Beijing breaks with US and EU, boosts state enterprises

Xi Jinping unveiled a three-year plan to support state-owned companies. The US and the EU want equal treatment for their companies. Some within China's power structure want to privatise the country’s 130,000 state-owned enterprises. Ursula von der Leyen calls more balanced relations with Beijing. For US Treasury Secretary, without Chinese reforms, decoupling will be inevitable.

Beijing (AsiaNews) – China has launched a three-year plan to boost its state-owned enterprises. This decision, taken recently by Chinese President Xi Jinping, is contrary to commitments China made to the United States and the European Union.

For years, the US and the EU have been demanding that their companies be able to compete on equal terms in the Chinese market.

Around 130,000 state-owned firms operate in China. Given their inefficiency, some in China itself have called for their reform through large-scale privatisation, made the more urgent by the economic crisis caused by the coronavirus pandemic and the ongoing trade war with the US.

In 2019, large state-owned companies generated profits worth 1.5 trillion yuan (US$ 215 billion), too little for the assets they have – 210 trillion yuan (US$ 30 trillion).

According to a 2013 government plan, large state-owned enterprises were supposed to be reformed along free market principles. Central Bank governor Yi Gang made it clear that the government should ensure a level playing field for everyone operating in China.

His position is closer to that of Premier Li Keqiang, but clashes with that of President Xi. For Li, the authorities should focus on helping small and medium-sized enterprises, most of which are privately owned.

However, for many observers, the Chinese Communist Party will never abandon support for state enterprises, considered a cornerstone of socialism with Chinese characteristics and, above all, a tool of economic and political control. This will intensify tensions between Beijing and western powers.

On 8 July, in a speech to the European Parliament, President of the European Commission Ursula von der Leyen  Ursula von der Leyen reiterated that Europe wanted a more balanced relationship with China. On 22 June, at the annual summit with Beijing, she had openly criticised the Chinese government for its delays in opening up its domestic market and for its support to state-owned enterprises.

The next day, US Treasury Secretary Steven Mnuchin was even tougher. Mnuchin said that if US companies were not given equal treatment in China, the decoupling of the US economy from China’s would be inevitable.