Rory Green, Chief China Economist at TS Lombard — an independent investment research provider — discussed China's newly passed private sector law. The law aims to provide regulatory stability, ensure fair payments and market access, and encourage technological innovation.
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00:01Rory Green is Chief China Economist at the independent investment research firm TS Lombard.
00:07Hi, Rory. So what does this mean in practical terms for China's private sector?
00:12I know it's a massive law, but if you could boil it down to the practical difference it might make for these companies.
00:19Yeah, thanks for having me on.
00:21And the main aim really is to level the playing field between the private and state sector in China.
00:27That's to provide regulatory stability and to protect private firms, to ensure fair payments, fair market access.
00:37And as your report was saying, a big factor aligning with China's longer term strategy is to encourage tech innovation and investment.
00:46Really a smorgasbord of targets, but primarily boosting confidence, ensuring fair treatment and that longer term tech tech goal as well.
00:55So the 57 million, that's an astonishing number of private enterprises in China, they make up more than 92% of all businesses in the country.
01:05So in that context, what does leveling the playing fields actually look like?
01:10Yeah, it's a huge part of the Chinese economy, as you say, 92% of all businesses, 80% of employment, 60% of GDP, are roughly 70% of all tech innovations.
01:26So, yeah, a massive part of the economy.
01:29And if Beijing is successful in leveling the playing field in terms of market access, speed of payments, legal protection, increasing confidence,
01:39this could have a very powerful contribution to growth.
01:43And it's not something that can happen overnight or happen very easily,
01:47but it is an encouraging step that will impact a big chunk of the Chinese economy.
01:53Will this law in any way help protect the private sector in China from the impact of U.S. tariffs?
02:00Because let's face it, it's shaking up everything, isn't it?
02:03Yes, yes, it certainly is.
02:06It's definitely going to help at the margin, initially via a confidence impact.
02:11And while the SMEs in particular judge the effect of this policy, it could help a nascent revival in animal spirits,
02:20especially if we unlock some of the payment blockages that have been happening at a very local and SOE level.
02:28But beyond this, in addition to private sector support and reform,
02:32I think we're going to need to see some fiscal stimulus as well to help offset that trade hit that is certainly coming.
02:38What message is Beijing sending to domestic entrepreneurs, but also to international investors with this law?
02:47Yes, it's a very simple message.
02:49One that Beijing has been pushing very clearly for a number of months,
02:54and that is we are back in business.
02:56We care about growth.
02:58We care about the market.
03:00Regulatory crackdowns are over.
03:02And it's a good time and a safe time to invest in China.
03:05And that message is front and centre and very clear in policy messaging so far.
03:13All right.
03:13Thank you so much for chatting to us.
03:14Rory Green is Chief China Economist at the research firm TS Lombard.