Japanese media believe that the development of China's favored state-owned enterprises has squeezed private enterprises. China's state-owned enterprises are putting pressure on China's previously dynamic private sector. A study by a US think tank found that in the two and a half years to the end of 2023, the total market value of large private enterprises fell by about 60%.
Many market observers have cited China's tightening of regulations, such as the zero-COVID policy and a crackdown on the tech sector, as the cause of the decline in private enterprises.
The Peterson Institute for International Economics analyzes the market capitalization of China's top 100 companies. It found that by the end of 2023, the share of state-controlled enterprises (** holding 50% or more) in total market capitalization will rise to 50%, the highest in five years. In June 2021, state-owned enterprises accounted for 31% of the total market capitalization of the top 100 companies, at a time when China's private enterprises, led by tech giants such as Alibaba Group Holding and Tencent Holdings, were growing.
In stark contrast, the share of private enterprises (i.e., those with less than 10% state-owned shares) in the total market capitalization has declined, and by the end of 2022 it was lower than that of state-owned enterprises. As of the end of last year, private enterprises accounted for 37% of the total market capitalization. The total market value of private enterprises reached 4$745 trillion, which has fallen to less than $2 trillion by the end of 2023.
The market capitalization of major tech platform operators, such as Alibaba, Tencent and food delivery app Meituan, has fallen by 50 to 70 percent in the past two and a half years. Starting in the fall of 2020, the authorities tightened their regulation of the tech sector. The move is believed to have been sparked by the remarks of Alibaba founder Jack Ma. Fears that tighter regulation would slow the pace of technological innovation led to a surge in capital withdrawals from Chinese tech stocks.
But China's tech sector's woes are not unique.
Last year, the total profit of private manufacturers and industrial enterprises was 234 trillion yuan (3,250.)900 million US dollars), which is 4% higher than that of state-owned enterprises. In 2015-2016, the gap between private and state-owned enterprises was more than twice as high as that between state-owned enterprises.
Private companies are also reluctant to expand due to the uncertainty of the future. In 2023, private fixed asset investment fell by 04%。This is related to the growth of state-owned enterprises by 6In stark contrast to 4%, SOEs are more likely to benefit from local**-led infrastructure investment.
Naoki Tsukioka, chief economist of the Mizuho Research Institute, said:"A series of policy factors, including zero-COVID and the tightening of controls on industry, have cooled the overall sentiment of the private sector."
With 80 per cent of workers employed in the private sector, the recession has taken its toll on the job market and incomes. According to data from Chinese Human Resources Corporation Zhaocaitong, as of October to December 2023, the monthly salary provided by enterprises for recruitment positions has declined year-on-year for three consecutive quarters. This anxiety has spread to households, dragging down overall economic demand.
* Ways to stimulate the private sector are currently being sought. The People's Bank of China, ** Bank and other financial departments have instructed commercial banks to increase the proportion of total loans to private enterprises. The National Development and Reform Commission plans to speed up the enactment of laws to promote the development of the private economy.
If inefficient state-owned enterprises continue to dominate the economy, productivity is likely to stagnate. As China's labor force shrinks, this will weigh on China's medium- and long-term economic growth.
2024 02 0519:10Nikkei English News.