BIG IDEA | ‘He wants to see a bigger role for the state in the economy. But in the last two years, he has done some course correction. For example, after talking up the role of state-owned firms and building stronger, bigger state-owned firms, he is talking about the equal importance for the private sector.’

Fund Manager 1: ‘I am concerned about Xi’s policies about private enterprise versus the state-owned sector.’

• ‘And about the comment that there are now fewer private companies.’

Fund Manager 2: ‘About there being fewer private companies, I want to mention that since Xi took over the administration there's been a big supply-side reform.’

• ‘One of the things supply-side reform has led to is the exit of a lot of smaller companies in the traditional basic materials and energy industries because they were not making money. This contributed to some of the reduction of the number of small companies.’

‘If you look at public listed companies, China has almost 4,000 companies listed in both the Shanghai and Shenzhen stock exchanges - It's the highest in the world.’

• ‘Japan also high, but it never had any consolidation.’

‘The other trend I want to mention from is consolidation.’

• ‘With this, leading companies in various industries started to get even better and they organically probably took away some of the market share from smaller enterprises who had to exit.’

Fund Manager 3: ‘I think those private companies are being squeezed. Squeeze means pressures that they're under.’

• ‘Delisting, restricting their private enterprises, that's what matters, not the number of the companies or the number of even IPOs in China.’

Economist: ‘Shang-Jin, you have given a very masterful overview of the factors that are important for assessing short-term, medium-term, and long-term growth prospects.’

• ‘But there are other factors that you haven't talked about much at all.’

‘For example, what is your assessment of what Xi Jinping really wants to achieve? Is the popular Western notion that Xi is out to suppress private sector development in China? Is that a correct one or should we have a different perspective?’

• ‘I personally think that we misunderstand what Xi is trying to do.’

‘He's not out to suppress private sector development in China or foreign private investment in China.’

• ‘He's out to find a balance, a more long-term balance between capitalism and socialism that promotes his supreme objectives of ultimate poverty reduction and common prosperity.’

‘These are slogans we are hearing a lot, but I think they are very meaningful and very important in the overall picture.’

• ‘What is your assessment of what Xi is really after?’

Shang-Jin Wei: ‘That’s more of a job for good political scientists and psychologists than for me.’

• ‘My guess is, Xi is trying to secure a good place in the history books relative to other leaders.’

‘He wants to see a bigger role for the state in the economy.’

• ‘But in the last two years, he has done some course correction.’
• ‘For example, after talking up the role of state-owned firms and building stronger, bigger state-owned firms, he is talking about the equal importance for the private sector.’

‘In the last nine or ten years since Xi took power, we see reforms aimed at reducing entry barriers for private sector firms.’

• ‘In fact, the number of private sector firms is a lot greater today than when Xi took over the end of 2012. Firm registration requirements, tax rates, and so on for private companies are also a lot lower today than in 2012 and 2013.’

‘So there's a mixed bag that allows people with different views to assign different interpretations.’

• ‘Xi does not want to see the economy to tank for sure, and his inclination on private versus state-owned firms could be different from some other leaders.’

‘It’s worth noting that as the top local leader top local leader of Fujian, Zhejiang, and Shanghai – Fujian and Zhejiang in particular were known for very vibrant private sector development.’

• ‘This gives some weight to his observations of the importance of private sector development.’
• ‘But clearly, relative to his predecessor, Xi is putting a lot more stress on building up the state sector.’