Ways to further unleash private sector dynamism in China
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Private firms drive China's economy: 90% of all enterprises, 60% of GDP and over 80% of urban jobs. But with global supply chains in turmoil, how can they keep growing and thriving?

This is Doing Business in China. I'm Tu Yun. Joining me and co-host Professor Qu Qiang from Mingzhu University of China is Mr. Michael Wu Kim Khan, a member of the 14th National Committee of China's Political Advisory Body, the Chinese People's Political Consultative Conference.

Mr. Wu is also chairman of the Hong Kong-based Wu Liang Li Group and lifetime honorary chairman of the Hong Kong Chiu Chau Chamber of Commerce. Thank you, Michael, for joining us. Thank you. First, let's start with your personal experience, Michael. Tell us your own experience of doing business on China's mainland, please. Yes, we are mainly involved in jewelry business as well as high-tech business.

With jewelry business, we're involved in branding, manufacturing, and also wholesale distribution, as well as e-commerce. So we would import name brands from overseas to be distributed in the greater China area, as well as Asia Pacific, and vice versa. And for the high-tech side, we're involved in autonomous driving,

and different new high-tech, including artificial intelligence. So all these businesses, you've got branches on the Chinese mainland, right? Yes, some of the branches, yes. Okay, then how do you perceive the current environment for private enterprises on the mainland then? Well, the global economical situation is facing different challenges. However, with the central government's insurance and insurance

emphasizing to have private sector to be part of the central government's key concern, that brings a lot of efforts from the central government in support of the private sectors. And the private sector law will be commencing and be taken into effect

very soon in a matter of months. So with all these, I think we can be positive for the private sectors. Actually, a recent symposium President Xi Jinping attended with private enterprises has shown how much the central leadership values the private sector.

And now authorities are giving permission to private investors to participate in nuclear power, oil and gas exploration and new energy storage projects. How encouraging does it sound to you, to private firms and investors?

Would you consider investing in them? Yes. With the main concern, we should meet the national security laws. That is number one. And I think all these opportunities would give us new possibilities. However, we would judge these investments in a case-by-case basis. However, we could see that some of the projects are attractive,

and is economically and profit-wise sounding. Right. Let's turn to Professor Chu here. Actually, nuclear power and oil and gas, to some extent, are quite sensitive, right? Because they concern national security. Why do you think the authorities decide to expand the access to private investors now? Well, Tu-Yin, I think this is a very good question. A

Well, since we have the nuclear power and the big energy industry, usually it's been dominated by the government companies, for example, not only in China or the former Soviet Union countries. But also let's take a look at the European Union, for example, the EDF. The EDF in France is probably the most influential nuclear companies of the whole world, even in America, even in Japan. Previously, I think all the nuclear power stations or plants are dominated by the state capitals.

But recently we've been finding there is a problem. The problem is that the state enterprises or state capital sometimes lack of motivation. They lack of incentive and sometimes in the innovation, in the marketing operation, they probably need some other help. And I think we need what we call the catfish, the catfish effect.

So we need to introduce in the competition from the private sectors. Let's say, for example, in America, they've been finding the Westinghouse and the Oakloe and some other private sectors. They've been doing very, very well because they don't have such a large investment. Because you see, if you want to build a reactor, if you want to build a nuclear plant, that means huge investment from the generation, from raw material import, from the disposal of the nuclear waste.

And that's probably are not the things of the private sectors, but they invented something new. Right now, from all over the world, from France to America to Japan, they've been talking about how we can introduce in private sectors. Right now in Japan, they have the Hitachi and the Toshiba combination to help this nuclear development. So I think that's the reason why China learned from this good experiences and want to

do the same thing. For example, right now in China, Shandong Weiqiao is doing the same thing, helping the Zhongguanghe and the Zhonghe, the big enterprises of China to do the same thing. Right. What kind of advantages do such private firms have in this regard? They're latecomers, right? Companies like Michael's company, they're engaged in jewelry or automotive assembling or dealing. Do they have any

competitive advantages here if they want to enter this area? Great question. Why not? Just take a look at the Elon Musk and SpaceX. Elon Musk used to do starting from the PayPal. It's a paying company. Anything related to a space company or rocket launching? No, nothing. And take a look at the Dajang, the DJI. And also, they do not have experience in the low altitude aviation at all. But somehow, because they don't have this experience as

or translating into another site, they do not have any stereotype or kinds of the obsolete idea in their mind. So they don't need to follow the old path. They can start a new one from zero, from ground zero. And that's the reason why they've been so successful. And that's the reason why in America, in Japan, in European Union, also in China, many big projects that used to be considered to be dominated by not only the state-owned enterprises,

but only by the military-owned enterprises like the rocket launching. Right now, take a look at China's rocket industry. Many newly graduated students started their own rocket company, as well as for the drone companies, as well for the robot company, technically the Unitree. That man does not have any experience in the robot, but somehow he becomes the number one in the whole world, Wang Xingxing. So I think...

It's the same story. And come back to Michael, and I think why a jewelry company cannot go into auto driving industry. Well, I think they have the largest drive for the auto driving. Right now, all kinds of the convoy, you know, guarding the precious goods, like guarding the bank, guarding the jewelries, guarding the very precious paintings, etc.

And they've been fully armed and guarded by human resources, a very, very huge investment. But consider if we can have a very high tech guaranteed and guarded like a drone vehicle fleet to transport all these very valuable goods, that will be a new track. That will be a new industry. So I think they have more than anyone else try to develop this kind of the new industry to protect this.

new business and build their own war against the other businesses, competitors. Michael, do you have any plan or thoughts of entering those areas like a renewable energy or energy storage? We are entrepreneurs. We are having open attitude to new opportunities, but we will not limit ourselves to

to what business we had before. However, like now we have the AI, we have manners to execute. I think we should, as private sector, we should embrace this new technology and think of new ways how to inject them into our various business and very

various level of business from R&D to manufacturing to precision sales and we always believe in the ends justify the means concept so

goes to the customer first, see the demand, and then we come back with and adjust our supplies. That's what we call entrepreneurship, right? Yes. Coming up, find out the key to further unleashing private sector dynamism in China. Sideline Story brings you all things sports related. The hottest topics, latest events, juiciest stories, all with a very personal take.

Subscribe to Sideline Story Podcast for heated sports discussions covering events that are happening in China and around the world. Doing business in China, straight from those who have done it. And actually, this year's government work report has highlighted developing private economy in a down-to-earth manner and stressed the importance of protecting the legitimate rights and interests of

private enterprises, entrepreneurs in accordance with the law. And as Michael just mentioned, a new law to promote private economy is about to be introduced in about one month. Right, Michael? Yes, that's what I have learned from our prime minister. And there are two pillars that stand out.

equal market access from Article 12 and also enhanced intellectual property protection in Article 30. So that will further enhance and protect

and promote the businesses in private sectors. Of all those points you just mentioned, which one do you think is key to further unleash private companies and entrepreneurs' dynamism then, Michael?

Yes, I think Article 12, equal market access, I think mandates that provincial governments establish bidding restriction based on ownership type. So I think these are some of the encouraging pillars that can help.

out our private sectors. Professor Chu? Well, I really want to ask Michael some questions because as Hong Kong entrepreneurs, well, you're like half and half because you're a private sector, but also you are some kind of like not foreign capital, but it's just out of the mainland capital.

When you enter China, have you ever faced a certain kind of obstacles? Like you just mentioned, the bidding policy is based on your ownership type. And I understand that your company also has operations outside of China, for example, in some other countries. So if you want to make a comparison between the mainland policy, especially the local government policies, towards some other foreign countries' policies, what kind of conclusion do you have or what kind of advice do you have for us?

Well, I think from my personal experience, no countries will be easy or problem-free

Now, it is a matter of attitude to overcome them. Now, with the local competitions, we need to do local adaptations, a lot of local adaptations. So even when we are in China, different province would have different characteristics and we need to do a lot of local adaptations. So that's what I learned from my experiences.

Right. Professor Xu, then of all those aspects that the authorities want to improve or streamline, like fair market access or, you know, ban on fining private firms without a legal basis and profit-driven cross-regional law enforcement,

I believe Michael's companies maybe haven't encountered such problems, but there are a lot of other companies encountering such problems. I can't say like every day, but every now and then. So which one would you say is probably the most urgent to be settled? Well, I think the protection of the private sector's benefit is probably the most urgent

Well, like Michael just mentioned, he probably was doing very well in his businesses and he knows the philosophy and the wisdom of adaptation to the local reality. I think that's perfect.

But I think in every places, not only in China, but also outside of China, they have something called local protectionism. For example, I know that Chow Chow Chamber of Commerce has a huge operation and presence in Thailand. For example, in the car dealing businesses, you probably are very familiar with the car dealing business in Thailand that if you have to build a company in Thailand, well, certain board members nomination have to give to the Thailand citizens. And you need to allow Thailand company to have certain share in your company.

Well, in China, we do not have that kind of requirement because that is one kind of the local protectionism. We understand they want to protect local job, local taxation. Fine. We understand that. But in China, for example, in some remote area, it's actually the lagging behind area. The local government want to guarantee their local jobs. So they will say, OK, if your private sector, if you want to bid, you probably need to create another extra like 100 or 200 jobs in here or prepay some taxation in here. So that kind of

This is also kind of the local protection. I think that's the reason why last year, the central government mentioned very clearly we need to build a unified and integrated market all over China. That's something we're facing right now. Right. Another issue a lot of private enterprises are facing is financing. Michael, probably your company hasn't encountered such a problem like financing, limited access to financing. Is that a big problem to you?

Financing is always an issue. Whether it will become a problem or not is, I think, profitability and being sensitive to finding new way, new businesses or renovating your business is crucial. But globally, financing is an issue. But have you...

Your company, hard times when you go to banks for money, for loans. Well, let me switch the question a little bit. So if your company want to have some expansion, do you want to find financing in Hong Kong banking sector or you would like to come back to the mainland and finding the money in the mainland banking sector? Which one is a better strategy? Well, in our case, I have an embarrassing position where

We are also a financial institution. All right. So we welcome anyone to talk with us on financing. We will provide competitive rates. So probably Michael doesn't have that much to say in that regard. Sorry for bringing advertisement. Wow, it's like deep seek when they ask you, do you need money to develop your new technology? They say, fine, we have enough money we have. That's true.

I'm not saying that we have enough money, but we have our way of finding competitive source of funds. Professor Chi, that's a big problem for a lot of private companies on the mainland, especially those small and medium ones. Yeah.

And it's been a bottleneck for many years. So what makes it so difficult for banks to grant loans to those firms then? Yes, it's indeed a very important question. Well, many of the mainland enterprises only rise up after the reform and opening up. And most of them actually rise up after the 2000s. Just take a look at the latest development like Xiaomi, like even Huawei, like Alibaba, right? They've been born like in the 1998s.

But in Hong Kong, many of the privileged enterprises, they've been having a long time, very long time in the free market and globalized market. For example, the Chamber of Commerce of Chaozhou basically are funded and established in the early 1900s. So they have a very long history. Well, they have a very good accumulation of their capital, of their experiences. So I think funding or financing issues probably...

are okay for them, but actually become the great challenge for Chinese and newly startups. So I think the problem is that they do not have enough collaterals. If you want to go to the bank, if you want to borrow money, and how much you can borrow and how much was the rate, well decided on how much collateral do you have, how large your company is, but actually those garage started startups, actually they do not have this privilege. So I think currently that's the reason why I think the premier has mentioned a very

strongly that we need to help them. We need to set up this stock market oriented mechanism to support this tech giants or tech startups. And also we need to start a new bond board to support this startups and to give them a lower rate and the

The government has subsidized their interest rate they have to pay. The government has tried to vouch for them to raise up their credit so the bank will dare to lend them more of the money. So I think this is actually a good mechanism. Michael, because Michael's got a financial institute. So Michael, if a small and medium-sized firm goes to your bank, is it bank or...

It's an integration of financial provision and also venture capital. So frankly speaking, they don't come and look for us. We look for them. We are looking for companies that have potential growth aspects. And we go actively to find them. Because for these new start-ups,

We need to have the analyzing know-how to find out who can have the capability, who can have the sustainability. And we go after them. Actually, we go after them. Ben, what kind of startups have more chances of getting loans or getting money from you? Yes, I think the practical usage is,

in the market and the demand of that and then the execution of the concept. That's the most important. And then we would evaluate also the

the owner and the operation team and the financing team as well as the long-term sustainability analysis. So these would all come into as a systematic evaluation SOP for investment companies in crude but not limited to venture capitalists. Those words are for those who want to borrow money from probably Michael in the future.

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And back to the government's support for private economy. With the government's emphasis on technological breakthroughs in such areas like AI and cloud computing, Michael, how can private enterprises position themselves to contribute and benefit from these initiatives then? Well, I think I'm a very practical person.

Please excuse me that today, all the questions you have asked, we have gone through various AI models to consolidate and take it as a reference. So I think not to be afraid of innovations, be brave, embrace and apply them. I think this is the most practical and easy way.

easy way of working out. So for myself, and also I encourage the members of our Chamber of Commerce, as well as the business sector in Hong Kong, is to actively engage yourself in understanding what the AI breakthrough is and just build simple task force of one or two persons or a few persons as a core committee. Start application into various areas

sectors or all sectors in the company and set up KPIs and deadlines for this whole process. Right. Michael, your focus at this year's National Conference for Political Advisers is how to facilitate the export of China-made automobiles.

We know a considerable share of the exports are electric vehicles made by private Chinese firms. So what's your proposal in this regard? Well, I could not mention the details of my proposal. I would bring out the main concern or the essence of my thoughts. So our family is involved in auto dealerships in Thailand.

So we are one of the players along the supply chain. And also with the Chamber of Commerce, we have our members globally, which I visited them. And also I have asked them to commission them to conduct local research projects.

And that is for the sales side. And for the manufacturer side, we have done intensive research with various automakers and the Chinese auto industry associations. After our conclusion, we would see a lot of potential adverse competitions. And we certainly do not like to see the situation such as the electric motorcycle industry of Chinese exports in Vietnam.

So price war, eventually lowering the quality to adjust to the price competition and then bringing the sustainability to an end. So we certainly do not want to have that happen in the auto industry. So the central government is already doing a good job.

However, I must bring the attention to make coordination effort and supportive effort to the EV car industry's export effort by various means. So we would have a three aspects approach that I suggest.

And concern number one is information collection. So we need to collect information from local markets, from various dealers, real time. And by having all this information analyzed, we would compile into proper strategies.

and coordinating various automakers to avoid irrational price competitions. And all of these is to bring sustainability to the auto industries. What kind of role do you expect the government or business associations like yours to play in this regard then? I think first is communication among central governments' proper division.

as well as the auto industry associations. So we always believe in self-discipline among the industry without government's over-involvement. However, I think to a certain extent, central government would need to play a role in coordinating and supporting, especially when the recent situation of geopolitical circumstances

could change rapidly and in a very drastic way. We need to have contingency ready for various possibilities. Professor Xu, from your observation, what kind of collaboration the authorities and those companies can have in that area?

Yes, I think Michael is absolutely right. That's the reason why we have certain very similar cases. Last year, it's in the photovoltaic industry, solar panel industry. Then the central government actually hold a meeting among all the stakeholders. They say, okay, we should not have this irrational competition or the involution or neizhuan. So don't do that because everybody's are going to die if you try to squeeze your competitor by this foul competition. Mm-hmm.

And not only your competitors are going to die, you're going to die as well. So I think the situation mentioned by Michael is very, very important because as far as I know, the same thing. We try to, you know, every EV makers, right, try to what we call the go abroad, because inside of the Chinese market and the mainland market, this competition has already been very bloody and brutal. So they've been shipping their cars everywhere, try to lower the prices because the starting price overseas is rather high.

But now the profit margin has actually been lowered to some extreme. I think what government can do is we can have some similar meetings like we do with the solar panel. We can let everybody sit down together to say, OK, we have a quota system or we can have a fair pricing system so that we don't need to fight within ourselves irrationally.

So eventually, I think we need to, you know, form a synergy, go out of China and, you know, to win the global market and win their customers, not to just, you know, fight against our own.

Next week, I'm going to meet with Lei Jun and Xiaomi because they have the Su Extra. So next weekend, I'm going to talk to him. I think Michael's idea really matters. Mr. Lei Jun is actually a very influential figure in the EV industry. Probably he is one of the most important EV makers. We'll also fill it and also file similar proposals. We're looking forward to hearing from you after that meeting. And last but not least, Michael,

Would you please give your advice to emerging entrepreneurs or your tips for succeeding in China? Well, I think I'm not being humble, but I'm being practical. I think we really be brave and stay open for new possibilities.

What you can imagine, it could be possible. That's it? Yes. Okay, thanks. And Professor Chu? Well, I believe Michael's right. Because everybody knows China in ancient time is farming-oriented nation, right? In Henan, in Shandong, we're farmers. But

But actually China is not only the farmers. We are nomads. In the northern part, like us, we're coming from the Mongolian tribe. So we built the northern presence of Chinese people, you know, in the physical way. But also you have to understand China also have another nomad in the south. That is the Chaoshan people, the Chaozhou people. They are not expanding themselves physically, but financially, business-wise. So if you take a look at the global map,

southern of China, actually in the ASEAN nations, in Australia, even to North America and Japan, you will find that there's a wide presence of Chaozhou businessmen. And they have been contributing to China with their business cavalier, with business skills, very good, very good traditions. So I think, like Michael just mentioned, they are going to carry on with this torch. They are going to build on with the spirit

and expand this whole business network by cooperating in the form of synergy with central government, with the mainland business network, like the newer generation of the entrepreneurs like Lei Jun, like Ma Huateng. So we will form a new synergy. So I think that's the future we're going to welcome and look into. So the point is, find the Chou Chou people. Find Chou Chou people, and then you will get into the network of the global business network.

Right. That's all for this episode of Doing Business in China. Make sure you explore more business opportunities with us next week. See ya.