CKGSB Knowledge - China Business and Economy

STATE ADVANCES, PRIVATE RETREATS

An explosive blog post by a self-styled financial veteran briefly knocked the wind out of the Chinese business community in September. In the piece, the author, Wu Xiaoping, argued that the country’s private firms should step aside and allow the state to increase its dominance of the economy.

The private sector has “basically fulfilled its task of assisting the state-owned economy in achieving its rapid development,” Wu wrote. “China’s private sector should not blindly expand.”

The article went viral on social media, sparking a storm of criticism from entrepreneurs, as well as support from left-wing commenters. When China’s online censors failed to step in and stop the debate, this was interpreted by many as an implicit government endorsement of Wu’s views, sparking more panicked speculation among businesspeople and investors.

Under normal circumstances, a blog by an obscure middle manager at a state-run investment firm would never garner so much attention. But Wu’s post touched a nerve. These are tough times for private firms, which have borne the brunt of China’s economic slowdown, as well as a series of government policies designed to clean up the environment and reduce risk in the financial sector.

In October, CKGSB’s Business Conditions Index (BCI), which tracks sentiment among small- and medium-sized enterprises, fell to 41.4. This is the lowest reading ever recorded since the monthly survey began in 2011.

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