With China celebrating the formation of its current Communist form on October 1, it is becoming clear that the nationalist government under President Xi Jinping wants to exert greater power over private enterprise.
There are Communist Party cells within the country's many state-owned enterprises. But private businesses have largely been left to operate independent of the Communist Party. The party would like that to change.
Senior Communist Party officials have in recent weeks begun stressing that private enterprise has an important role to play in "United Front work". That's a propaganda euphemism for ensuring that entities not controlled by the state nevertheless continue to support the Communist Party's policy objectives and agenda.
Communist Party committees within private companies are due to be given a greater say in how the company is run. Where they do not exist, they will be encouraged to form, even in joint ventures run with international partners.
"What Xi really wants is an increasing share of the economy controlled by state-owned enterprises," one government adviser tells the Financial Times.
The FT reports that Communist top officials are assembling a "team of representatives" from the private sector. Team members would either be Communist Party members themselves or be asked to join formal advisory bodies to the government.
There would be a focus on recruiting younger entrepreneurs in strategically important sectors. In theory, private companies would be rewarded with greater government support and a promise to ensure they get equal treatment to state-owned companies.
The Communist Party has made such empty promises in the past, stating that private companies would be given equal status to state-owned enterprises. But private industry nevertheless finds it hard to get bank loans and other financial support from China's big banks, all of which are state-owned. Officials often favor state companies, and control the strings over which permit gets issued, and when.
This is the first time the Communist Party has tried to co-opt entrepreneurs in this way. It is sure to focus on their efforts to support the party - and may down the line conveniently forget about those pledges to level the playing field.
"The government has so many policies designed to help us, but none of them actually do," one unnamed entrepreneur told the FT in response to the new initiative. "We just have to rely on ourselves."
One study by the Beijing-based consultancy Plenum has found that Communist Party cells in more than 800 listed companies have had little to say about how the company is run. Most party committees arrange parties and events for Communist members working in the company, and have had little to do with corporate decision-making.
But Xi would like them to exert greater influence. He has in recent years called top entrepreneurs such as Alibaba Group Holding (BABA) co-founder Jack Ma and Tencent Holdings (TCTZF) founder Pony Ma (no relation) for private hearings at which Xi told them not to forget who is really in charge.
China's private sector employs 80% of urban workers, and contributes 60% of the country's economic output. Still, Xi told the 19th Communist Party congress that "north, south, east, west and center - the party is leader of all."
Tomorrow is China's National Day. It honors October 1, 1949, the official formation of the People's Republic of China.
The event this year coincides with the Mid-Autumn Festival, a holiday equivalent to Thanksgiving in China, when families gather together for a meal. Traditionally, it is a time to be thankful for the harvest, and to gaze at the full moon with lanterns.
The Communist Party will hold a plenum at the end of October at which it will outline its priorities. It is due to unveil details of its next Five-Year Plan, to cover 2021-2025.
China just loves a good five-year plan, even if it is more plan than good. This next episode will be the 14th installment.
China's top leaders will likely set a lower goal for growth than the 6.5% annual average implied by the 13th Five-Year Plan, from 2015-2020.
"Obviously, Covid-19 has somehow spoiled the party, which indicates that uncertainties are still ahead," the Commerzbank Asia economics team writes in a note to clients. It is even possible that the leadership will sidestep any formal target.
The economic downturn as a result of the coronavirus has hampered China's efforts to "eradicate poverty" by 2020. Xi had hoped to have rural poverty eliminated by the end of this year. But it has been forced to admit that more than 600 million people live on 1,000 yuan (US$140) or less per month, a situation not helped by the coronavirus.
Xi is likely to use the plenum to push his latest brainwave. "Xi Jinping Thought" is already installed in the canon of the Communist Party, and must be taught to party members and in schools. His latest theory is of "dual circulation," which stresses the development of China's domestic economy.
Xi has explained that China must rely for its development on "internal circulation," which refers to the domestic cycle of production, distribution and consumption. By implication, this would downplay "external circulation," meaning China's exports and economic interactions with other nations.
The shift is in contrast and reference back to the "great international circulation" strategy adopted by former Chinese leader Deng Xiaoping. Deng toured China's southern provinces in 1992, and proposed bolder steps to open up the country's coastal strip to the West.
Now, China is turning inward, given the geopolitical pressure it is experiencing over trade. There are also uncertainties provoked by Covid-19 and China's spats with not only the United States but also India, Australia, Britain, and almost all the Southeast Asian nations with claims to parts of the South China Sea.
China is one of the few nations globally due to post this growth, and the only major economy. China's GDP will likely grow 2.3% this year, according to Oxford Economics, when most nations are experiencing a historic recession, and jump sharply to 7.6% in 2021.
The benchmark CSI 300 of the largest stocks in Shanghai and Shenzhen is up 12.0% so far this year, through three quarters. That is the best performance in Asia by a long stretch, with only Korean (up 5.3%), Taiwan (up 4.3%), and New Zealand (2.2%) even in the black.
Mainland China's stock markets will be closed the rest of this week and almost all of next. Trading will resume on Friday, October 9.
