Chinese scholars suggest official line between entrepreneurs, capitalists to jolt private-sector spirit

Chinese academics have recommended an official line be drawn between entrepreneurs and capitalists to restore business confidence
Private sector has lost initiative in post-pandemic recovery, as measures to rein in capital have raised questions of status in relation to state firms

China economy

Mandy Zuoin Shanghai

Published: 6:00am, 10 May 2024

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As business confidence reaches new lows and a law to support China’s private firms works its way through the system, scholars have called on the government and Communist Party to formally differentiate “entrepreneurs” from “capitalists” to provide theoretical backing for a resurgence of the non-state sector.

The proposed change comes in response to a perceived ideological bias against millions of business owners – particularly billionaires, the wealthiest individuals in the country – with some figures going so far as to call for the elimination of private ownership outright.

Concerns were amplified when Beijing took action to curb what it termed the “disorderly expansion of capital” as part of its campaign for “common prosperity”, a reorientation of the economy towards a more equitable distribution of wealth.

The term “capitalist” holds derogatory connotations in China, an officially socialist country whose constitution upholds public ownership as the “mainstay” of the economic hierarchy. While private property rights were enshrined in a 2004 amendment to the country’s founding document, the non-state sector has remained relegated to a supporting role.

In a recently published book, Views on China’s Private Economy, economists Teng Tai and Zhang Haibing argued that private business owners are not “capitalists” as originally theorised in the works of Karl Marx. Instead, they said, entrepreneurs are “enterprise managers, innovators, investors, the final risk bearers of enterprises and socialist builders”.

At a subsequent symposium held for the book’s release in mid-April, several economists and advisers agreed with the duo’s sentiments, calling for unleashing the “entrepreneurial spirit” that drove China’s economic boom without applying labels to those leading the charge.

China needs to draw a line between entrepreneurs and capitalists, said policy adviser Liu Shijin at the symposium, as it “transforms from high-speed growth to high-quality development”, a time when “innovation driven by entrepreneurship is more important than ever”.

Instead of being tarred as capitalists – associated with exploitation, greed and ruthlessness under orthodox formulations of Marxism – Chinese entrepreneurs deserve respect for their ability to make effective use of various resources including capital, said Liu, a former deputy director at the Development Research Centre of the State Council, China’s cabinet.

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Despite issuing a number of supportive policies for the private economy over the years, China needs “major theoretical and policy breakthroughs” to ensure a free and fair environment for all businesses, he said.

Besides not conflating entrepreneurs with capitalists, the country should also cease the practice of categorising businesses by ownership entirely, Liu added, which in his view has prompted different policies for different divisions and led to inequality.

China’s top legislature said on Wednesday that the making of a law promoting the private economy was on its agenda for 2024.

Drafting work was launched earlier this year, with business representatives and academics summoned for a gathering in February to solicit advice as the world’s second-largest economy, faced with a structural slowdown, looks to boost confidence.

Meanwhile, the long-awaited third plenum of the Communist Party’s Central Committee – a major political meeting expected to lay out Beijing’s economic strategy for the next several years – will be held in July.

Though Beijing has repeatedly pledged the private sector will be treated on equal footing with its state-owned counterpart, doubts persist over its status, said Huang Wenfu, former chief editor of China Business Times, at the book launch symposium. One important reason, he said, is a weak theoretical basis.

Without the establishment of a firm consensus, he said, “many of us have had a complicated, discriminatory, or distorted understanding of the private economy”.

Private firms have been the engine of China’s rapid growth since the era of reform and opening up began more than four decades ago. They now contribute to more than half of China’s tax revenues, over 60 per cent of its gross domestic product and more than 80 per cent of its urban employment.

But its confidence has been shaky as China works through a sluggish post-pandemic recovery.

About 60 per cent of private businesses reported a drop in revenue or zero growth last year, while only 28 per cent said they planned to increase investment in the coming two years, according to a recent survey of over 1,400 companies by research institute Beijing Dacheng.