Entrepreneurs squirm under Xi Jinping's tightening grip

Guo Junwen was a successful property developer in southwestern China when the authorities threw him behind bars three years ago on charges involving land use and seized his business.

Now free, Guo — who still disputes the charges — says the police are refusing to return money they still owe him under Chinese law.

“They said, ‘We have no choice, Old Guo,’” Guo said in a telephone interview from the Indonesian island of Batam, where he lives part time. “‘We have no fight against you, but this is what the higher-ups want.’”

China’s relationship with entrepreneurs like Guo, already complicated, has become strained. The Communist Party, which suppressed private enterprise after taking power in 1949, officially welcomed them to join its ranks early last decade, recognising that the country needed private business to power growth and innovation.

But the state is now asserting its authority over private business in new ways. President Xi Jinping has pushed for strengthening state-owned enterprises and has called on businesspeople to maintain loyalty to the party. His government has set clear restrictions for outbound investment and directed private companies to take stakes in those that are state owned. It is pushing some tech firms to give it stakes and board seats.

“They are getting nervous about how powerful these companies are becoming,” said Gary Rieschel, founder of Qiming Venture Partners, a Seattle-based venture capital company that invests in Chinese start-ups. Citing China’s two biggest internet companies, he added, “You look at the most valuable companies in the world, and after Amazon, Google and Facebook, you then have Tencent and Alibaba.”

China is showing signs that it is aware of unease in the private sector, which could become a problem as the country looks for new ways to grow. In an unusual move in September, China’s top leaders sought to assure entrepreneurs that it would support and protect their rights, a statement that cheered Guo.

“The central government’s policy is very positive,” Guo said. “But what is key is the issue of enforcement. The gap between the central government and local governments is still quite large.”

The government has also made it easier for small businesses to get loans and stepped up the country’s once-weak intellectual property laws. In a speech at the opening of the Communist Party Congress on Wednesday, Xi said the party would “inspire and protect the spirit of entrepreneurship.”

Private businesses have become a major driver of China’s development. They underpin its thriving internet scene and its growing consumer culture. Economists generally say China should give private businesses a greater role in a country that still relies on bloated state-run industries.

©2017 The New York Times News Service