Commentary: Why Xi’s Meeting with Business Leaders is Good News for China’s Economy

In a significant move, President Xi Jinping attended a symposium with private business leaders to affirm the government’s support for the private sector. This meeting holds importance for multiple reasons. [para. 1]

Firstly, it occurred against the backdrop of U.S. President Donald Trump’s second term, marked by the imposition of additional tariffs on Chinese exports. These tariffs severely impacted private enterprises, which contribute 64.9% of China’s total exports as of 2024. Amid these disruptions, the symposium sought to reassure the private sector of government support and address their challenges, thus aiming to bolster social confidence in the face of economic uncertainties. [para. 2]

Secondly, the timing coincided with notable achievements by private enterprises. The release of the blockbuster film Ne Zha 2 and the technological breakthrough by DeepSeek exemplify this, showcasing the private sector's resilience and innovation despite U.S. technological sanctions. These developments underscore the dynamic role of private businesses in China's economy and their importance in driving technological progress. [para. 3]

Moreover, the symposium took place ahead of the annual legislative meetings, or the Two Sessions, where policies to support the private sector could be formally discussed and potentially included in the Government Work Report. [para. 4]

The symposium emphasized the government's commitment to revitalizing market dynamism through the growth of the private sector, notably by establishing a robust legal framework. In response to concerns over excessive regulatory actions against private businesses, Chinese leaders are advocating for a Private Economy Promotion Law to ensure legal protection of private enterprises and their operators. A draft of this law was released for public consultation, reinforcing the government’s intent to create a supportive environment for such enterprises. [para. 5][para. 6]

Emphasizing the importance of technological innovation, private enterprises remain instrumental in this area, contributing 79.3% of the country's research and development spending in 2023. DeepSeek's achievements highlight the ability of Chinese private companies to lead in technological competition. Policymakers, guided by President Xi, have reiterated the need for enhancing enterprise innovation capabilities and achieving breakthroughs in major technological projects, affirming the central role of businesses in this domain. [para. 7][para. 8]

Boosting confidence in the private sector is crucial, resembling efforts from a similar 2018 symposium that helped stabilize market sentiment amid U.S. trade tensions. Like then, the symposium chaired by Xi intends to reassure the business community and prevent systemic risks, previously leading to a substantial market recovery. Currently, private companies account for an increased share of total market capitalization, illustrating their growing significance. [para. 9]

The recent symposium signifies a new phase for private enterprise growth and technological innovation, with expected positive outcomes for capital markets. The share of private companies in total market capitalization has risen, evidencing their expanding role. The focus now shifts to implementing supportive policies across finance, legislation, and the business environment to sustain market confidence and sentiment. [para. 10]

Lu Zhe, the chief economist of Soochow Securities, offers these insights, highlighting the editorial independence of Caixin Media from these opinions. [para. 11]