ChinaTech #6 | Xi Jinping's meeting with Chinese entrepreneurs
... and implications for Chinese private tech ecosystem
This new segment by Shobhankita Reddy is your go-to newsletter for updates and perspectives on China’s tech ecosystem. This edition seeks to understand the recent high profile meeting of Xi Jinping with Chinese private sector entrepreneurs
Last week, a high-profile symposium of private entrepreneurs met with Xi Jinping. This meeting occurred at a critical time, just ahead of the National People’s Congress’s annual session scheduled for March 5, 2025.
Also, the last time such a meeting took place was in late 2018, during the trade war started by the first administration of Donald Trump. This time around, too, the meeting is seen to be triggered by the increasing threats of tariff hikes that Trump, in the first months of his second term in office, plans to issue.
However, a lot has changed in the Chinese economy since 2018. Starting in November 2020, Beijing has led a regulatory crackdown on domestic tech.
Specifically, following a controversial speech by Jack Ma, co-founder of Alibaba Group, the IPO of Ant Group, a fintech affiliate of Alibaba, which would have been the largest in the world, was quashed. This was followed by a tightening of anti-trust laws, data privacy rules, rampant investigations and a change of corporate governance measures that saw trillions of dollars wiped out in value.
The roots of the crackdown are believed to be ideological. Xi Jinping has had a dismissive view of consumer technology, comparing it to “spiritual opium” owing to the fact that it doesn’t contribute to hard “national power” and threatens the “common prosperity” of the people. The “barbaric” growth and “disorderly expansion of capital” in the internet economy was believed to be antithetical to the CCP’s standing.
The Chinese economy and stock market have been in decline for the past four years.
As an aside, this WSJ article is a fascinating read.
The Chinese administration tried to shore up the stock prices by having a “national team” of state-linked firms buy up select stocks. This initially led to insider trading, and the strategy soon shifted to buying ETFs. This was when Chinese quant firms and hedge funds came into clash with government intervention.
“The central government could not tolerate having the national team buying only to find that the quant funds were selling,” said Colin Liang, head of China research at Redwheel, a global asset manager. “That was against the broader market and national interests. That was the red line.”
Controls and bans followed. Chinese hedge funds, otherwise used to a fledgling capital market where they previously minted higher returns than their US counterparts, faced severe losses. This, interestingly, included High-Flyer, DeepSeek’s parent company. So, if anybody were to tell you that DeepSeek enjoyed preferred status under the Xi Jinping administration, remind them of this. Like many Chinese technology companies, DeepSeek arose despite and not necessarily because of the administration. It emerged out of a systemic technological and market depth cultivated in China over a much longer period of time.
Since the global attention that DeepSeek has attracted, the Hang Seng Tech Index, a benchmark for Chinese technology stocks has risen and entered a bull run overdrive, outpacing the NASDAQ 100. Xi’s meeting with tech entrepreneurs, including the DeepSeek CEO, at such a time is also note-worthy.
Six private entrepreneurs spoke at the meeting.
Ren Zhengfei, CEO of Huawei Technologies Co., Ltd.
Wang Chuanfu, Chairman of BYD Co., Ltd.
Liu Yonghao, Chairman of New Hope Holdings Group Co., Ltd (Agribusiness enterprise)
Yu Renrong, Chairman of Shanghai Will Semiconductor Co., Ltd.
Wang Xingxing, CEO of Hangzhou Yushu Technology Co., Ltd (Unitree Robotics)
Lei Jun, Chairman of Xiaomi Technology Co., Ltd.
A news report captured in the People’s Daily says this of Xi Jinping’s meeting -
“He emphasised that the basic policies and guidelines of the Party and the state for the development of the private economy have been incorporated into the system of socialism with Chinese characteristics, and will be adhered to and implemented consistently. They cannot and will not change. “
In Xi’s own words -
“The vast number of private enterprises and entrepreneurs should be full of passion for entrepreneurship and patriotism, continuously enhance their ideals, deeply cultivate a sense of national responsibility, keep in mind their roots and the need for progress after becoming prosperous, carry forward the entrepreneurial spirit, focus on strengthening, optimising and expanding their enterprises, and firmly become builders of socialism with Chinese characteristics and promoters of Chinese-style modernisation. It is necessary to unswervingly follow the path of high-quality development, adhere to the main business, strengthen the real economy, enhance independent innovation, transform the development mode, continuously improve enterprise quality, efficiency and core competitiveness, and strive to make more contributions to promoting scientific and technological innovation, cultivating new quality productive forces, building a modern industrial system, comprehensively advancing rural revitalisation, promoting coordinated regional development, and guaranteeing and improving people’s livelihoods.”
Acknowledging difficulties faced by the private economy, he said -
“Some difficulties and challenges currently facing the development of the private economy are generally occurring in the process of reform and development, industrial transformation and upgrading. They are local rather than universal, temporary rather than long-term, and surmountable rather than being unsolvable.”
Essentially, the private sector pain is short-term and necessary in the pursuit of long-term progress.
Xi Jinping’s speech also included measures required to help private industry -
“It is necessary to resolutely eliminate various obstacles to the equal use of production factors and fair participation in market competition in accordance with the law, continuously promote the fair opening of competitive sectors in infrastructure to all types of business entities, and continue making great efforts to resolve the issue of difficult and expensive financing for private enterprises. It is necessary to focus on solving the problem of arrears of accounts owed to private enterprises. It is necessary to strengthen law enforcement supervision, focus on rectifying arbitrary charges, fines, inspections, and seizures, and effectively protect the legitimate rights and interests of private enterprises and private entrepreneurs in accordance with the law. At the same time, it must be recognised that China is a socialist country governed by the rule of law, and enterprises of all types of ownership cannot evade investigation and punishment for illegal activities.”
Interestingly, Jack Ma was in attendance, leading several analysts to theorise if this means he has been rehabilitated since his long absence from public life. However, it is important to note that he did not speak at the symposium.
What does this mean for the direction of the Chinese private sector? Does this signal a shift in Xi’s stance since the crackdowns?
Manoj Kewalramani has the following take -
I don’t see any particular policy re-evaluation that Xi has offered to China’s private sector. First, the choice of speakers is indicative of the emphasis on hard technology and industrial technology focus as opposed to consumer technology. Second, I read his remarks as an acknowledgement of some of the challenges facing the private sector, in terms of access to finance, regulatory hurdles and arbitrary costs. He also seemed to suggest that the private sector promotion law will provide stronger guarantees for the sector’s development. These are not new complaints or commitments.
The most important takeaway from the symposium, then, is in Xi’s reach out to the private sector and his reiteration that they must contribute to the national goals of the Chinese “real” economy during increasing geopolitical tensions with the US.
As for whether this necessarily means a softer and more accommodating stance towards domestic tech, we will have to wait and watch.