China’s pledges to back private sector to lead tech innovation
The Chinese government has outlined plans to strengthen the country’s economy by giving more resources to the private sector to help achieve technological breakthroughs.
It was one of the measures announced to support the private sector following the most recent meeting of the government. “[It is necessary] to support capable private enterprises to take the lead in undertaking major national technological research tasks, and further open up major national scientific research infrastructure to private firms,” according to a post-meeting document endorsed by the Communist Party’s 20th Central Committee.
The document also covered a wide range of reform objectives for the next five years in areas including economic development, science and technology, human capital, defence and social security.
The announcement “seems to focus on how to unite private enterprises to shoulder national strategic tasks”, said Su Yue, principal economist for China at the Economist Intelligence Unit.
The meeting also endorsed supported the formulation of a law to promote the private economy. The law had already been introduced into the law-making process by the country’s top legislature in February.
“We think China may accelerate its legislation process of the law on promoting the private economy and boost the establishment of a unified and fair national market, which should help underpin investors’ confidence,” said Ning Zhang, senior China economist at UBS Investment Bank.
Beijing pledged equal and fair market access for all firms, especially in terms of infrastructure construction, and to improve the mechanism for private companies to take part in major national projects.
The government also agreed to help private companies get access to finance, while improving the regulatory system on debt settlement for corporate accounts in arrears.
The private sector contributes 50% of tax revenues, generates more than 60% of gross domestic product and drives more than 70% of technological innovations.
It also provides more than 80% of urban employment and accounts for over 90% of market entities.
Su said that a bumpy post-Covid economic recovery has continued to weigh on the confidence of private businesses. The economist added: “The central government definitely wants to stabilise the confidence of the private economy and will definitely introduce policies, but the current international environment is not good. The two factors may offset each other, so the effect seems to be very limited.”
From Beijing’s perspective, in addition to boosting the confidence of private enterprises, maintaining national security is also a priority, she added.
For the state sector, the government pledged to support to make it “stronger, better and bigger” and enhance its core functions and competitiveness.
China intends to promote the concentration of state-owned capital in important industries related to national security and the lifeline of the national economy, including public services, emergency response capabilities, public welfare and forward-looking strategic emerging industries, it said.
E-commerce sector boosts economy
China’s e-commerce sector saw robust growth in the first half of 2024, boosting momentum for a recovery in consumption.
Online retail sales during this period grew by 9.8% year-on-year to 7.1 trillion yuan ($996 billion), of which the retail sales of goods reached 5.96 trillion yuan, marking an increase of 8.8%, according to data from the Ministry of Commerce (MOC).
The MOC said that digital products, services consumption, and trade-in programmes were the three key drivers for consumption growth during the period.
In terms of digital products, AI learning machines and smart wearable devices grew 136.6% and 31.5% respectively, the figures showed.
For services consumption, surveyed online travel and catering services grew 59.9% and 21.7% respectively.
E-commerce platforms in China coordinated to offer trade-in services for more than 400,000 products and recycling services covering over 300 categories of goods, the MOC said. Trade-in services saw sales of refrigerators, washing machines, mobile phones and TVs increase by 82.1%, 70.4%, 63.9% and 54.3% respectively, on major online shopping platforms.
