Chinese Government Investing to Keep Private Businesses Alive

Chinese Government Investing to Keep Private Businesses Alive

The Chinese government is buying stakes in private companies to keep them afloat amid economic troubles in the country, the WS-J reports.

The government has taken steps in the past few decades to move from state-owned businesses to private enterprises, since their public-sector companies tended to lag behind private firms in terms of efficiency and innovation. But, private businesses fell into a weaker position because of their limited access to low-cost financing, and due to efforts by the government to reduce pollution and overpopulation.

President Xi tried to reassure China’s business community by saying in October that “Any word or act to deny or weaken the private economy is wrong.”

According to the WS-J buyers backed by the state purchased 47 stakes, ranging from 1 to 100%, in privately-owned companies in 1-H of this year.

The majority of these stake acquisitions need to be understood from the perspective of relieving financial stress,” said an analyst at Fitch Ratings, which compiled the data.

Beijing is stepping in because they are worried about a sharp rise in unemployment,” an MD at Orient Capital Research added.

Stay tuned…

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