Much of modern Chinas epic growth was driven by private enterprise but under Xi Jinping, the Communist party has returned to being the ultimate authority in business as well as politics.
When Xi Jinping took power in 2012, he extolled the importance of the state economy at every turn, while all around him watched as Chinas high-speed economy was driven by private entrepreneurs. Since then, Xi has engineered an unmistakable shift in policy. At the time he took office, private firms were responsible for about 50% of all investment in China and about 75% of economic output. But as Nicholas Lardy, a US economist who has long studied the Chinese economy, concluded in a recent study, Since 2012, private, market-driven growth has given way to a resurgence of the role of the state.
From the Mao era onwards, Chinese state firms have always had a predominant role in the economy, and the Communist party has always maintained direct control over state firms. For more than a decade, the party has also tried to ensure it played a role inside private businesses. But in his first term in office, Xi has overseen a sea change in how the party approaches the economy, dramatically strengthening the partys role in both government and private businesses.
The relationship between the party and private sector companies is, up to a point, flexible certainly more so than with state companies. The party doesnt habitually micromanage their day-to-day operations. The firms are largely still in charge of their basic business decisions. But pressure from party committees to have a seat at the table when executives are making big calls on investment and the like means the lines have been dangerously blurred, in the words of one analyst. Chinese domestic laws and administrative guidelines, as well as unspoken regulations and internal party committees, make it quite difficult to distinguish between what is private and what is state-owned.