19-25 November 2023

Weekly newsletter tracking high-level policy signals sent by China’s top leaders. For more information, visit About Five Things.

Commentary

When a story about Uruguay tops the list of most widely circulated articles in China’s official media, you have to wonder whether something else is going on.

There are contenders, notably the $35 billion mismatch between assets and liabilities uncovered at Zhongzhi Enterprise Group. But also the recent moves by the People’s Bank of China and other government agencies to provide support to the private sector (see here).

From a propaganda standpoint, playing down the former is understandable, yet couldn’t the latter be played up more?

Let’s hypothesise that officials across China are becoming more risk averse and see where that takes us.

In 2021, Xi Jinping, complained about officials lacking initiative, telling a meeting of the Central Committee for Discipline Inspection that too many only took action after receiving written edicts from their leaders.

Since then, however, those officials have received many messages from the centre about the importance of following CPC guidance and adhering to the many diktats of Xi Jinping thought. They could not have missed the signals that China’s leaders wanted more control to rest in their hands.

The Zhongzhi blowout illustrates why. In areas lacking adequate oversight, problems can accumulate rapidly. The private sector, particularly finance, cannot be trusted and needs tighter supervision.

So while the private sector is essential to China’s economic well-being, it cannot be allowed to run free. Rather, it must be constrained.

Of course, things do change, and the last several months have seen a significant switch in calls from the centre for greater support, particularly from banks, for private business.

Yet is this believable to officials across the country?

Back in November 2018, speaking at a symposium on the private sector, Xi said: “Over the past 40 years, the private sector of the economy has become an indispensable force behind China’s development … All private companies and private entrepreneurs should feel totally reassured and devote themselves to seeking development.”

Less than two years later, the government had launched a clampdown on private businesses that included blocking Ant Financial’s $34 billion IPO and imposing tighter regulatory controls across China’s internet sector.

That clampdown may have eased, but officials perhaps sense a reworking of the ideological superstructure without a change in its underlying base.

In addition, there is also a question of timing. Now would not seem to be the moment for an economic turnaround. Too many structural issues remain unresolved, obviously in the property sector, but also across many industries where over-investment has built-over capacity. These include industries where China is or will likely prove successful, such as electric vehicles, renewable energy equipment, and energy storage.

And a private sector needs freedom to operate – to take risks, to make mistakes; to get some things right and other things wrong – adopting such measures at this moment could spark more business failures in the short term, possibly including many more on the scale of Zhongzhi.

Not only are China’s leaders struggling with credibility – do they really want to let private businesses loose? – but probably also with fear – and worries on the ground about what the possible consequences of allowing too much light into the private sector.

Perhaps it’s not surprising that news outlets are playing it safe.

Top-ranked articles for 19-25 November 2023
% = percentage of publications monitored carrying the article

1. Xi Jinping meets Uruguay’s President Lacalle
习近平同乌拉圭总统拉卡列会谈Xinhua News Agency, 22 November 2023
Chinese / Machine translation / 32%

2. Xi Jinping meets Russia’s State Duma Chairman Volodin
习近平会见俄罗斯国家杜马主席沃洛金Xinhua News Agency, 22 November 2023
Chinese / Machine translation / 26%

3. Xi Jinping attends special video summit of BRICS leaders on Israeli-Palestinian issue
习近平出席金砖国家领导人巴以问题特别视频峰会Xinhua News Agency, 21 November 2023
Chinese / Machine translation / 26%

4. Promote ceasefire and end the war to achieve lasting peace and security
推动停火止战 实现持久和平安全
Xinhua News Agency, 21 November 2023
Chinese / Machine translation / 22%

5. Chinese-Spanish edition of “Excerpts from Xi Jinping's Discourse on Respecting and Safeguarding Human Rights” launched globally in Madrid
《习近平关于尊重和保障人权论述摘编》（西汉对照）全球首发式在马德里举办Xinhua News Agency, 22 November 2023
Chinese / Machine translation / 19%

For more information about Five Things on China’s Leader’s Minds, visit About Five Things on China’s Leaders’ Minds or email fivethings@bilby.ai