Xi's Great Wall:

Public-Private Sector Relations in China

In this article, we take a deep dive into the relations between China and its private sector. In dissecting the Chinese Dream and Xi Jinping’s agenda, we argue that both public-private relations and investment in China are actually predictable, if you know how to look at the big picture from a contextualised approach. To do so, we look at the Chinese Dream and Xi’s personal agenda as the primary agents dictating every move within China’s economy. Then, we recall the recent events surrounding Jack Ma and his companies Alibaba and Ant Group that warrant this scrutiny. Following this, we discuss state-controlled capitalism and state-owned enterprises that define the current Chinese economy. We also look at China’s perceived innovation problem and the issues surrounding investment, arguing that the environment created by the Communist Party of China (CPC) is hostile towards startups and entrepreneurs. In conclusion, we analyse China’s intentions and goals of bridling the private sector in pursuit of economic dominance and Xi’s dream of ultimate power.

Image: Xi Jinping at BRICS Summit in 2015.


To fully grasp public-private relations and their impact on investment opportunities in China, we must look beyond the law, beyond the numbers, towards the endgame of the CPC, and Xi himself. If you take time to understand the sociopolitical underpinnings of China’s economy, the Chinese Dream and Xi’s agenda emerge as predictors of every action occurring between the public and private sectors.

Every questionable action, every regulation works towards the CPC’s goal of realising the Chinese Dream by 2049, the PRC’s centennial. By this date, China hopes to become a fully developed and advanced nation and Xi plans to make China the largest economy in the world.¹ Failing to recognise this pursuit as the underlying raison d’être for every move of the CPC presents a partial and superficial understanding.

Xi first referenced the Chinese Dream (zhongguo meng) after his promotion to the top CPC post in November 2012. Upon ascension as President, Xi incorporated the Chinese Dream rhetoric into nearly all speeches. In his own words, Xi claimed “We must make persistent efforts, press ahead with indomitable will, continue to push forward the great cause of socialism with Chinese characteristics, and strive to achieve the Chinese dream of great rejuvenation of the Chinese nation." Later, Xi said that "To realise the Chinese road, we must spread the Chinese spirit, which combines the spirit of the nation with patriotism as the core and the spirit of the time with reform and innovation as the core.”

International Investment Banker Robert Kuhn observes that the Chinese Dream is comprised of four parts: “Strong China (economically, politically, diplomatically, scientifically, militarily); Civilised China (equity and fairness, rich culture, high morals); Harmonious China (amity among social classes); Beautiful China (healthy environment, low pollution).”¹ In Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, which has been incorporated into the CPC constitution, these goals  then translate into Xi’s Four-Pronged Comprehensives put forth in 2015, consisting of

1. Building a moderately prosperous society

2. Deepening Reform

3. Governing the nation according to law

4. Strictly governing the party ²

Through these prongs, Xi reinforces an unencumbered central authority, linking Confucian and Marxist-Leninist governance and discipline models. It is important to note that the central authority aligns with Chinese legal tradition. While Western conceptions of “rule of law” rest upon separation of powers, law in China is determined and interpreted through appropriate authorities, not the courts or various branches of government.³ Accordingly, each of these prongs helps to justify a strong, omnipotent CPC government, who will, allegedly, develop and build a strong country for its people in accordance with the Chinese Dream.

The nationalistic Chinese Dream acts as a unifying factor. In a country of over 1.4 billion people, having a common rallying point around economic growth and prosperity can unite diverse interests. The Chinese Dream is vague and nonspecific in such a way that it can be applicable to any effort in support of China’s betterment and success. It is important to note that the Chinese dream differs considerably from the American dream in its emphasis on the collective rejuvenation and revitalization of all China.

But here’s the thing: the CPC’s Chinese Dream is but a cog in Xi’s personal agenda, as exhibited by the Xi Jinping Thought and the Four Comprehensives. Xi’s personal agenda boils down two things: (1) staying in power for life and (2) retaining full control over an expanding Chinese empire. Already, Xi has approached the level of power held by Modern China’s Founding Father, Mao Zedong, and the Architect of Modern China, Deng Xiaoping. After less than 6 years in power, Xi has paved the way for staying in power for life, expanding his power as president in 2018 when the National People’s Congress passed an amendment to do away with term-limits. Furthermore, creating the largest economy in the world ensures Xi’s power in a number of ways. Firstly, a large economy provides employment, thereby keeping Chinese citizens busy and happy with income and low unemployment rates. Busy working people are far less likely to revolt or question a leader’s authority if they think said leader was responsible for creating jobs such as their own. Secondly, Xi needs both the hard and soft power that comes along with being the largest economy in the world. As such, Xi and the CPC fully recognise the importance of a vibrant private sector towards its long-term goal of unquestionable authority in the global economy. They know that the private sector accounts for over three-quarters of the economy, and that’s exactly why they want control over it. Xi genuinely thinks that increased state control over the private sector will grow the economy and, in turn, his own power and authority.

Image: Jack Ma Performing at his Retirement Party from Alibaba, Hangzhou, China, 2019.


Recent events are revealing the true colors of China’s intention of state-controlled capitalism and set the scene for our investigation into Chinese public-private sector relations. Moreover, the Chinese government’s actions towards Alibaba and Ant Group founder Jack Ma are setting an example for future relations and should be acknowledged accordingly.

In late October 2020, Ant Group was poised to launch the largest IPO in the world, valued around $37Bn. In the days leading up to the offering, Ma attended The Bund Summit in Shanghai, where he very publicly derided and critiqued China’s financial and regulatory system. While claiming the “pawnshop mentality” of state banks was outdated, risk-averse, and stifling for innovation and growth, Ma declared “We cannot regulate the future with yesterday’s means.”⁴

Following Ma’s inflammatory speech, Chinese regulators suspended Ant’s IPO seemingly overnight, an action allegedly ordered directly by Xi. Then, in November, China’s antitrust watchdog, the State Administration for Market Regulation (SAMR) announced antitrust regulations and guidelines “to prevent and stop monopolistic practices on internet platforms, reduce the costs of compliance and law enforcement, protect fair market competition, as well as safeguard the interest of consumers.” In days following the new rules, Chinese tech companies lost nearly $290Bn as the uncertainty of autonomy for private companies was brought to light.⁵ Then, in early December, CPC’s politburo vowed to target monopolies to curb the “disorderly expansion of capital.” Later that month, an antitrust probe was announced by SAMR, investigating Alibaba’s monopolistic actions.⁶

Ma’s appearance at the summit in Shanghai was the last we saw of the e-commerce tycoon for over three months.⁷ After “laying low” during negotiations with regulators, Ma finally reemerged to the public eye in a virtual ceremony for rural teachers on 20 January 2021. Addressing his disappearance, Ma responded with a clearly rehearsed line: “My colleagues and I have been studying and thinking, and we have become more determined to devote ourselves to education and public welfare...Working hard for rural revitalisation and common prosperity is the responsibility for our generation of businessmen.”⁸ If this isn’t a perfect recitation of the Chinese Dream then I don’t know what is.

The suspension of Ant’s IPO, investigation into Alibaba, and silencing of Jack Ma is clearly an act to set an example for others, asserting state power over the private sector. Ma’s reappearance and declaration of devotion to collective prosperity and public welfare are evidence that the state has tightened its grasp on the private sector. Regardless of any legal trouble that Ma could be in, when a government stifles a company’s IPO and increases regulation on the private sector, there are serious consequences that reflect the same arguments Ma made in his controversial speech.

If the Great Wall couldn’t hold back Genghis Khan, surely Chinese governmental regulation cannot hold back Jack Ma...right?

Image: Forbidden City, Beijing, China.


So what political and economic systems allow China to crack down on its private sector? In this section, we will look at the structures that dictate public-private relations, and why Chinese state-controlled capitalism seems antithetical to a Western perspective. When multinational companies operate across an increasingly globalised world, differential economic systems clash and pose obstacles to conducting business. Many economic leaders have free-market economies, including the United States, Canada, Europe, Japan, and Singapore. In a free-market economy, multinational corporations are the principal actors, run by shareholders, with a minimum of government regulation. Free-market capitalist economies are by far more favourable for companies.

As stated by Xi and other leaders, including Mao Zedong, China runs on “socialism with Chinese characteristics,” or, commonly defined from a Western perspective, state-controlled capitalism. In a state-controlled capitalist political economy,  the government owns and controls companies for the country, even if most of the population will receive no benefit. According to Ian Bremmer, state-controlled capitalism is that in which “the state is the principal actor and judge, and uses the markets for political gains.”⁹ In China, there is a high degree of state intervention into all aspects of the socialist market economy, employing state-owned enterprises (SOEs) as the primary, though not exclusive, mechanism for its brand of capitalism.¹⁰ SOEs have shares either wholly or significantly owned by the state in some form. Bolstered by monopolistic positions, corporatisation, and state funding, SOEs frequently rank amongst the Global Fortune 500. As noted by Deng Feng, SOEs are inefficient and teeming with corrupt bureaucracy and excess waste of public goods, services, and funding.¹¹

With state-controlled capitalism, China has the power to dictate all aspects of the economy, and this authority is visible in stock market reactions towards government regulation. For instance, the 24 December SAMR investigation into Alibaba sank shares 13.3% to close at $222.00, the biggest one-day drop since the company went public in 2014.¹²  When the Chinese government announces an investigation, investors take it very seriously, as they know that the government will actually follow through. In this way, the Chinese state-controlled capitalism touts absolute power for the government, leaving private companies in its wake. In contrast, when an antitrust case against Google was filed by the US Department of Justice in October 2020, Google stocks actually rose 1.4%. This rise signals that people do not believe the US government would follow through with regulations that could seriously hinder or change BigTech.

However, the Chinese government’s power is not so absolute because it needs tech companies to act as both a symbol and produce profit for the country. Gavekal Dragonomics Research notes that “The government is proud of the success of these firms, and views them as national champions. That status means the government will happily support their development, as long as they are complying with government priorities."¹³ Similarly, Rana Mitter, an Oxford University professor of history and politics of modern China observes that ”The squelching of the big name tech entrepreneurs is part of that wider process by the party to take back control, and really rewrite the narrative of how China's tech innovation takes place only under the circumstances the party will allow."¹⁴ In this way, private companies are kept on a long leash, allowed to conduct business independently but within oversight and control of the government.

Image: Statue of Confucius at Beijing Confucius Temple, China.


Historically, innovation is synonymous with China, as the ‘four great’ inventionsーgunpowder, the compass, papermaking, printing―developed in Middle Kingdom China. Today, however, China has a perceived innovation problem, due to a culmination of various factors, including the inefficient usage of Research and Development (R&D) expenditure and CPC’s alignment with Confucian values that stress evolutionary rather than revolutionary creativity and change.

Characterising China as a “fat tech dragon” due to the “low metabolism of inputs into successful high-tech advancement,” CSIS’s Scott Kennedy critiques China’s innovation culture as wasteful and inefficient.¹⁵ China’s innovation inputs are higher than its outputs, indicative of significant resource waste. While state ownership allows companies to access R&D funds, the funds are not efficiently used. Corporate expenditure on R&D is notably lower than other companies in OECD nations, spending only around 1.5% of annual revenue compared to over 4.5% of German or US Companies.¹⁶ When bogged down by political tasks and agendas, innovation output and efficiency are significantly decreased.¹⁷ Patent production is a good indicator of output. While China issues the largest number of patents a year, the patents are primarily utility and update models on past technology. Kennedy notes that only around one third of China’s patents contribute new technology or innovation.¹⁶

A culturally relativist stance provides another view towards China’s perceived innovation problem. There are cultural and structural differences between Eastern and Western nations that dictate behaviour. The CPC, especially under Xi, has assertively realigned itself with Confucian traditions for purposes of continuity and legitimacy of the modern People’s Republic. Confucian principles stress reverence and obedience to authority (i.e. Xi Jinping), very much beneficial to a communist leadership. Furthermore, Confucianism praises social harmony, morality, and loyalty, also beneficial values for fulfilling the Chinese Dream.

As argued by Charlene Tan, Confucianism doesn’t inhibit creativity. Rather, Confucianism demonstrates creativity as that of evolutionary change, not revolutionary change.¹⁸ In this way, creativity and innovation do not occur overnight, but are a long process to build upon and contribute towards. Accordingly, the large number of utility and update patents makes sense in this context. Furthermore, this contextualises Kennedy’s argument that Chinese educational systems do not encourage creativity or risk-taking and that this ill-prepares students for entrepreneurial careers.¹⁵ However, this is a fairly narrow-minded assertion that doesn’t take cultural priorities into account. Evolutionary creativity greatly contrasts from a Western perspective that values individuality and revolutionary creativity. Instead of comparing apples to oranges from an apple’s perspective, we should instead contextualise the comparison first, as we have done here.

Image: Stack of Yuan


Operating in a country where the state itself could be a competitor, private companies in China face difficulty in raising capital.¹⁹ As funding is directly funneled into lethargic SOEs, little is left over for entrepreneurs and their startups. China has taken an “indigenous innovation” approach to policy, a protectionist buzzword aimed at stimulating domestic growth with government procurement. Unfortunately, this approach has resulted in gross inefficiency and significant waste of resources as well.²⁰ Through this strategy, funding is directed towards SOEs rather than promising small and medium-sized enterprises (SMEs).

However, the alternatives for raising capital are not as prolific as they are in free market economies. In China, VC, PE, and angel investors are fairly reluctant and hard to find, focusing funding on commercially promising technology, claiming “We don’t invest in zero to one, we invest in one to one hundred.”¹⁵ As such, most VC and angel investments go towards startups well beyond the seed-level. For purposes of comparison, by 2016, 50.6% of VC funding went towards seed-level projects, while only 18.2% in China.¹⁵ Additionally, in 2019, Silicon Valley Bank’s (SVB) startup outlook noted that 28% of Chinese startups found the current fundraising environment to be extremely challenging, in comparison to 13% of American startups.²¹

Source: Survey by SVB, 2019.

Stock market investment is a potential platform for private Chinese companies to raise capital, as listing companies may allow for investment that private companies cannot get from the government. However, if the government is actively suspending IPOs as it did with Ant Group, then this stream of funding could be an issue. Regardless, global investors are looking towards China’s SMEs as potential areas for growth.²² For instance, the Matthews China Small Companies fund invests at least 65% of assets into small Chinese startups, injecting funding to deprived entrepreneurs. Additionally, it will be important to watch foreign investment in China’s big tech as US investors are forced to divest on account of a new investment ban.

Image: Bronze Bull Statue located outside Shenzhen Stock Exchange, China.


Looking beyond the numbers and beyond the jargon of regulatory laws, we have tapped into the sociopolitical underpinnings of China’s economic agenda. Employing lessons learned from history and cultural relativism, the current events fall in line with a long-term CPC agenda. Without recognising the fundamental differences in political economy, culture, and ideology between China and the Western free-market world, investment in China does indeed seem perilous and unpredictable. Critics, such as Kyle Bass, continue to define China according to their own terms, refusing to realise that China neither plays by the same rules, nor will it ever. Bass, a Texan Hedge fund manager, and possibly China’s biggest critic, consistently bets on China’s downfall and tries to short the yuan, primarily due to his insistence on free-market capitalism being the one, true religion (and it clearly is a religion to Bass). However, if Xi’s agenda and the Chinese Dream succeed, as is quite likely with the government’s funding and authority to pump back into the domestic economic agenda, Bass and his fellow critics will see critical losses on their anti-China bets.

Once you understand that the CPC’s Chinese Dream is actually Xi’s personal agenda to retain power, Chinese relations become straightforward. For every act, you must ask “What would Xi think? Does this act threaten Xi’s power?” While Western nations see changing leadership and agenda every 2-10 years, China now has a president who can rule for life. This consistency is key for solid investment strategies, as political instability and transition periods become fairly irrelevant in stock market factors. Armed with the knowledge of the Chinese Dream and Xi’s personal agenda, investment in China becomes straightforward. Take the aforementioned example of stocks plummeting in response to the Alibaba probe and Ant Group IPO suspension. Stocks plummeted due to confidence and predictability in China’s regulatory response. In contrast, the US antitrust case against Google saw a rise in the market, a wholly illogical response to external factors that demonstrates the tug-of-war for dominance between regulators and capitalists in the US. The stock market responds in a fairly predictable and logical way in China, and when we look at the big picture, we can take advantage of this for investment opportunities. Of course, if you choose to not invest in China for humanitarian reasons, that is your prerogative. However, no one should choose to avoid investment in China because they claim to not understand it or find it too volatile.

In conclusion, Chinese state ownership and authority over the private sector functions as political, economic, and social capital around the world, as both hard and soft power. Even through harsh IPO suspensions, China presents itself as a protector of competition and free-trade, reigning in monopolistic power towards a similar end as Europe and the UK are attempting with tech regulations. In a way, Ant’s IPO suspension was a warning, a head on a spike if you will, warding off threats to the authority of the CPC. Xi and the CPC will allow and foster private sector growth, but only on its own terms. In China’s economy, the state always comes first, and those who forget that, face the consequences.


¹ Robert Lawrence Kuhn 2013. “Xi Jinping’s Chinese Dream,” The New York Times.

² BBC 2015, “China’s Xi Jinping unveils new ‘four comprehensives’ slogan” BBC News.

³ John Garrick and Yan Chang Bennett 2018. “Xi Jinping Thought: Realisation of the Chinese Dream of National Rejuvenation?” China Perspectives 1-2(113).

⁴ The Asset 2020, “Transcript of the Speech delivered by the tech billionaire at The Bund Summit,” The Asset.

⁵ Bloomberg News, 2020, “Down $290 Billion, China Tech Investors Mull Nightmare Scenarios,” Bloomberg.

⁶ Rita Liao, 2020, “China’s e-commerce titan Alibaba hit with antitrust probe,” TechCrunch.

⁷ Katie Canales 2021, “Jack Ma hasn't been seen in public since Ant Group's IPO was pulled. Here's how Chinese regulators slammed the brakes on the firm's would-be record-breaking $37 billion IPO,” Business Insider.

⁸ Ryan McMorrow and Tom Mitchell 2021. “Jack Ma makes first public appearance since Ant’s cancelled IPO” FInancial Times.

⁹ Ian Bremmer, 2009. “State Capitalism Comes of Age: The End of the Free Market?” Foreign Affairs 88(3), 40-55.

¹⁰ Benjamin L. Liebman and Curtis J. Milhaupt 2016, Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism, Oxford: Oxford University Press.

¹¹ Deng Feng 2016, “Indigenous Evolution of SOE Regulation,” in Benjamin L. Liebman and Curtis J. Milhaupt 2016, Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism, Oxford: Oxford University Press, 3-28.

¹² Tomi Kilgore, 2020, “Alibaba stock suffers record fall after antitrust probe in China,” MarketWatch.

¹³ Gavekal Dragonomics Research, 2020, “The Internet Is No Longer Exempt,” Gavekal Dragonomics.

¹⁴ Selina Wang, 2021, “Jack Ma was almost bigger than China. That’s what got him into trouble,” CNN Business.

¹⁵ Scott Kennedy 2017. The Fat Tech Dragon: Benchmarking China’s Innovation Drive. Center for Strategic and International Studies (CSIS).

¹⁶ Scott Kennedy 2020. Touching the Elephant: China’s Uneven High-Tech Drive. Center for Strategic and International Studies (CSIS), 9.

¹⁷ Kevin Zheng Zhou, Gerald Yong Gao, and Hongxin Zhao 2016. “State Ownership and Firm Innovation in China: An Integrated View of Institutional and Efficiency Logics.” Administrative Science Quarterly 62(2), 375-404.

¹⁸ Charlene Tan 2016. “Confucius and Creativity.” Journal of Genius and Eminence 1(1), 84-89.

¹⁹ Andrew Atherton, 2013. “Promoting Private Sector Development in China: The Challenge of Building Institutional Capacity at the Local Level,” Environmental and Planning C: Government and Policy 31, 5-23.

²⁰ Nathaniel Ahrens, 2010. “Innovation and the Visible Hand: China, Indigenous Innovation, and the Role of Government Procurement,” Carnegie Endowment for International Peace.

²¹ SVB 2019. China Startup Outlook 2019.

²² Jeff Prestridge, 2020, “There may be many reasons NOT to invest in China, but is it time to embrace the Century of the Dragon?” This is