Measures to help private enterprises are expected to be included in the next Five Year Plan (2026-2030). Though the government has already launched a barrage of measures intended to make life easier for private businesses, more than 60% of them still describe the climate as “difficult”, and many industries could soon face a “wave of bankruptcies” if conditions do not improve, according to a recent report by independent research firm Beijing Dacheng. Will the country’s leaders be able to restore the confidence of the private sector and help its entrepreneurs stay competitive in a rapidly changing and unpredictable environment? Zhan Xiao, Co-founder of a consulting firm, is one of many hoping for a lifeline. When she tried to secure financing for a local arts project, she found banks were far less willing to lend to private firms like hers than to her state-owned competitors. She also found local officials harder to reach in smaller cities. “There are no clear channels, things very much depend on personal ties and favors, and a lot of deals are closed during drinking sessions,” she said. “Even getting a bank loan often boils down to favors and relationships, not transparent rules,” Zhan added. “Tenders and bids feel rigged – state-owned firms always stand a much bigger chance of winning when the competition is cutthroat.”
This kind of sentiment presents a huge challenge for Beijing: private firms are the backbone of the Chinese economy, generating 60% of the country’s gross domestic product (GDP) and 80% of urban jobs. But many private companies are struggling and remain reluctant to invest. Though the number of private firms in China surged by more than 40% between 2020 and 2025, according to the National Development and Reform Commission (NDRC), the landscape is increasingly polarized. The country’s tech giants and advanced manufacturers are thriving. Start-ups in emerging industries like artificial intelligence (AI)and robotics are making waves and attracting generous funding. Yet, for every DeepSeek, there are thousands of small businesses struggling with weak demand and financing bottlenecks. According to Beijing Dacheng’s survey of 58 entrepreneurs across 13 provincial-level Chinese regions, firms in traditional manufacturing, services and property-related industries are facing the greatest strain: revenues and profits are falling, cash flows are tightening and lay-offs are on the rise. Looking ahead, fewer than one in five companies said they planned to expand investment over the next two years. Even those inclined towards expansion stressed they would proceed cautiously.
“If conditions don’t improve soon, we may be staring at a wave of bankruptcies across entire industries,” the report said. The warning comes as Beijing steps up a campaign to revive the private sector, with the past few months seeing related policies and high-profile events designed to boost confidence. In February, President Xi Jinping held a meeting with China’s top entrepreneurs – the first gathering of its kind since 2018 – and vowed that the country would protect the interests of entrepreneurs and guarantee a level playing field for private firms. “The policies and measures to promote the development of the private economy must be implemented in a solid and thorough manner,” Xi said in February. “Whatever the party’s Central Committee has decided must be resolutely carried out – without ambiguity, delay or compromise.” Chinese authorities have since taken several steps in this direction. A new law enshrining the rights of private firms and banning “profit-driven law enforcement” was enacted in May, and the Supreme People’s Court made several key rulings to further protect the private sector, the South China Morning Post reports.
