China’s Xi Jinping seeks helping hand from embattled tycoons

The President met business leaders before an important communist party meeting that began in Beijing on Monday.

Police patrol outside the Jingxi Hotel, where China’s are conducting the Third Plenum in Beijing this week. Picture: AFP

President Xi Jinping is appealing to private businesses to support his personal vision for China’s ­future as he outlines a much-­heralded economic reform program.

He met business leaders before an important Communist Party meeting that began in Beijing on Monday, at a time when foreign companies have expressed unease about his tightening restraints on their freedom to operate.

Mr Xi has shown no sign of willingness to change his approach to powerful tycoons he regards as a threat to Communist Party orthodoxy, or of allowing over-indebted companies to collapse. Yet the challenge his party-led economic model faces was highlighted when worse-than-expected economic figures – 4.7 per cent GDP growth, against a target of 5 per cent for the year – were revealed as the meeting began. In addition, foreign investment fell 29 per cent in the first half of the year compared with the same period in 2023.

The meeting, formally the “third plenum of the 20th central committee of the Communist Party of China”, is a longstanding feature of the party’s government cycle, in which the next five-year plan is approved.

Redolent of China’s Maoist era of state industrial planning, five-year plans remain important for setting economic priorities. After a series of economic setbacks in the past year, Mr Xi had been expected to ease a crackdown in which some of China’s billionaires have been made to reorganise their businesses to put them under firmer party direction, with others arrested and jailed. Party documents released before the meeting, however, give little indication that Mr Xi is prepared to change course.

Workers polish bicycle wheels in Hangzhou. China posted on Monday lower than expected growth in the second quarter, with all eyes on how top officials gathering in Beijing might seek to tackle the country's deepening economic malaise. Picture: AFP

An official statement on the most recent politburo discussion of the plan made no mention of entrepreneurs. Instead it stressed that “the overall goal of further deepening reform is to continue to improve and develop the socialist system with Chinese characteristics”.

Few business leaders will take on Mr Xi publicly, and those who have commented on their meetings with the President have been loyal to a fault. Mr Xi continues to push huge government-directed investment in green technologies, digital infrastructure and artificial intelligence despite analysts calling the business environment “difficult”.

A survey for the EU chamber of commerce in China found that more than half of members were planning to reduce costs, with some shifting investment to “more predictable, reliable and transparent” rivals.

“Plenums” of the central committee, the 200-strong body of ministers, provincial party leaders and other officials, occur every year. But ever since Deng Xiaoping used a “third plenum” in 1978 to announce market reforms and to end Mao’s Marxist absolutism, this stage of the cycle has been seen as the government’s main manifesto.

There have been rumours that Mr Xi, 71, will use this week’s session to make changes to the politburo, further reinforcing his control of the party, or perhaps appoint his wife, Peng Liyuan, to a top job. However, he has given no indication that he will go further than to authorise the official expulsion of disgraced figures such as the former defence minister, Li Shangfu, who is being investigated for corruption.

Instead, officials have made clear the plenum’s main goal is to “deepen reform” – a buzzword usually deployed when the party leadership needs to reinvigorate growth. In particular, the property sector, a big driver of the economy, has been troubled by the collapse of several large real estate companies, falling house prices and oversupply.

Western economists have urged China to boost household spending. The country’s economic model has depended for four decades on boosting industrial output and exporting surplus production.

With both the US and EU imposing big tariffs on Chinese imports, and Donald Trump promising even more if he is elected as US president in November, the prospect of a trade war is looming.

The most widely touted technical reform would be to increase China’s equivalent of VAT and charge local government with its collection.

THE TIMES