Companies have raised a record $58bn in initial public offerings in mainland China so far this year, according to Bloomberg, a financial-information firm, compared with just $19bn in America and $5bn in Hong Kong. Another 1,000 firms are reportedly lining up to go public. A fresh cohort of tycoons is emerging, too.
China’s ten richest magnates have accumulated a net $167bn in wealth since the start of 2020.
According to the Peterson Institute for International Economics, an American think-tank, by 2020 privately controlled companies accounted for more than half of the market capitalisation of China’s 100 biggest listed firms, compared with less than a tenth a decade earlier.
The private sector employs four in five urban workers, or around 150m all told.
Thirty-two private Chinese companies feature in the Fortune 500 ranking of the world’s biggest firms by revenue, up from none in 2005.
China’s wealthiest man is Zhong Shanshan, who built Nongfu, which sells bottled water.
Muyuan has grown into one of the world’s biggest hog producers. The Communist Party of Nanyang city, where the company is based, has an explicit goal of putting it on the Fortune 500 list. In late 2021 the local party told officials to make land available for Muyuan, and to streamline its various applications and inspections. The company is to receive subsidies for farm equipment, and local engineers and other workers are to be connected with the company, the plan ordains. The fortune of Muyuan’s founder, Qin Yinglin, has swollen to $23bn.
The central government wants to create 1m innovative small and medium-sized firms between 2021 and 2025. Of those, 100,000 will be dubbed “specialised new enterprises” and 10,000 will earn the distinction of “little giant”. The state still takes direct stakes in private companies. But it is finding new ways to influence and guide the private sector, often through industrial parks and a system of state-designated status.
Designations such as “little giants” act as endorsements and signal where capital ought to flow. Such labels also make for “good public relations”, says Gu Jie, founder of Fourier, a robotics startup. Obtaining them eases access to places like Zhangjiang Robotics Valley in Shanghai, part of a larger high-tech development zone housing 150 research and development (r&d) centres, more than 24,000 companies and 400,000 workers. The local government owns and runs the zone.
The recipients of such largesse do not see this as the first step to nationalisation. Zhou Hanyi, co-founder of Xinzailing, a company specialising in lift safety, likens it instead to a bank loan without a fixed maturity, which does not typically engender state meddling. If a particular company fails, its technology and workforce can be absorbed by others without too much waste, says Christopher Fong of Welkin Capital, a private-equity firm in Hong Kong (and investor in Xinzailing). Older businesses, too, are opting to join state-backed innovation parks.
Xi’s ideal private sector might look something like Germany’s Mittelstand, according to Enodo Economics, a research firm: “a large stable of small private firms that are innovative, generate high-paying jobs and produce technologically advanced manufactured goods”. Some entrepreneurs say bureaucracy is being cut back in professionally managed industrial zones and that the state is meddling less in their operations.
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