge research and the commercialization of scientific achievements. 

The second area of concern is to encourage participation in major national strategies. There are some new recommendations in this respect, such as supporting private enterprises to participate in efforts to promote carbon peaking and carbon neutrality, including through the provision of carbon reduction technologies and services; supporting private enterprises to increase their participation in rural revitalization; and supporting private enterprises to participate in comprehensively strengthening infrastructure construction, as well as directing private capital to invest in major projects and filling key bottlenecks, such as new-type urbanization, transportation and water conservancy projects. 


Third, the “Opinions” also underscore the need for private enterprises to expand employment, including promoting the expansion of industrial workers in the private economy and optimizing the conditions for workers’ continued professional development. It also recommends strengthening protections for the rights and interests of workers engaged in flexible employment and new forms of employment, as well as capitalizing on enterprises in the platform economy to increase employment opportunities. 

China Business Journal: One of the main objectives of the “Opinions” is to bolster confidence in the private economy’s growth and development with the aid of robust policy measures. What suggestions do you have on how to better stimulate the vitality of the private sector and stabilize confidence in this sector of the economy? 

Li Ke’aobo: In 2019, China issued its “28 Articles to Support the Private Economy,” but what I have found to be the most striking is that private entrepreneurs now pay far more attention to how such policy measures are actually implemented, as opposed to merely taking them at their face value. In fact, many of the proposals in the “28 Articles” were quite good, but there were explicit contradictions and clashes between some of these policies and the existing regulatory approaches taken by various administrative departments. Subsequently, due to the impact arising from the outbreak of COVID-19 in early 2020, the central government's policies were not sufficiently articulated in such a way that these departments could fully implement them, including providing support for the regular operations of private enterprises and the effective execution of related plans.  

Most policy documents issued by the central authorities serve as a kind of overarching guide. Therefore, in looking forward to the future, I very much hope to see this kind of important policy guidance undergo further refinement into detailed sets of rules and regulations that can then be put into action by all the different industries, in this way providing vigorous support for the development of the private economy.