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Two Sessions 2022
EconomyChina Economy

China’s private sector struggling with ‘common prosperity’, Covid-19 and financing; SOEs thrive

  • China’s private sector contributes more than half of the country’s tax revenue and GDP, yet it is bearing the brunt of economic pressure
  • Crackdowns on tech giants and private tutoring, and Covid-19 restrictions on tourism and catering have all taken a toll

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Private sector companies in China (including Tencent, above) are facing crackdowns, regulatory discrimination and a lack of financing, while SOEs are thriving. Photo: Gcmt/ Imaginechina via AFP
Ji Siqi

In January 2022, Xian, a city in northern China, was 22 days into a lockdown due to a Covid-19 outbreak, when two private hospitals were ordered by local authorities to suspend operations for three months.

They were being punished for rejecting patients, citing Covid-19 control measures based on government orders, which led to the death of an unborn baby and a man from a heart attack. As soon as the decision was made public, the stock price of International Medical – the listed company behind the two hospitals – plummeted, leading to the suspension of trading in its shares the following day.

Despite the mismanagement, the two hospitals attracted some sympathy from local residents and on social media, because they were not alone in denying admission of people in critical condition. Other state-run hospitals had done it with impunity.

This is far from being an isolated case of discrimination over the past few years, however, even though President Xi Jinping has repeatedly promised to “unswervingly encourage, support, guide and protect the development of the private economy.”

Privately-owned Xian Gaoxin Hospital was ordered to suspend operations for three months in January 2022 after turning away patients who later died. Photo: Weibo
Privately-owned Xian Gaoxin Hospital was ordered to suspend operations for three months in January 2022 after turning away patients who later died. Photo: Weibo

“The business landscape in China is definitely changing, right now,” said Tao Jingzhou, an international arbitrator exercising at Arbitration Chambers in Hong Kong and London, in a commentary piece in January. “The future prospects for China’s innovation and economic growth, driven by the private sector over the past four decades, are increasingly bleak.”

Economic pressure has been mounting in the country since the second half of 2021, and it appears that private firms have been bearing most of the pain, while many state-owned enterprises (SOEs) have remained largely intact, or have thrived.

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