Fintech

China Entrepreneurs Face Grim Future, Says Beijing Academic

 

China’s crackdown on entrepreneurs has been prompted by them shunning the help of state-owned enterprises and displaying too much independence, according to a Renmin University scholar based in Beijing.

The private sector, especially technology and new economy startups, rely on founders’ entrepreneurial genius and international investors rather than Communist Party connections and partnerships with state agencies, Martin Miszerak argued in a weekend essay.

The academic said he analysed the companies targeted – including taxi-hailing platform DiDi, Alibaba affiliate Ant Financial, entertainment streaming service Tencent, food delivery platform Meituan and e-commerce company JD.com – and concluded it was a coordinated policy.

The most likely explanation for the crackdown is that it is “an assault on China’s entrepreneurial private sector”, he said in the essay, published by the East Asia Forum, a think tank.

Beijing is closing the distance between the establishment and entrepreneurs by cracking down on their ventures and interrupting their business models.

“This distance from the state is being disrupted by the crackdown through which the Chinese Communist Party is moving to solidify political control over corporate cash flow,” Miszerak, a visiting lecturer at Renmin Business School, said.

 

Transparent Corporate Structure

Companies such as DiDi Global unnerved China’s ruling class with their “extremely slim and transparent” corporate structure, compared with bloated and inefficient state-owned enterprises (SOEs).

“Few state-affiliated investors participated in DiDi’s earlier fundraising rounds, as its founders have always sought to raise capital from world-famous names such as Apple, Temasek and Alibaba,” Miszerak said.

Miszerak said the policy was most likely instigated by Xi Jinping, China’s top leader.

“One interpretation of [China’s crackdown] is that the campaign is part of Xi’s strategy to steer China towards a Maoist model of governance in which the private sector is significantly downsized and private companies are likely to lose what is left of their independence and become mere appendages of the state,” he said.

The signal by Liu He, China’s vice-premier, that the government intended to end its ‘regulatory rectification’ campaign suggested that Xi had “finally awoken to the damage” the year-long crackdown has wrought on investor sentiment, Miszerak said.

But China’s crackdown shows entrepreneurial companies have paid a steep price for their independence, he said.

Although Ant Group might be allowed to proceed with its much-delayed public offering on the Hong Kong stock exchange, regulators are pushing for a corporate restructuring in which Ant Financial will take on SOEs as partners.

“It remains unclear how DiDi’s case will unfold, but much can be learnt from looking back on Jack Ma’s experience with Ant Financial,” Miszerak said. “The future of China’s entrepreneurial capitalism looks decidedly grim.”

 

  • George Russell

 

READ MORE:

Didi Seen in Talks For Stake in China EV Maker Sinomach

Ant Group Names HKEX Chair Laura Cha to Board

Alibaba Founder Jack Ma Reappears In Hong Kong

 

 

George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

Recent Posts

China Services Activity Jumps in January as Covid Curbs End

China's dropping of travel curbs resurrected services activity in January for the first time in five…

17 mins ago

China to Build Antarctica Ground Stations for Ocean Satellites

The China Aerospace Science and Technology Group is to build the $6.53 million stations amid…

14 hours ago

China Battery Firm CATL Seen Eyeing $5bn Swiss Listing Boost

The global depositary receipts listing could even see CATL raise $8 billion if market conditions…

16 hours ago

Xpeng Secures Key Permit to Launch ‘Flying Car’ – TechCrunch

The 'special flight permit' from the Civil Aviation Administration of China will allow the Xpeng…

19 hours ago

Paris Club Seen Giving Sri Lanka Support for IMF Bailout

The Paris Club of creditor nations is ready to provide financing assurances for Sri Lanka,…

19 hours ago

China Needs Tech Self-Reliance to Avoid Being Strangled: Xi – SCMP

President Xi Jinping warned this week that China must speed up moves to become self-reliant…

20 hours ago