China Signals Patriotism Key Expectation for Entrepreneurs

(Bloomberg) -- The Chinese government underlined that patriotism is a core element of entrepreneurship, with official media saying it had for the first time defined what enterprise means for the world’s second-biggest economy.

The joint statement issued late Monday by the Communist Party’s Central Committee and the State Council urged entrepreneurs to advance patriotism and professionalism, as well as innovation and social responsibility. It called for stronger party guidance of entrepreneurs and for them to endorse party leaders. It also promised to create a environment where they can thrive.

The guideline "has defined the core meaning of Chinese entrepreneurship under the new era,” with being patriotic and professional core components, the official Xinhua News Agency said. It’s the first edict “of its kind that focused on entrepreneurial spirit” and is intended “to spur market vitality,” Xinhua said.

The call for patriotic entrepreneurs underscores the trend of emphasizing the national missions of both private and state-run businesses under President Xi Jinping, who has sought to shore up the state sector and build “national champions.” It 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.”

Read More: Why China Is Scrutinizing Its Biggest Dealmakers

The new guidelines define what constitutes entrepreneurship and how to create a favorable environment for 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.

In a written question-and-answer session published later Tuesday, China’s top economic planning body, the National Development and Reform Commission, said that the guidelines placed specific requirements on entrepreneurs, especially strengthening “socialism s” among a younger generation of private business owners.

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.”