China’s Henan province, one of the country’s largest manufacturing hubs, has issued a desperate plea for entrepreneurs to “dare to invest” in the region as the central government grapples with a slowing economy.
This move is part of a broader effort by Chinese leaders to shore up confidence in the country’s faltering private sector, which has been plagued by economic uncertainty and arbitrary law enforcement.
At a recent Lunar New Year lunch hosted by senior officials in Henan, China’s most populous province, Governor Wang Kai urged local entrepreneurs to “dare to venture, dare to invest.”
He assured business leaders that local officials would provide the “best services” to support the private sector.
Wang emphasized the government’s commitment to improving policies, protecting legitimate rights and interests, and listening to business leaders’ needs to create a first-class business environment, as reported by local media.
Henan, China’s sixth-largest regional economy, is striving to restore confidence and boost economic growth through these efforts.
This latest effort to placate the business community comes as China’s economy shows signs of slowing and private sector investment declines.
The country’s heavy-handed approach to governance, coupled with arbitrary law enforcement and a lack of transparency, has created an environment of fear and uncertainty for private enterprises.
Despite achieving a 5% economic growth target in 2024, private sector investment dropped by 0.1%, a stark contrast to the 3.2% increase in overall investment that year.
This decline is particularly alarming, considering the private sector contributes half of the government’s tax revenue, 60% of national economic output, and 80% of urban employment.
China’s economic policies appear increasingly ineffective in addressing these critical issues.
Beijing has made repeated attempts to bolster ailing private firms in recent months.
At December’s Central Economic Work Conference, the government proposed various measures to incentivize investment, curb cutthroat competition, create a unified national market, and rein in the excesses of local authorities. In October, Beijing released a draft of a new law to promote the private sector, with provisions dedicated to protecting the rights of entrepreneurs.
The law is expected to be passed when the country’s top legislature meets in March.
Despite these efforts, Henan has remained a rare bright spot in an otherwise gloomy economic landscape.
The region is home to the world’s largest iPhone assembly hub, operated by Foxconn Technology Group, as well as electric vehicle plants run by BYD.
Additionally, private retailers like Pangdonglai symbolize the resilience of domestic consumption in the province.
Private sector investment in Henan soared by more than 10% in 2024, and the private sector accounted for over half of the province’s gross domestic product last year.
Henan has set an ambitious goal of achieving 5.5% economic growth in 2025, banking on continued upsurges in private and foreign business investment.
This target is likely higher than the national level, with Beijing widely expected to set this year’s growth goal at around 5%.
Henan officials have outlined plans to facilitate funding support for private capital to invest in key projects.
These plans include providing cheap loans and helping private firms take full advantage of national and provincial support policies.
In separate meetings with business leaders in January, Henan officials reiterated their commitment to fostering a favourable business environment.
However, these efforts to stimulate investment and economic growth cannot mask the underlying issues plaguing China’s economy.
The central province’s commitment to protecting and supporting the private sector, along with its efforts to create a conducive business environment, underscores the broader strategy of China’s leaders to restore economic growth and stability.
The country’s heavy-handed approach to governance, coupled with arbitrary law enforcement and a lack of transparency, has created an environment of fear and uncertainty for private enterprises.
Businesses are wary of investing in a climate where their rights and interests may not be adequately protected.
Moreover, the decline in private sector investment highlights a broader issue: the diminishing confidence in China’s economic policies and direction.
The government’s attempts to reassure and incentivize private firms have yet to yield the desired results, as evidenced by the stagnant growth in private investment.
This lack of confidence is further compounded by the tightening regulatory environment and the government’s increasing control over various sectors.
The situation in Henan serves as a microcosm of the broader challenges facing China’s economy.
While the province has managed to attract investment and maintain relatively strong growth, it is not immune to the overarching issues affecting the country.
The success of Henan’s efforts to stimulate investment and economic growth remains uncertain, given the prevailing economic and political climate.
In conclusion, Henan’s call for local entrepreneurs to “dare to invest” amid the economic slowdown highlights the urgent need to revitalize confidence in China’s private sector.
The central province’s commitment to protecting and supporting the private sector, along with its efforts to create a conducive business environment, underscores the broader strategy of China’s leaders to restore economic growth and stability.
However, the effectiveness of these measures remains to be seen, as challenges persist in achieving sustained private sector investment and overall economic resilience.
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