China looks to revive confidence in Covid-hit private sector – South China Morning Post

Nevertheless, China has made achievements over the past several years in promoting entrepreneurship, according to the government’s annual work report, also delivered to the National People’s Congress on Sunday.

The report mentioned plans to boost market confidence by encouraging the private economy and private businesses, while facilitating the development of small, medium and micro enterprises and creating a fair business environment for all companies to compete and flourish.

Analysts said the lack of confidence within the private sector remained one of the major challenges as China reached for a sustainable economic recovery.

“A key issue to watch in the next few months is how the new leaders will boost private sector confidence. This is more important than the fiscal and monetary policies, in my view,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“There will [need to] be actions rather than slogans in the next few months. One gesture could be a meeting between the top leaders and private entrepreneurs.”

Private businesses play a pivotal role in China’s economic development, accounting for more than half of the country’s tax revenue; 60 per cent of its gross domestic product, fixed-asset investment and foreign direct investment; and more than 80 per cent of urban jobs.

This year, the private sector also has the tough assignment of stabilising employment.

Beijing aims to create around 12 million new urban jobs this year – more than last year’s target of 11 million, according to the government’s work report.

The government also aims to keep the surveyed urban unemployment rate at around 5.5 per cent in 2023, unchanged from last year, but a record 11.58 million new university graduates this year will compound pressure to create jobs, many of which authorities hope will come from the private sector.

In its report, the NDRC acknowledged the hardships facing these businesses.

“Enterprises, especially small, medium and micro enterprises, are facing difficulties in production and operations, and residents are cautious about spending. At the same time, the lack of confidence in developing businesses and weak market demand could lead to a weakening cycle,” it said.

To improve conditions, struggling private businesses would be granted further tax rebates, fee cuts and other supportive policies.

Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank affiliated with the provincial government, said the problems faced by small, medium and micro enterprises, as well as the lack of confidence, had resulted from sluggish spending.

“The middle class is the main driver of consumption. To stimulate domestic demand, it is necessary to help small, medium and micro enterprises out of their predicaments and improve their confidence,” Peng said.

“Development is the absolute principle.”

Gao Yunlong, chairman of the All-China Federation of Industry and Commerce, said authorities and organisations at all levels must come up with more ways to benefit private businesses, such as bridging financing networks.

“We should also optimise the business environment to streamline costs for companies,” Gao said.

Additional reporting by Mia Nulimaimaiti