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One of the most significant developments in Beijing concerning its economy has been President Xi Jinping’s meeting with the heads of China Inc. in February 2025. While there is regular communication between the political executive or the legislative wing of the Party-state, and the doyen of industry in China, the timing of this interaction is noteworthy.
The conclave assumes importance in light of the slowing economy, the escalating technology curbs instituted by Washington, and the tariff shocks of Donald Trump 2.0. In the past, such sittings have taken place at crucial junctures— in July 2020 in the wake of the COVID-19 pandemic, and previously in November 2018 at the height of the US-China trade war.
It also signals Xi closing ranks with the captains of industry, some of whom like Alibaba’s Ma Yun (Jack Ma) have been a target of his regulatory campaigns. Regulators abruptly stopped the initial public offering (IPO) of Ant—the financial and lending arm of the Alibaba Group—in 2020. An anti-monopoly investigation followed suit against the group, resulting in regulators imposing a penalty of US$ 2.8 billion in April 2021. Ma later relinquished control over the Alibaba group in 2023.
Xi has branded the exercise of upscaling the economy as ‘Chinese-style modernisation’, which he claims can be achieved with the integration of innovation, talent, industrial, and monetary-capital chains.
In his address, Xi exhorted the industry moguls to improve confidence, and unleash their animal spirits for reviving the economy as a “national duty”. Assuaging their collective sentiment, Xi stressed that the challenges faced by the industry were transient, and the result of the Party-state’s upgrade of the economy. Xi has branded the exercise of upscaling the economy as ‘Chinese-style modernisation’, which he claims can be achieved with the integration of innovation, talent, industrial, and monetary-capital chains. It emerges that among the priorities are pursuing innovation, improving competitiveness, and upgrading the industrial setup. Some of the attendees included founders of Alibaba and DeepSeek Jack Ma and Liang Wenfeng respectively, Huawei’s Ren Zhengfei, BYD’s Wang Chuanfu, Xingxing Wang from Unitree Robotics, Will Semiconductor’s Yu Renrong, Nan Cunhui of electrical-device maker Chint, Liu Yonghao from animal-feed producer New Hope, and Leng Youbin, from children’s-nutrient producer, Feihe.
Consumer confidence has been weak, resulting in dampened spirits among entrepreneurs who respond to market sentiment. This development has also been compounded by Xi’s crackdowns on large companies in the past, and geopolitical stress in the wake of the emergence of Trump. In November 2024, Beijing Dacheng, a research body, gave voice to the dire outlook of China’s private sector. Among the 800-odd small and medium-sized enterprises interviewed, more than 50 percent disclosed that they were facing a tough situation. Furthermore, 63 percent of the respondents revealed that they were in the red, or experiencing reduced cash flows as compared to previous years. Only 16 percent of the firms in the sample had any plans to increase investment over the next two years. This is also mirrored in a recent survey by the American Chamber of Commerce in China conducted between October–November 2024. The survey found nearly 30 percent of US firms are either weighing shifting operations out of China or have already relocated elsewhere. Alarmingly, this flight of American corporations from China is twice as big as in 2020, when the COVID-19 pandemic led China to impose harsh curbs. Profitability in the Chinese market is a prime reason for this exodus with more than 50 percent of the firms interviewed in the American Chamber of Commerce survey stating that they were either only breaking even or facing huge losses. This has affected the consumer and services sectors, where the figures for companies that are in the red or just breaking even are 60 percent and 57 percent, respectively. The American report also highlighted that 21 percent of the companies had not factored in China as a ‘top priority’ in their investment plans.
Profitability in the Chinese market is a prime reason for this exodus with more than 50 percent of the firms interviewed in the American Chamber of Commerce survey stating that they were either only breaking even or facing huge losses.
The common complaints are about high operating costs and the phenomenon of ‘nèijuǎn’ (内卷) which means ‘involution’, denoting intense competition and is related to China’s economic model. Over the years, China has stoked growth by large capital investment, which has resulted in the problem of overcapacity. The flooding of inexpensive goods in the market has meant that any reduction in demand affects producers, which results in them cutting prices to remain competitive. Now, Trump’s recent call for new tariffs on Chinese merchandise is most likely to exacerbate this problem for Chinese companies. Alternatively, after facing the heat of Trump’s tariffs, if manufacturers opt to shift production lines outside China, then it may also exacerbate the precarious employment situation. Incipient job losses may pose a major challenge to the Communist Party of China’s hold on power. Thus, in recent months, industry associations in sectors such as battery manufacturing and solar-power accessories have taken the lead in urging members to regulate production and refrain from promoting aggressive discounts to curb losses.
In summation, first, the Sino-American technological contest has been heating up ahead of the Presidential transition in Washington. Among those present at Xi’s meeting were Tencent’s Ma Huateng (Pony Ma) and Zeng Yuqun from Contemporary Amperex Technology Co., Limited (CATL) who were recently identified by the US government for having ties to the Chinese military. CATL is said to be one of the world’s largest battery manufacturers, while Tencent operates a multi-utility phone application, ‘WeChat’ that merges communications, electronic cash transfers, social networking, transport, and meal delivery with a user base of almost a billion. The tech conglomerate’s interests span the spheres of finance, cloud computing, media, messaging, video streaming, and movie production. Conversely, during Trump’s inauguration in January, the heads of America’s top tech firms like Amazon, Apple, Google, Meta, OpenAI, and TikTok prominently marked their attendance, which points to the intensification of the technology competition yet again.
The tech conglomerate’s interests span the spheres of finance, cloud computing, media, messaging, video streaming, and movie production.
Second, a perusal of the guest list for the entrepreneurs’ gathering shows that either market leaders or heads of such companies who play a major role in bolstering their industrial prowess through technology innovation were invited. This throws light on the issue of supply chains being topmost on Xi’s mind in the wake of Trump’s tariffs. The concern was also voiced during the third Plenum meeting of the 20th Central Committee in 2024, in which it was resolved to build resilience through strong industrial chains for items like industrial machine tools, integrated circuits, and industrial software. The Plenum also expected China Inc's wholehearted support of more technological breakthroughs—a key priority outlined by Xi.
Lastly, the symbiotic, synchronising goals of China’s private sector with the party-state should be heeded by policymakers, particularly with India and China moving towards a cautious normalisation of relations. In the wake of the Galwan incident of 2020 and the subsequent military standoff, the Indian stance held that economic cooperation with China would be incumbent on peace and tranquillity on the border. Now with the patrolling agreement inked in October 2024, there will be heightened expectations of permitting Chinese investments. The establishment will have to calibrate reopening to China carefully while being mindful of Beijing’s recent actions of restricting its labourers working at manufacturing units based in India, and greater monitoring of exports from China by tech companies in a bid to obstruct production lines from moving to India.
Kalpit A. Mankikar is a Fellow of the Strategic Studies programme and is based out of ORF Delhi centre.
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