Tue, 7 March 2023 at 3:05 am GMT
(Bloomberg) — President Xi Jinping sought to rally China’s private sector to help overcome “containment” by the US and other countries, in rare direct criticism of the nation’s biggest trading partner.
China is grappling with “comprehensive containment and suppression by western countries led by the US over the past few years, which have brought unprecedented and severe challenges for China’s development,” Xi told the country’s top political advisory body on Monday, according to state broadcaster China National Radio.
He stressed the importance of the private sector to China’s economy, and urged companies to strengthen innovation and play a bigger role in establishing technology independence.
Xi’s comments underscore mounting tensions between the US and China, especially over advanced technology, and raise questions about whether the two sides can establish guardrails to reduce the risk of miscalculation. After Xi and President Joe Biden pledged to improve ties during a November meeting, relations took another turn for the worse.
In addition to concerns over an alleged Chinese spy balloon the US shot down last month, the Biden administration has continued to take actions to prevent major Chinese companies from accessing American technology. Earlier this year, the US also rallied Japan and the Netherlands to restrict exports of some advanced chipmaking machinery to China, largely to curb military expansion.
Xi’s comments come as China holds its annual meeting of its legislature, the National People’s Congress. Beijing is seeking to restore business and consumer confidence in the economy after growth weakened to just 3% last year, missing the government’s target by a wide margin. Authorities are targeting growth of around 5% for this year.
While Xi made encouraging comments about supporting private business and entrepreneurs, he said the government will regulate their growth “according to the law” and reminded them they have a role to play in “rewarding the society” in order to achieve common prosperity — a reference to his goal of driving down inequality by spreading wealth in the country.
He warned private companies to build a “harmonious” relationship with workers and make sure that the development of the firms “benefit all employees in a fairer way.”
Xi’s campaign to reduce inequality under the “common prosperity” drive has led to an overhaul of the for-profit education industry, regulatory crackdowns on technology platform companies, and fueled concerns about wealth taxes.
Investors took the speech in their stride on Tuesday. Chinese stocks trading in Hong Kong added 1.6% as of 10:52 a.m. local time with tech shares including Alibaba Group Holding, Tencent Holdings and JD.com Inc. being the biggest point contributors. The mainland’s benchmark CSI 300 Index was little changed.
‘Whole Nation’ Strategy
In his government work report released at the start of NPC on Sunday, outgoing Premier Li Keqiang reiterated the call for a “whole nation strategy” to edge out Washington on basic scientific research and advanced technologies ranging from advanced intelligence to space.
China in particular has sought to mobilize national resources to develop its own chip industry. Earlier this month, Vice Premier Liu He told a meeting of executives in Beijing that developing the industry requires China to “make good use of both government and market forces.”
China has already pledged to invest an extra $1.9 billion in the country’s biggest maker of memory chips, Yangtze Memory Technologies Co., a deal that could herald a renewed influx of government capital into the sector.
The capital infusion from the Big Fund, as Beijing’s signature investment vehicle is commonly known, was slated for completion on Jan. 31, according to Tianyancha, a government website that discloses company registration information.
China’s senior leaders have grown frustrated by the lack of progress in developing local chip alternatives. Last year they launched a sweeping corruption campaign in 2022 that took down senior officials and several executives linked to the Big Fund.
YMTC is one of only a handful of domestic chipmakers within striking range of the global leaders, competing with South Korean giants Samsung Electronics Co. and SK Hynix Inc. to provide memory chips for applications from smartphones to data center servers.
Seen as a national champion, the firm was placed last year on Washington’s lengthening US trade blacklists.
–With assistance from Fran Wang.
(Updates with additional details.)