Xi Jinping's Shift: Private Sector Revival

But on the Party's Terms

Stockpickers rely on a specific set of skills—analyzing financial statements, understanding corporate strategies, and reading market sentiment. In China, however, they also need to interpret the shifting moods of Xi Jinping. Five years ago, Chinese regulators launched a sweeping crackdown on the tech sector that sent Alibaba’s Jack Ma into self-imposed exile. It also wiped out roughly $2 trillion in market value as foreign investors pulled back, and the country’s private entrepreneurs lost confidence in the Communist Party’s commitment to their success.

But now, the tides seem to be turning. On February 17th, Xi invited a select group of tech executives to a rare “symposium,” signaling a shift in the party’s stance. Seated in the front row was none other than Jack Ma, a symbol of the country’s evolving relationship with its tech giants. The high-profile meeting sends a clear message: the party wants the private sector to flourish once again—but within limits.

A New Mood in the Party

The symposium acknowledged that private entrepreneurs can play a critical role in driving China’s economy. Xi even shook hands with Liang Wenfeng, the founder of DeepSeek, a startup from Zhejiang province that has developed artificial intelligence (AI) models rivaling the world’s best at a fraction of the cost. DeepSeek’s success has provided a much-needed boost to China’s stock market, pushing tech stocks listed in Hong Kong up by 23% in just the past month. Shares in Alibaba and Tencent have also surged, fueled by optimism about growing AI demand.

The party seems eager to ride the tech wave. With China still grappling with a prolonged property slump, weak consumer confidence, and an ongoing deflationary cycle—the longest since the Asian financial crisis of the late 1990s—a rally in tech stocks could inject some much-needed economic stimulus. After all, a little corporate ambition could help offset the broader sense of economic anxiety.

Private Sector—Less of a Threat, More of a Tool

Why the shift in tone? Part of the answer lies in the evolving landscape of China’s tech sector. Five years ago, ambitious tech firms were amassing vast amounts of personal data—tracking citizens’ spending habits, travel patterns, and borrowing activity. These companies knew more about Chinese consumers than the government itself. At the same time, they were expanding rapidly beyond China’s borders, courting foreign investors and regulators. Didi, the ride-hailing giant, famously ignored warnings from China’s data regulators to list in New York in 2021, a decision that ultimately led to its downfall.

Things have changed. China has now implemented stricter rules for overseas listings, given more power to party committees within private firms, and tightened laws around data collection and transfer. Meanwhile, growing tensions with the United States have led many Chinese companies to refocus on the domestic market. If foreign investors view these firms as “uninvestible,” then companies are left with little choice but to seek capital at home. And as America blocks China’s access to advanced computer chips, even private firms are increasingly aligning themselves with the state’s agenda of self-reliance.

Xi’s Vision: Private Enterprise with Party Control

Xi Jinping’s recent symposium was not just a symbolic gesture. The party is genuinely interested in reviving the entrepreneurial spirit and removing some bureaucratic hurdles that have stifled progress. But Xi’s message to the tech leaders was clear: as they seek success, they must “remember their roots.”

His vision for China’s private sector is not about serving shareholders or maximizing profits. Rather, it’s about promoting “Chinese-style modernization”—a model that aligns with the party’s overarching goals. The government is willing to offer support to the private sector, but this support is contingent on private capital serving the party’s interests. In short, the embrace of private enterprise is conditional on its loyalty to the state.

While the mood has shifted, and there’s renewed optimism among entrepreneurs, one thing remains unchanged: China’s private sector will thrive, but only within the boundaries set by the Communist Party.