The president of Shanghai University of Finance and Economics, Liu Yuanchun, told “The Observer” (guancha.cn) July 20 that reviving private investment is the key to China’s economic recovery.
Private investment in China is notably focused on three key sectors. Firstly, the real estate market experienced a 7.9% year-on-year decline in national real estate development investment during the first half of the year, directly impacting overall private investment. Secondly, private investment is highly concentrated in the tertiary industry, although the current growth rate stands at a modest 1.6%, as compared to a potential 7%-8% under normal circumstances. Despite the service industry’s gradual recovery, it has not yet reached the stage of expansion, with some segments still facing challenges. The third sector, the traditional manufacturing industry, continues to struggle, except for a few high-end manufacturing industries.
From a structural standpoint, it becomes evident why private investment growth rates have declined. Moreover, private entrepreneurs, as a whole, lack confidence in future investment returns. Notably, different companies have varying concerns—larger private enterprises fret over safety issues, while smaller and medium-sized ones worry about the possibility of diminishing investment returns, leading to insufficient internal motivation for further investments.In addition to these challenges, certain state-adopted structural policies exhibit bias towards state-owned and large enterprises, while funding, credit allocation, and preferential policies for small and medium-sized enterprises, which constitute a significant market share, may be insufficient.
Recently, Premier Li Qiang and central ministries and commissions, including the National Development and Reform Commission, the Ministry of Commerce, and the Ministry of Industry and Information Technology, have actively engaged private companies through business seminars and roundtables since July. The underlying message of these symposiums is two-fold. Firstly, they enable the central government to directly communicate policy orientations and strategic intentions, effectively bolstering the confidence of private enterprises in the present and future economic landscape. Secondly, the symposiums foster open communication regarding the implementation and efficacy of current support policies for private enterprises, allowing for a deeper understanding of the grassroots situation, paving the way for more effective policy strategies.
The significance of private enterprises in China’s economy is well-established, represented by the “five-six-seven-eight-nine” private economy. These enterprises contribute more than 50% of tax revenue, over 60% of GDP, more than 70% of technological innovation achievements, more than 80% of urban labor employment, and over 90% of the total number of enterprises. If private enterprises continue to face a downturn, even the prosperity of state-owned enterprises would struggle to uplift the overall economy. That underscores the importance of resolutely implementing the “two unwavering” principles, as advocated by the general secretary, and supporting the private economy to foster growth, resilience, and success.