China Tells Entrepreneurs They Must Put Patriotism Over Profit

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China said patriotism must be the highest priority in entrepreneurship, officially defining for the first time what the concept should mean for the world’s second-biggest economy.

Patriotism and professionalism are the first “core” components of entrepreneurship, followed by “innovation and the pursuit of greatness” and “social responsibility,” the Communist Party’s Central Committee and the State Council said in a joint statement late Monday. They called for strengthening party leadership over entrepreneurs and guiding them to endorse party leaders.

The guideline is the “first of its kind that focused on entrepreneurial spirit” and intended “to spur market vitality,” the official Xinhua News Agency said. The party’s flagship People’s Daily newspaper published the announcement on Tuesday’s front page, as did other state papers including Economic Daily, National Business Daily and Shanghai Securities News.

The call for patriotic entrepreneurs underscores the trend of emphasizing the national missions of private and state-run businesses alike under President Xi Jinping, who has sought to shore up the state sector and build “national champions.” The move also reflects internal concern about capital outflows and acquisitions, which have put downward pressure on the yuan in recent years.

“Key elements of the document relate to the phenomenon of Chinese firms going on massive overseas shopping sprees,” said Han Meng, a senior researcher at the Chinese Academy of Social Sciences Institute of Economics in Beijing. “If not reined in, this could hurt China’s economic base. Patriotic entrepreneurs are those who can do more to benefit the domestic economy and society.”

The patriotism edict, which comes weeks before Xi convenes a twice-a-decade leadership reshuffle, represents another shift in the ruling party’s fraught relationship with capitalism since the reform and opening up era began in the late 1970s. After decades of rapid economic growth, the party under President Jiang Zemin decided in 2001 to accept private businessmen as members.

Continued Controversy

However, private enterprise remains controversial and those looking to invest face many barriers, from limited access to financing to bureaucratic meddling. Last year, one of the government’s most powerful policy-making bodies commissioned a study of private businesses to discover how to turn it around.

Xinhua cited Zhu Hongren, the deputy president of the Chinese Association of Enterprises, as saying that the new edict signaled a “new phase of protecting and advancing entrepreneurship.”

The new guidelines define what constitutes entrepreneurship and how to create a favorable environment private business. The document stressed that the government would protect the legal rights and interests of entrepreneurs, ensure fair competition and strengthen protection of intellectual property rights to encourage innovation. It also urged to government to curb unfair competition and regional protectionism.

Meanwhile, China has tightened strict capital controls to keep money onshore. Private financing and investing are increasingly scrutinized, and the banking regulator recently ordered some lenders to assess exposure to offshore acquisitions by private companies including Dalian Wanda Group Co., Anbang Insurance Group Co., HNA Group Co. and Fosun International Ltd.

In March, Premier Li Keqiang said in report to the national legislature that starting businesses, innovating, and creating wealth were all encouraged.

“We will inspire and protect entrepreneurship, and ensure that entrepreneurs can run their businesses and make investments with peace of mind,” Li said. “Activities that infringe on the property rights of businesses must be investigated and dealt with severely.”

By Ting Shi
Bloomberg

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