‘Analysts say the shift away from private enterprises is a sign Beijing felt that the private sector was getting ahead of the Party’s ability to control things.’

'Beijing has grown increasingly suspicious of powerful business elites.'

• 'Under a new paramount leader, Xi Jinping, the Party has begun to exert greater control over the private sector, with plans announced last September to cultivate a “backbone team” of business executives who “unswervingly follow the Party” and cooperate in “major national strategies.” '

'There’s little doubt that business elites who defy the Party will be dealt with harshly.'

• 'In recent years, Beijing has hunted down entrepreneurs, seized their assets, and broken up and occasionally even nationalized firms deemed a systemic risk to the economy.'
• 'In Hong Kong, the authorities kidnapped the billionaire Xiao Jianhua from the Four Seasons Hotel and then smuggled him across the border into mainland China, before dismantling his financial empire.'
• 'Just last week, the government handed down a life sentence for one corrupt state executive and a death sentence to another.'

‘The Chinese Communist Party, of course, has never been entirely comfortable with capitalists.’

• ‘Throughout its 71-year-history, even when the Party has relied heavily on market-driven growth, it has viewed private firms as a source of inequality, a rival to state enterprises, and perhaps an independent force that could undermine Party rule.’

‘ “The Party likes to control everything,” says Bruce J. Dickson of George Washington University.’

• ‘ “They worry about independent sources of wealth as a threat to the government. And there are two ways of dealing with that threat: you co-opt it or you crush it.” ’

‘China, through the decades, has done both.’

• ‘It has invited businessmen to become members of the Communist Party, when that suited the goals of the leadership.’

‘And it has ousted and imprisoned them in strikingly large numbers, and then publicly pilloried them, as Jack Ma is now experiencing.’

• ‘Perhaps no other nation has arrested more billionaires and brought them to heel.’

‘Analysts say the shift away from private enterprises is a sign Beijing felt that the private sector was getting ahead of the Party’s ability to control things.’

• ‘They say Beijing is now reasserting control over the economy and private entrepreneurs, bringing to an end a decades-long period of free-wheeling capitalism and globe-trotting business tycoons.’

‘The Party has generally succeeded in eliciting support from entrepreneurs by giving them a greater stake in the system.’

• ‘But as the private sector has ballooned in China — private firms comprised 84 percent of all companies in 2018, up from 17 percent in 1996 — the Party has felt its influence over business wane.’
• ‘A 2017 study by the Unirule Institute of Economics, a Chinese think tank since shut down by Beijing, found that 92 percent of private entrepreneurs believed political involvement helped their business, but only a small minority actually cared about the political goals of the Party.’

‘For Xi, such ambivalence is alarming.’

• ‘He has been clear about the need for risk-taking executives to respect control-oriented policies, including new regulations that strengthen United Front work in private firms and stress the need for “ideological and political education” of entrepreneurs.’

‘He has also made moves to elevate the role of corporate Party committees from simply organizing political trainings for a firm’s Party members to “monitoring” whether business choices respect Party policy.’

• ‘To that end, his campaign to achieve “comprehensive coverage” of Party committees in private firms has led to is the strictest supervision since the Mao era.’
• ‘According to an official survey, the proportion of private firms with Party committees rose from just 4 percent in 1993 to 48.3 percent in 2018, with a growth rate that’s more than doubled under Xi.’

"The reason why Jack Ma and others could build enormous Internet companies is because the Party had no idea what they were doing. They became famous globally and made China look very good, but then the Party had to figure out how to get their arms around them."

‘Even Jack Ma, the country’s best-known entrepreneur, seems to have fallen out of favor with the Party.’

• ‘He’s been upbraided by Beijing and denounced in state media.’
• ‘Xi is reported to have personally intervened to cancel the global stock offering of Ma’s Ant Group on the eve of what was expected to be the biggest IPO in history, following a strident speech Ma made in October.’
• ‘In the aftermath, banking and antitrust regulators are threatening to carve up parts of Ma’s $400 billion empire amid reports the 56-year-old internet tycoon has gone missing.’

‘It was the fall of 2020, and Jack Ma had reason to worry.’

• ‘Recent moves by Beijing would tighten controls on digital finance and could stymie the business model of his digital payments company, Ant Group.’
• ‘With Ant’s upcoming debut on Shanghai’s STAR market expected to be the biggest in history — a record $37 billion listing — Ma felt like he should speak up.’

‘At the Bund Forum in Shanghai last October, he blasted China’s financial regulators as a “geriatric club” and argued that the tools they were using to control China’s financial system were misguided and out of touch.’

• ‘The imposition of reserve requirements on micro-lenders such as Ant, he said, would be like “feeding dementia medication meant for seniors to a child suffering from polio.” ’
• ‘People close to Ma told Reuters that he rejected suggestions to soften his remarks at the Bund Forum because the tech titan believed that “he should be able to say what he wanted.” ’

‘After Ma’s speech, Xi ordered an investigation into Ant’s lending practices, and just two days before Ant’s planned debut on November 5, the Shanghai Stock Exchange suspended Ant’s listing — the stated reason being the sudden approval (with Xi’s blessing) of tough new rules that require Ant to guarantee up to $20 billion more of its loans.’

• ‘In a sensational report published in late December, The Wall Street Journal said that just before the authorities canceled the Ant Group IPO in November, Jack Ma offered to hand over to the government parts of his online financial emporium.'
• ‘Then a week later, Beijing also announced antitrust measures for tech firms.’
• ‘Ant’s market valuation, by one estimate, has been halved.’

‘Ma is a Party member and once boasted to fellow entrepreneurs about his closeness with Xi Jinping.’

• ‘But while the national business hero has prevailed against regulators in the past, observers say his speech contravened the prevailing wisdom for business leaders in China since Rong’s time.’
• ‘That is, “serve the Party — within whatever limits the current Party line allows, but don’t get too far out in front,” says Jerome A. Cohen, a legal scholar.’
• ‘ “Towing the party-line in public statements is safer than expressing independent opinions about China’s political economy,” says Kellee S. Tsai, a professor at Hong Kong University of Science & Technology.’
• ‘ “Look what happened to Ren Zhiqiang [the real estate tycoon recently sentenced to 18 years in prison for criticizing the Party].” ’

‘But in addition to brazen contempt for Party officials, Ma’s transgression was made worse by his seeming obliviousness to the Party’s economic goals, which have shifted considerably in recent years.’

• ‘In 2015, a stock market crisis combined with unexpectedly volatile experiments in RMB devaluation “played a huge role in convincing Xi Jinping that the private sector was not under control, that the Party-State had not even close to sufficient insight into what corporate finance was like in China and into what financial innovation was happening,” says Harvard’s Meg Rithmire.’

‘De-risking China’s debt-laden financial system became one of Xi’s top priorities.’

• ‘Even though Ma may be right about the need for more innovation in China’s financial sector, Rithmire says his speech highlighted how the fissures between profit-maximization and Party priorities have widened in recent years.’
• ‘ “It used to be that, within limits, capitalists were allowed to do what they wanted to do because their pursuit of profits was producing economic growth for China,” Rithmire says.’
• ‘ “But things changed once the Party-State started to see them as a potential source of financial risk, and therefore as a potential source of risk to social stability. For a long time, we thought that growth was the bottom line for the CCP, but the bottom line is actually social stability.”’

‘ “The reason why Jack Ma and others could build enormous Internet companies is because the Party had no idea what they were doing,” says Jim McGregor of APCO China.'

• ' “They became famous globally and made China look very good, but then the Party had to figure out how to get their arms around them.” ’

‘Xi, of course, is not Mao.’

• ‘He believes the private sector is an “intrinsic element” of China’s economy and refers to entrepreneurs as “our people.” ’
• ‘Xi does not want to socialize business; he mostly wants private firms to support Party policies.’
• ‘And if the decision to rein in Ma is any indication, he will likely succeed.’