China Proposes Civil Support Measures... "Environment Unlikely to Change Significantly"

Encouraging Private Sector to Revitalize Sluggish Domestic Market
Diagnosis at a General Level Without Specific Guidelines

China has announced improvement measures to facilitate the smooth management activities of private enterprises, but there are criticisms that these remain at a theoretical level. It is interpreted as a decision to encourage the private sector to revitalize the sluggish domestic economy, but experts evaluate that the 'harsh' environment that companies have experienced so far is unlikely to change in a short period with just a few guidelines.

According to local media such as Caixin on the 20th, the Communist Party of China and the State Council announced the "Opinions on Promoting the Development and Growth of the Private Economy" on the same day and presented comprehensive support measures for private enterprises. The Party and government stated, "We must improve the institutional framework for fair competition and the policy implementation mechanism, and treat enterprises equally regardless of ownership type." This appears to acknowledge criticisms that government support has been concentrated on state-owned enterprises, resulting in relatively poor business environments for private and foreign-invested enterprises in China.

[Image source=EPA Yonhap News]

The support measures mainly involve conducting surveillance activities on enterprises within clear legal and standard frameworks and enabling financing. When seizing or freezing corporate assets, the responsible agencies must adhere to authority, scope, amount, and time limits, and protect property rights by ensuring business activities are maintained as much as possible even during investigations or inquiries. Additionally, the plan includes improving the credit evaluation system for small and medium-sized enterprises and small businesses and supporting qualified private SMEs to raise funds in the bond market.

Furthermore, the government will introduce a system to record and discipline breaches of trust if it breaks promises, and it is stipulated that information on contract violations, debt defaults, and refusal to comply with judgments by institutions or business units must be registered on the national credit information sharing platform.

The Party and government emphasized, "The private economy is the driving force for promoting Chinese-style modernization and an important foundation for high-quality development," and stressed the need to accelerate the creation of a first-class business environment characterized by marketization, legalization, and internationalization, as well as the improvement of the private economy development environment.

This plan was announced amid growing concerns about the recent economic downturn in China. China's second-quarter gross domestic product (GDP) growth rate, released on the 17th, was only 6.3%, far below the market expectation of 7%. The youth unemployment rate (ages 16-24) reached a record high of 21.3%, and consumption and export indicators also underperformed expectations, showing a sluggish trend.

However, external experts generally agree that the Chinese government's response is merely a principled declaration and lacks concrete and immediate effects. Xinsheng, a senior lecturer on China and East Asian business at King's College London, told Bloomberg News, "I do not believe that the harsh political and business environment recently experienced by the private sector will change overnight with just a few guidelines," adding, "There is a lack of concrete measures that can be implemented immediately."

There are also opinions that senior officials, including Chinese President Xi Jinping, should directly express their commitment to supporting the private sector. Gabriel Wildau, director at global consulting firm Teneo, said, "It won't change overnight, but private entrepreneurs will take such signals seriously," and added, "If President Xi Jinping makes similar remarks personally, it will have a greater impact."

This content was produced with the assistance of AI translation services.