The annual White Paper on the New Middle Class, published by financial writer and Zhejiang University professor, Wu Xiaobo, shines light on the spending and investing habits of China’s burgeoning middle class.Photo: iStock
China’s vibrant private sector is the nation’s biggest job creator and dominates industries such as tourism and retail. Photo: iStock

Beijing appears to be forcing private enterprises and their owners and stakeholders to adopt the same “political requirements” that apply to Communist Party members and state enterprises.

The party push comes after President Xi Jinping’s latest direction to ramp up the party’s so-called United Front work, described by one expert as rallying private businesses behind the party’s policy initiatives.

The perception has been intensified by the recent conviction of high-profile Xi critic Ren Zhiqiang, a senior party member and the former chief of a state-owned realty firm. Ren was given 18 years for “graft and economic crimes” by a court in Beijing on Tuesday. 

Some observers suspect that the charges were trumped up and the party must have ordered the jailing to muzzle a detractor of Xi. The case has sent chills down the spines of some entrepreneurs as they are prodded to follow the party’s lead in the United Front drive.

Hong Kong-based veteran China affairs commentator Johnny Lau pointed out on Facebook that the guidelines on enhancing United Front work, sent by the party to all its frontline branches last week, had noted that all private enterprises, including those whose investors are from Hong Kong, Macau and Taiwan, must stay on message with the party and top leaders on “cardinal, political issues.”

The document said that, just like all party members, business owners and stakeholders must learn and practice key party doctrines, in particular, Xi’s “Thought on socialism with Chinese characteristics.”

“This is thus a clear sign that Beijing is applying the same set of ‘political and allegiance requirements’ to the wide swath of private entities that used to be excluded from the party’s ideological education and proselytizing,” Lau said.

“When senior party members like Ren can be locked up, then the chilling effect is there and the private sector must know what they should and should not do.”

Lau, a reporter-turned-commentator who for decades covered China for Hong Kong’s pro-Beijing newspapers, also urged private entrepreneurs to read between the lines, especially about the document’s chapters on patriotism and “serving the country’s needs.”

“What Beijing really means can be that private entrepreneurs should also serve the country’s changing needs, be it setting up party branches inside their own companies or safeguarding national security, or even hand over part of their net profits or even properties to the party when needed, on top of paying taxes,” said Lau. 

There have already been revelations about private properties and homes being sequestrated overnight in the central province of Shanxi after the local government backtracked on a deal to return homes in prime locations once leased by the authorities. 

Old fears about Beijing advancing the state sector at the expense of the private economy are revived by the United Front drive, on top of the concerns about the extra-legal vagaries of China’s fickle business environment. 

A young Chinese man gets into his Ferrari on a street in Beijing. Photo: AFP / Peter Parks
A young Chinese man gets into his Ferrari on a street in Beijing. China’s private sector contributed to 60% of the nation’s GDP in 2019. Photo: AFP/Peter Parks

The Communist Party is still sticking to its Marxist founding tenet that the private economy and ownership must be dismantled, even though Deng Xiaoping’s sweeping liberalization reforms and opening-up policies since the end of the 1970s marked a striking departure from the party’s textbook approach to economic and ownership management.

Former president Jiang Zemin even changed the party constitution to recruit private entrepreneurs as party members to bolster the ranks of the ruling class in the early 2000s. 

Yet since Xi took office in 2012, there has been a clear tendency to adopt stricter ideological and economic policies similar to those in place before Deng. 

Advocates for the party’s bigger role in the private sector, however, argue that the new drive could smoothen communication and interaction between businesses and policymakers and thus lift confidence and improve the outlook. 

Zhao Jinping, a senior policy consultant with the Chinese State Council’s Development Research Center, told Asia Times that one should not overlook Beijing’s “words of assurance” in the new guidelines. 

“Beijing has made it categorical in the foreword part of the document that the private sector forms the foundation of the Chinese economy and that the swelling ranks of business owners, proprietors and stakeholders are friends of the party that must be united and counted upon,” said Zhao.

“What does United Front mean? First and foremost, it means uniting different sectors to form synergy, thus the new drive is to rally the numerous private businesses behind the party’s policy initiatives and increase their input in policymaking to make a common cause, irrespective of their ownership structure.

“The new drive to enhance relationships is also aimed at spurring the development of the private sector as a whole and align private businesses with the party’s goals.

“Under this rubric, Beijing will further level the playing field and grant equal access to all market players. The private sector is part of the family and will be protected against foreign sanctions, as long as people in the sector stay loyal to the party as required by the document.”

It is also hoped that with more party and state involvement in and oversight of the operation of private entities, financial fraud and shenanigans and substandard bookkeeping, major problems plaguing private SMEs and listed companies, may also be addressed.  

More than 90% of private enterprises already had established party branches or cells by the end of 2018, official figures from the party’s United Front Work Department showed.

Data from China’s National Statistics Bureau show the private sector accounted for half of China’s fiscal revenue, 60% of GDP and 80% of new jobs created in 2019. 

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