Beijing Announces New Measures to Boost Private Industry As Businesses Take Hit

December 26, 2019 Updated: December 26, 2019
FONT BFONT SText size

The Chinese regime in recent days has signaled a range of measures attempting to boost employment and private enterprises, as it grapples with how to kickstart a slowing economy.

The cabinet-like State Council on Dec. 24 said it would emphasize creating new jobs, safeguarding existing jobs, and make more effort to heed of risks of unemployment.

Simultaneous downturns in the services and manufacturing industries pose a major problem for authorities seeking to keep a lid on unemployment and prevent social unrest as economic growth decelerates to near three-decade lows.

The regime will also step up financial support for private and small firms, including implementing targeted reserve requirement cuts and encouraging banks to boost long-term loans to small firms in the manufacturing sector, the State Council said.

The announcement comes days after the council released 28 new rules aimed at supporting private enterprises.

Private Companies Struggling

As the regime looks to reinvigorate its flagging economy, China’s richest man Jack Ma revealed the dire situation of some private businesses.

“Yesterday, I received a lot of phone calls from friends to borrow money. Five calls in one day. In the past week, about ten of my friends sold their real estate properties [to collect cash]. It’s really hard,” Ma said at a business forum in Shanghai on Dec. 21.

Ma, the founder and retired chairman of Chinese internet giant Alibaba, said business owners are struggling to pay suppliers and employees at the end of the year after a lacklustre 2019. Operators have thus had to sell assets or borrow money to keep their businesses going.

“As entrepreneurs we know that every year isn’t easy. But the 2019 has been most difficult. While previously only a portion of entrepreneurs would be in a tough situation, but in 2019 it seems that most entrepreneurs are finding things tough.” Ma said.

Ma added that many Chinese businesspeople were struggling because of the economy, and only those who keep “studying, communicating with others, work very hard, and adapt themselves,” are the ones who “can move forward in 2020—the most difficult period.”

Skepticism

Analysts voiced skepticism at whether the new rules to help private businesses will yield fruit.

“The state council has previously released a lot of policies and rules. The key is execution,” Ma Hui, general secretary of the Environmental branch of the All-China Federation of Industry and Commerce, told state-run media Yicai on Dec. 22.

Ma said the private companies are helpless if local governments don’t implement the rules or policies, noting that the worst-case scenario would be if the rules were inconsistently applied by authorities.

Yicai interviewed a private entrepreneur from Shandong province who asked not to be named. He said his business was designed to use coal for production, which was originally approved by the government.

“Before my factory went into production, the local government asked me to install desulfurization and denitration devices. After I installed the devices, the government told me that the factory couldn’t use coal,” The entrepreneur said.

“I spent several millions of yuan to buy the devices. Now they are trash.”

Hong Kong Economic Times in a Dec. 22 commentary noted that given that Jack Ma’s friends are likely to be successful businessmen, if they have resorted to selling properties and borrowing money, then it is an indication that private enterprises in China are facing tough times.