Growth of private firms can help address challenges

Editor's note: Clearing the bottlenecks in domestic circulation and effectively responding to external impacts will be critical for promoting high-quality development during the 15th Five-Year Plan (2026-30) period. Hai Wen, former vice-president of Peking University, spoke to the Securities Times on these issues. Below are excerpts from the interview. The views don't necessarily represent those of China Daily.

The pressure on consumption is not due to a lack of macro-level policy support but weak investment sentiment, particularly among private enterprises. That, in turn, has constrained job creation, undermined income expectations and dampened consumption, which depends not only on current income but also on expectations of future earnings.

The key to increasing demand lies in employment, which in turn requires the growth and vitality of private enterprises. Private businesses contribute over 80 percent of urban employment, especially in the service sector where they provide flexible and diverse job opportunities. Only when private enterprises are willing and able to invest with confidence can employment and incomes stabilize.

Although macro policies have been accommodative, fixed-asset investment by the private sector has remained subdued. The main reason is the aforementioned sentiment among private entrepreneurs as well as the disruptive practices such as arbitrary fines by certain local governments in some places, and the underdevelopment of a level playing field for private and State-owned enterprises in terms of market access and competition.

To address the challenge of insufficient demand during the next five years, policymakers must place greater emphasis on supporting the private economy. It is important to foster a rule-of-law business environment, in which the functional boundaries between State-owned and private enterprises are clarified. In sectors where the two compete, private enterprises must be treated as equals.

China is at a critical juncture as it shifts from old growth drivers to new ones. Emerging technologies, such as artificial intelligence and automation, are improving productivity but also pose the risk of displacing low- and mid-skilled jobs. During the 15th Five-Year Plan period, it will be vital to align the employment-first policy with industrial upgrading.

The government should avoid impractical industrial planning that risks creating bubbles. And stronger efforts should be made to provide reskilling and retraining programs to help workers adapt to the changing labor market.

During the 15th Five-Year Plan period, China should further leverage the role of private enterprises in advancing high-level opening-up, particularly by supporting their overseas expansion. In recent years, Chinese private enterprises have accelerated the "going global" strategy and achieved marked growth in overseas operations. Amid external uncertainties, Chinese private enterprises must give greater weight to the diversification of their international markets. For instance, they could engage more deeply with countries and emerging markets involved in the Belt and Road Initiative.

Thanks to their market-driven flexibility, many private enterprises have already performed well in adjusting strategies and diversifying their markets. Going forward, Chinese enterprises must be more mindful of balancing their own development with the interests of host countries. This includes creating local jobs, contributing to tax revenues, sharing technology and managerial expertise and fostering mutually beneficial partnerships. Only by building such win-win communities can Chinese enterprises establish long-term roots abroad and ensure sustainable global growth.