China is learning that its communist authoritarian governance model isn’t terribly conducive to entrepreneurship. And this is a significant problem for President Xi Jinping’s regime.
If Xi is to achieve his new “dream” objective of making China the world’s most dominant power, he can’t simply steal all the world’s intellectual property (although he’s certainly been trying as hard as anyone could expect). Xi will also need citizens who can create the next best high-tech product, internet service, or a more affordable means of doing something important. What Xi doesn’t appear willing to recognize, however, is that gutting your most successful businessmen doesn’t exactly encourage others to follow in their footsteps.
In recent months, China has relegated Alibaba CEO and Ant Group chief Jack Ma to social detention as regulators pick apart his companies. Tencent CEO Pony Ma has also found his stock, prestige, and personal wealth plummeting after state-run media criticized his company. Investors fear that Tencent might be about to follow in Ma’s footsteps. China’s ride-sharing and education sectors have also faced surprise regulatory attacks in recent days. And these are the lucky ones.
Consider billionaire agriculture magnate Sun Dawu, for example. He was just sentenced to 18 years in prison for criticizing the Communist Party’s poor handling of a swine flu outbreak and daring to challenge a state-owned competitor. Just as it is very dangerous to make clown jokes about Xi, Chinese entrepreneurs are learning that it’s dangerous to be too successful.
Young Chinese are taking note. As the South China Morning Post recently reported, increasing numbers of graduates are choosing comparatively low-paid jobs in the civil service over the higher-earning, higher workload private sector. China’s great risk is that while U.S. business school graduates aspire to fame and fortune, Chinese business school graduates increasingly fear a lifetime of constraint and/or possible incarceration.
Party elites are trying to assuage such concerns. In an inadvertently hilarious Global Times article this week, Hu Xijin correctly warned that “China cannot compete with the U.S. without the prosperity and development of the large number of Chinese private enterprises.” But these private enterprises shouldn’t fear, Hu added, because “the country will never discriminate against them or suppress their development.”
Imagine being a Chinese entrepreneur who has witnessed Xi’s crackdown and then reading Hu’s statement while keeping a straight face. I don’t think it’s possible.
Hu, though, does at least cut to the heart of why this is such a difficult issue for the regime. It’s all about the intersection of political paranoia and absolutism.
“No matter how successful they are,” Hu says, “entrepreneurs must remain humble, firmly support the leadership of the Communist Party of China, abide by laws and regulations, and resolutely be a positive energy in promoting the CPC’s lines, principles, and policies.”
Entrepreneurship is perhaps less attractive when, as a condition, one is strictly required to be a government apparatchik. Or else.
