Han Cheng is a Master’s student in Public Policy at the Harvard Kennedy School.
All eyes are on the Third Plenary Session of the 20th Central Committee of the Communist Party of China — which begins today in Beijing and runs until Thursday, July 18th — to provide more long-term clarity regarding the state’s plans for the private sector. But even in the last year, various political maneuvers indicate some of the state’s new efforts to support and integrate private enterprises into the broader framework of its economic policies. These policy proposals aim to stabilize the private business environment, but so far, they have largely paid lip-service to the cause of supporting private enterprises without bringing tangible relief.
Prescribing “Pills”: The patient and the treatment
During Covid, sporadic city lockdowns left private businesses crippled, and policy shifts around the tech industry and education services worsened their condition. At this critical juncture, the private sector suffers from multiple maladies: the lingering symptoms of the pandemic and the effects of unstable policies and harsh regulatory interventions, along with a questionable market competition environment between private and state-owned enterprises. These factors have resulted in a significant decline in private business confidence.
Solving the confidence crisis will be a crucial step in solving China’s unemployment problem: private businesses account for more than 80%[1] of employment nationwide. The youth unemployment rate has been especially vexing, reaching an alarmingly high 21.3% in June of 2023.[2], according to official statistics — just before the Statistical Bureau decided to stop publishing figures for the rest of the year. Adding to the business community’s concerns, several well-known private entrepreneurs[3] have left China.
The term “stabilizing pill” (定心丸) for private businesses was first coined in 2018, pre-Covid, by General Secretary Xi Jinping in a speech[4] emphasizing the importance of boosting confidence among private enterprises. These “pills” range from financial support to tax reductions, to industrial subsidies[5], to online opinion management, and more controversial actions, such as shielding private enterprises from consequences of the justice system. The term “stabilizing pill” has come to be used by the media and the state alike as a kind of shorthand for political and legal support for private enterprises.
An image of a commercial district in Shenzhen City. Photo credit: Anonymous
In February, a new measure was proposed aiming to further boost private sector confidence: the Private Business Incentivizing Bill (民營經濟促進法). Liu Junhai (瀏俊海), the Director of the Commercial Law Research Institute at Renmin University of China – and a drafter of the bill – has suggested[6] that it principally promotes, among other priorities, equal legal status between public and non-public enterprises; fair competition; mutual cooperation; regulatory and governmental integrity; and legal protection for the healthy development of the private economy.
The Economic Observer newspaper emphasized[7] that the bill must “grow teeth” (長牙齒) in order to have the force to regulate public/governmental interventions against private sectors. The bill[8] would effectively guarantee the private sector benefits similar to the state sector: with similar legal and social status and opportunities for mutual cooperation and competition. This bill also insinuates a more regulated government intervention in the context of the justice system — the political-legal organs (政法系統). Its scope spans[9] multiple legal domains, including criminal justice, civil law, and corporate law. The bill promotes more cautious prosecution and judicial sentencing, aims to reduce the incidence of wrongful convictions and ensure their subsequent rectification, and advocates for a more tailored approach in piercing the corporate veil in search and seizure practices when dealing with private business actors.
Phase One Trials: Bills, pills, and interventions
In late 2022 and early 2023, Xi Jinping re-emphasized[10] the macro-political agenda of “Two Unwaverings” (兩個毫不動搖), a term he first began using a decade earlier. In two speeches, in December 2022 and January 2023, Xi highlighted[11] the importance of boosting business confidence in the private sector, granting equal institutional and legal status to both private and state-owned sectors, and encouraging the growth of private businesses through favorable policy and public opinion. In the months after these speeches, “more than 100 “stabilizing pill” policies were issued by central government ministries and commissions alone,” Liu Junhai noted in an interview[12] published on the Ministry of Justice‘s official website. However, many of these measures offered rhetoric more than substantive policy change. According to Liu[13], the Private Business Incentivizing Bill aimed to enhance the previous bills’ “justiciability, arbitrability, and enforceability” (可訴性、可裁性與可執行性) — in essence, to increase the efficacy of the “pills.”
Pills of Finance: Since pre-Covid, there has been speculation[14] that the central government is prioritizing the state sector over the private sector (國進民退) and that state-owned enterprises are superior to private ones. In response, the State Council announced its agenda in January 2023 through a press release[15], emphasizing stabilization of financial health, promotion of information transparency, support for innovation, industry-leading development, and collaborative financial ventures for both state-owned enterprises and private enterprises. These priorities signified[16] to the market the idea of “mutual advancement of the public and the private” (國民共進). Additional initiatives included state capital support for private businesses and encouraging SOEs to purchase private sector services.
By July 2023, the State Council had unveiled[17] 31 total initiatives aimed at bolstering support for private businesses. These initiatives called for various government branches to devise more standardized and institutionalized policies to assist private enterprises, including normalizing prevention and clearing mechanisms for government arrears on private businesses. In August 2023, the National Development and Reform Commission (國家發展與改革委員會 / 發改委) recommended[18] a comprehensive support plan for the private sector, specifically focused on boosting confidence in the private economy. Moreover, the People’s Bank of China, the Ministry of Finance, and the National Financial Regulatory Administration (國家金融監督管理總局), along with five other state offices, have jointly demonstrated[19] their commitment to supporting private enterprises through various means, including expanding the availability of capital and funding channels.
An image of the Great Hall of the People in Beijing. Photo credit: Anonymous
Pills of Reputation: A new initiative has been attached to the pre-existing Operation Clearance campaign (清朗行動) that is aimed at protecting the reputations of those in the private sector. Originally launched in 2022[20], to “purify” cyberspace, the campaign now has a completely new aim[21]: It targets malicious, false, and discriminatory speech against private entities. Interestingly, it also targets[22] online content that sensationalizes the private lives of entrepreneurs, including aspects like their romantic or marital affairs. In 2023, the National Development and Reform Commission labeled[23] individuals engaging in such activities as “Internet Dark Mouths” (網絡黑嘴) and “Dark Industry Chain“ (黑色產業鏈).
In addition to the Cyberspace Administration of China (中央網絡安全與資訊化委員會辦公室 / 網信辦), the judicial branch of the Central Government also joined[24] this opinion management effort, albeit in an advocacy capacity: the Supreme People’s Court published several precedent-setting cases[25] all protecting the personal rights (人格權保護) of the private sector. According to Chen Yifang (陳宜芳)[26], the head of the First Civil Division of the Supreme People’s Court, “these cases aim to effectively protect the reputation rights of private enterprises, creating a favorable public opinion environment for the private economy.”
Pills of Justice: In the political-legal realm, from February to December 2023, the Supreme People’s Procuratorate initiated[27] a national campaign for the “Judicial Protection of Private Enterprises” (民營企業司法保護專項活動). This campaign mandated all procuratorates to meticulously address appeals made by private entities, such as those concerning improper case initiation, detention, search and seizure, and administrative delays in criminal proceedings.
Similar actions have also been observed at the local government level. For instance, in March 2023, the Hainan provincial government issued[28] an official statement delineating a newly implemented criminal justice policy (刑事司法政策) that advocated for political-legal organs to adopt a “Fewer Arrests and Cautious Prosecution and Detention”[29] (少捕慎诉慎押) approach when dealing with private enterprises. This policy has sparked considerable controversy[30] among online communities, as its language could be interpreted as affording certain legal preferential treatment to private entrepreneurs and entities.
Original Text: “貫徹落實少捕慎訴慎押[刑事司法政策]，對民營企業家涉案人員能不捕的不捕、能不訴的不訴、能不判實刑的不判實刑，能不繼續羈押的及時予以釋放或變更強制措施。”
Translation: “To implement the [criminal justice policy] of “Fewer Arrests and Cautious prosecution and detention,” for private entrepreneurs, if there is no need for detention, prosecution, or imprisonment, and if there is no need for a real sentence, they shall not be subject to these measures. If there is no need for continued detention, they shall be promptly released or have their compulsory measures changed.
The statement appears to ask the political-legal system to apply a necessary “easing” (少 / 能不) of the processes of detention, prosecution, and judicial sentencing when dealing with private enterprises. The softening of language in the second half of the statement leaves some debate over its precise interpretation, but there is clearly a heavy emphasis on “caution” (慎).
Prognosis: A treatment plan with long-lasting relief?
It’s impossible to delve into every single measure “prescribed” by the state over the last year-plus in the space of this piece, but it is important to note just how broad the scope of the campaign to bolster private sector confidence has been. The combined efforts have involved joint initiatives from multiple government branches, including the financial regulators, the State Council and its subsidiaries, and the justice system. There has been a deluge of new policy proposals, press releases, initiatives, and white papers issued from the central government and the local government municipalities alike – all of which contribute to a seeming “treatment plan” for ailing Chinese private enterprises.
While the active ingredients of these “pills” may seem like the appropriate remedy, their efficacy will depend on consistent policy implementation, genuine political commitment, and the creation of a stable and predictable policy environment for private businesses — factors we can’t yet predict. For example, the judicial protection special action of the Supreme People’s Procuratorate only lasted for ten months. There is a question mark about whether such initiatives will continue. In other words, Liu Junhai’s emphasis[31] on “justiciability, arbitrability, and enforceability” will be a critical check on this treatment plan, while the results of this week’s Plenum will test the mettle of the practitioner.
[1] Edward Cunningham, “Edward Cunningham: What is the future of China’s private sector?,” Harvard Kennedy School (Summer, 2022), https://www.hks.harvard.edu/faculty-research/policy-topics/international-relations-security/what-future-chinas-private-sector.
[2] Meaghan Tobin, “China’s solution to record youth unemployment is to stop reporting it,” The Washington Post (August 15, 2023), https://www.washingtonpost.com/world/2023/08/15/china-economy-youth-unemployment-rate/.
[3] Li Yuan, “Entrepreneurs Flee China’s Heavy Hand: ‘You Don’t Have to Stay Here,’” The New York Times (January 19, 2023), https://www.washingtonpost.com/world/2023/08/15/china-economy-youth-unemployment-rate/.
[4] “定心丸！总书记这么肯定民营经济,” Xinhua (November 1, 2018), http://www.xinhuanet.com/politics/xxjxs/2018-11/01/c_1123649882.htm.
[5] Zhao Zhanhui, Lin Lili & Wang Pei, “充分激发各类经营主体的内生动力和创新活力（开局之年中国经济高质量发展述评),” 《人民日报》 [People’s Daily] (December 24, 2023), http://paper.people.com.cn/rmrb/html/2023-12/24/nw.D110000renmrb_20231224_4-01.htm
[6] Wang Zhen, “刘俊海：《民营经济促进法》应坚持六项核心原则，地位平等是根本,” 中华人民共和国司法部, 立法工作 [Ministry of Justice of the People’s Republic of China, Legislative Work], 界面新闻 [Interface News] (March 11, 2024), https://www.moj.gov.cn/pub/sfbgw/fzgz/fzgzxzlf/fzgzlfgz/202403/t20240311_495998.html
[7] ”民营经济促进法得“长牙齿,” 经济观察报 [Economic Observer] (February 24, 2024), https://www.eeo.com.cn/2024/0224/639049.shtml
[8] “全国工商联团体提案：建议制定出台民营经济促进法,” 中华工商时报中华全国工商联合会，全联要闻 [China Industry and Commerce Times, China General Chamber of Commerce, Union News], 中华工商时报 [China Business Times] (March 7, 2023), https://www.acfic.org.cn/qlyw/202303/t20230307_188614.html
[9] Zhou Youyong, “深入学习贯彻习近平新时代中国特色社会主义思想 以高水平法治助力新质生产力发展,” 全国人民代表大会，中国人大网 [National People’s Congress, China National People’s Congress website], 光明日报 [Guangming Daily] (May 21, 2024), https://www.gmw.cn/2024-05/21/content_35524377.htm
[10] Zou Duowei, “新闻多一点 | 总书记讲话中提到的“两个毫不动摇”“三个没有变”“两个健康,”” 新华社 [Xinhua News Agency] (March 7, 2023), http://www.news.cn/2023-03/07/c_1129417265.htm
[11] Song Zijie & Xiao Congcong, ““坚定信心开新局”系列报道三：切实落实“两个毫不动摇” 习近平这样要求,” 人民网–中国共产党新闻网 [People’s Daily Online – CPC News] (February 20, 2023), http://cpc.people.com.cn/n1/2023/0220/c164113-32627447.html
[12] Wang Zhen, “刘俊海：《民营经济促进法》应坚持六项核心原则，地位平等是根本,” 中华人民共和国司法部, 立法工作 [Ministry of Justice of the People’s Republic of China, Legislative Work], 界面新闻 [Interface News] (March 11, 2024), https://www.moj.gov.cn/pub/sfbgw/fzgz/fzgzxzlf/fzgzlfgz/202403/t20240311_495998.html
[13] Liu Junhai, “民营经济促进法如何激发民企活力,” 中国新闻周刊 [China Newsweek] (March 4, 2024), https://new.qq.com/rain/a/20240301A03AOQ00?uid%5B0%5D=465365288&uid%5B1%5D=465365288
[14] Shen Lu, “监管风暴下，中国经济现“国进民退,” “华尔街日报中文网 [Wall Street Journal Chinese] (October 23, 2022), https://cn.wsj.com/articles/监管风暴下，中国经济现“国进民退” -11666491310
[15] “国务院新闻办举行发布会 介绍2022年中央企业经济运行情况,” 新闻办网站 [State Council Information Office Website] (January 18, 2023), https://www.gov.cn/xinwen/2023-01/18/content_5737806.htm
[16] Wang Zilin, “国民共进”推动经济协同发展,” 上海证券报 [Shanghai Securities News] (March 9, 2023), https://paper.cnstock.com/html/2023-03/09/content_1733503.htm
[17] “中共中央 国务院关于促进民营经济发展壮大的意见,” 中华人民共和国政府，政策，中央有关文件 [Government of the People’s Republic of China, Policies, Relevant Central Documents], 新华社 [Xinhua News Agency] (July 19, 2023), https://www.gov.cn/zhengce/202307/content_6893055.htm
[18] “发改体改 (2023) 1054号: 关于实施促进民营经济发展近期若干举措的通知,” 国家发展改革委 [National Development and Reform Commission] (August 1, 2023), https://www.ndrc.gov.cn/xwdt/tzgg/202308/t20230801_1359008.html
[19] “8部门发布25条举措 助力民营经济发展壮大,” 人民网 [People’s Daily Online] (November 27, 2023), http://finance.people.com.cn/n1/2023/1127/c1004-40126599.html
[20] “2022年“清朗”系列专项行动举行新闻发布会,” 中国网信网 [China Cyberspace Administration] (March 18, 2022), https://www.cac.gov.cn/2022-03/17/c_1649125522577850.htm
[21] “维护企业和企业家网络合法权益 依法依规处置虚假不实侵权,” 央视网 [CCTV News] (March 28, 2023), https://news.cctv.com/2023/03/28/ARTInWQ5w1oowTr60iZTXbT0230328.shtml
[22] ““清朗·优化营商网络环境 保护企业合法权益”专项行动查处一批典型案例,” 中国网信网 [China Cyberspace Administration] (August 1, 2023), https://www.cac.gov.cn/2023-08/01/c_1692460647400775.htm
[23] “发改体改 (2023) 1054号: 关于实施促进民营经济发展近期若干举措的通知,” 国家发展改革委 [National Development and Reform Commission] (August 1, 2023), https://www.ndrc.gov.cn/xwdt/tzgg/202308/t20230801_1359008.html
[24] Zan Xiuli, “最高人民法院：加强对民企民营企业家人格权司法保护,” 中国证券报·中证网 [China Securities Journal] (October 17, 2023), https://www.cs.com.cn/xwzx/hg/202310/t20231017_6370907.html
[25] “最高法发布涉民营企业、民营企业家人格权保护典型案例,” 最高人民法院新闻局 [Supreme People’s Court News Bureau] (October 16, 2023), https://www.chinacourt.org/article/detail/2023/10/id/7578825.shtml
[26] Zan Xiuli, “最高人民法院：加强对民企民营企业家人格权司法保护,” 中国证券报·中证网 [China Securities Journal] (October 17, 2023), https://www.cs.com.cn/xwzx/hg/202310/t20231017_6370907.html
[27] Gu Fangqing, “最高检部署开展“民营企业司法保护专项行动,”” 检察日报–要闻版 [Procuratorial Daily – News Section] (February 24, 2023), https://www.jcrb.com/xwyw/2023-02-24/98266.html
[28] Qiu Chunyan & Shi Zhaokun, “少捕慎诉慎押的检察实践,” 最高人民检察院微信公众号 [Supreme People’s Procuratorate WeChat Account] (December 14, 2021), https://www.spp.gov.cn/zdgz/202112/t20211214_538793.shtml
[29] “海南省人民政府办公厅印发关于支持民营经济发展的若干措施的通知,” 海南省人民政府办公厅 [Hainan Provincial People’s Government Office] (March 24, 2023), https://lhqzf.haikou.gov.cn/xxgk/lhqzf/lhqkxjsgyxxhj/fdzdgknr/gzdt_9563/202307/t1304485.shtml
[30] “对涉案民营企业家“能不捕的不捕” 不是你理解的那样,” 澎湃新闻 [The Paper] (March 28, 2023), https://m.thepaper.cn/kuaibao_detail.jsp?contid=22482676&from=kuaibao
[31] Liu Junhai, “民营经济促进法如何激发民企活力,” 中国新闻周刊 [China Newsweek], (March 4, 2024), https://new.qq.com/rain/a/20240301A03AOQ00?uid%5B0%5D=465365288&uid%5B1%5D=465365288