Alibaba, Tencent and Meituan have all received hefty fines and undergone heavy business restructuring since October 2020 amid Beijing’s regulatory crackdown.

China’s Xi calls for big power-system reforms, flags ‘prominent problems’

The trio were among 10 leading internet giants praised by the NDRC. Alibaba owns the South China Morning Post.

The top economic planner also laid out the initial boundary of China’s so-called green-light projects – where private internet giants can invest and receive government backing, pinning high hopes on their role in boosting the development of the real economy and shoring up headline growth.

“While obtaining rich returns and improving their core competitiveness through their investments, platform companies have also contributed to technological self-reliance, the real economy and the country’s high-quality development,” the NDRC said in a statement on its official WeChat account.

The statement marked an official recognition of the private sector’s contribution to technological advancement, as well as national economic growth.

07:30

Why China is tightening control over cybersecurity

Why China is tightening control over cybersecurity

“For the next step, the NDRC will release typical investment cases for platform companies and support them to play a more active role in economic development, job creation and international competition,” the economic planner added.

The results of the NDRC investigation were released after a nationwide fact-finding campaign, which has since March sought to tackle China’s deep-seated problems, from faltering private confidence to major hindrances to foreign direct investment and social issues, including unemployment, an ageing population and medical services.

Li also admitted that platform companies have offered a “new engine” for innovation and a “new channel” in job creation, and that “their status is increasingly prominent in overall economic development”.

He also reiterated pledges to create a more level playing field, improve investment access and new business assessment, and reduce corporate operating costs.

“This clarifies the rules for investment expansion, and it is also conveying an important signal to the private sector and to the market that the regulation has become clearer and looser,” said Zhao Xijun, a finance professor at Renmin University in Beijing.

“It means that the previous capital overhaul has been put in place, and this is also in response to the current downward economic environment.”

The projects highlighted by the NDRC are, according to Zhao, choke points for China’s economy, meaning they need increased efforts to ensure sustainable growth.

Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank affiliated with the provincial government in the southern Chinese province, said: “The situation is pressing. The weak economic recovery requires more pro-growth policies.”

China opens direct line with private business, who want support and clarity

Peng said confidence in the private sector was hit hard by the regulatory crackdown on big tech companies, which has a knock-on effect on economic growth and also employment.

China had more than 47 million registered private firms by the end of 2022, and they, together with self-employed businesses, contributed to 60 per cent of the national gross domestic product (GDP), 70 per cent of technological progress and more than 80 per cent of the employment for the urban workforce.

Slowing economic activities in the second quarter have fanned market worries over a slower-than-expected post-coronavirus recovery.

Major banks have cut their estimates on China’s 2023 economic growth, despite their forecasts remaining slightly higher than the government target of around 5 per cent.

The National Bureau of Statistics is due to release second-quarter GDP data, as well as industrial production, fixed-asset investment and retail sales figures, on Monday.

Concerns of financial risks have also jumped among academic and policy circles, given struggling local governments, mounting debt pressures and a sluggish property market.

Yellen’s China trip saw these demands made, and missteps avoided, Beijing says

The NDRC also found that the top 10 platform companies – as measured by their market capitalisation – increased their investment in chips, self-driving technology, new energy and agriculture in the first quarter, with their proportion rising by 15.6 percentage points from the previous quarter.

“Judging from our research, platform companies keep increasing their investment in technological innovation and empowering the real economy,” the NDRC added.

Their research and development input also totalled 500 billion yuan in the past three years, while annual growth was as high as 15 per cent.

“[The firms] have become a key force in the innovation of digital technologies,” the economic planner added.

The digital economy is regarded by Beijing’s policymakers as a new source of growth, as it already accounted for more than 40 per cent of the national GDP last year.

It is also, though, a new lane of competition with Washington.

China’s central government has initiated new communication channels with private firms, foreign investors, and industrial and technology companies to address emerging issues.

Premier Li eyes ‘combination of punches’ at critical economic juncture

He acknowledged the complex intertwining of structural issues and cyclical contradictions, calling for the prompt implementation of targeted, comprehensive and concerted policy measures, as China is currently at a “critical juncture” of economic recovery and industrial upgrading.

“With momentum slowing on account of weak global demand, an ongoing drag from the property sector and insufficient transmission of domestic consumption strength more broadly, we think more policy support is needed to revitalise the recovery,” Erin Xin, a Greater China economist at HSBC, said on Tuesday.

“Fiscal policy is expected to continue to take the lead, while monetary policy will provide support through the use of liquidity tools.”