The meeting Xi presided over included a raft of China’s most successful entrepreneurs. Apart from Ma, Tencent’s Pony Ma Huateng, Huawei’s Ren Zhengfei, BYD’s Wang Chuanfu, CATL’s Robin Zeng and DeepSeek’s Liang Wenfeng were among the large group of business leaders that Xi reached out to.
Xi was seen shaking hands with Ma, a signal that Ma has regained favour within the regime.
Xi Jinping (right) shaking hands with Jack Ma in Beijing.
In 2020 Ma gave a speech in which he made a number of provocative, hubristic and derisive comments about China’s financial system, its state-owned banks and regulation.
It didn’t go down well in Beijing, which saw the comments as a sign that the billionaire class was becoming emboldened enough to criticise the state, and implicitly the party.
Ma disappeared for the next three years. Even after he resurfaced in 2023 he has remained largely out of sight, with only the very rare public appearance.
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Not long after that infamous speech, the proposed $US34 billion-plus float of his Ant Group was aborted only days ahead of its launch, which marked the start of several years of harsh crackdowns on the big tech companies and their billionaire leaders.
Beijing, clearly concerned about the extreme wealth being accumulated by the tech entrepreneurs and, as Ma had demonstrated, their increased assertiveness, used the umbrellas of competition policy, consumer protection, data privacy and national security to attack the “disorderly expansion of capital”. State media referred to the “barbaric” growth of private wealth.
Xi’s “three red lines” restricting the leverage of property developers was imposed in 2020, precipitating a destructive property market meltdown that, while starting to stabilise, has continued until now, with chilling effects on domestic economic activity.
Heavy and intrusive regulation was imposed on the big tech platforms, initially the fintechs and e-commerce giants like Alibaba and Tencent, but subsequently private education providers (where a ban of profits wiped out a $US100 billion sector almost overnight), ride-share companies and food delivery companies.
Those actions were part of a significant shift in policy as Xi pivoted from Deng Xiaoping’s philosophy of encouraging wealth creation – “let some people get rich” – in order to drive common prosperity through the trickle-down effects, to one that prioritised redistribution of existing wealth.
Donald Trump’s tariffs will put even more pressure on China’s economy. Credit: AP
“Excessive” and “unreasonable” income was to be regulated and wealthy individuals and companies “encouraged” to share more with the rest of China’s society.
The “encouragement” worked, with China’s billionaires queuing up to hand over billions of dollars to philanthropic foundations. Many of them, after seeing some of their peers detained, fined heavily or their assets seized, did as Ma had done and disappeared from public life.
The private sector, which historically has provided a disproportionate share of China’s economic growth, became risk-averse as the crackdown continued and China’s growth, hit hard by the flow-on effects of the property market’s implosion, slowed.
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Now Xi needs China’s entrepreneurs as he confronts structural challenges within the economy – destabilising financial stresses at the local government level that Beijing finally started to address late last year; deflation; weak consumer spending; excess factory capacity and an over-reliance on exports that makes China very vulnerable to a new trade war.
Even without the new 10 per cent tariff Donald Trump has imposed on China’s exports to the US, or the removal of the exemption for low-value parcels (if the US can work out how to implement it) that would have a dramatic impact on the billions of parcels China’s Shein and Temu ship to the US, China needs its tech entrepreneurs onside if it is to achieve Xi’s vision of building “new productive forces” within the economy.
Essentially, that’s a strategy – designed to enable China to achieve self-sufficiency in critical areas of technology – that is reliant on advanced manufacturing and artificial intelligence.
The US, under the Biden administration, restricted China’s access to the latest generation of advanced semiconductors and the machines that make them in a less-than-completely-successful attempt to thwart Xi’s ambitions and protect America’s technological superiority.
Trump will almost inevitably go even harder and is likely to ratchet up the existing tariffs on Chinese imports to the US to significantly higher levels. During his election campaign he foreshadowed a 60 per cent tariff on all Chinese imports.
The weakness of its domestic economy has caused China to become increasingly dependent on exports to sustain its massive manufacturing base.
Xi may not have changed his views on how common prosperity should be achieved and the Communist Party but, for the moment at least, he needs them.
The prospect of a new round of Trump tariffs on everyone, slowing global growth and trade and choking that flood of exports, along with tougher restrictions on access to US technologies, are creating pressure within China to do more to stimulate domestic consumption and also to encourage its own tech sector to do more to compete with America on cutting-edge technologies.
The success of DeepSeek in developing an AI model comparable to the leading models in the US at a fraction of the cost has highlighted the capacity for China’s tech companies to compete with the big American tech companies ploughing hundreds of billions of dollars into AI – if they are prepared, allowed and encouraged to compete.
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After four years of a brutal crackdown on their companies, their wealth and their positions, the tech billionaires – China’s best and brightest entrepreneurs – are being invited in from the cold. Xi may not have changed his views on how common prosperity should be achieved and the Communist Party but, for the moment at least, he needs them.
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