After years of chilly treatment, Beijing is trying to make nice with its tech champions. Last week, President Xi Jinping met with domestic business titans, promising to “unwaveringly encourage” the private sector. The appearance of Alibaba’s Jack Ma, who mostly disappeared from public view after criticising state regulators in 2020, was particularly notable. The rare, high-profile meeting follows optimism surrounding China’s DeepSeek, which shocked global investors last month by unveiling a pioneering AI model. The Shanghai Stock Exchange has now also rebounded by around 20 per cent, after dropping to a post-pandemic low in September.
Xi’s warm words mark a welcome thaw in state-business relations, but Beijing needs to go further to win back the trust of companies and revive animal spirits.
Investor faith in China — both at home and from abroad — has been scarred by the policy uncertainty and interventionism of recent years. A regulatory assault on large companies, which began in 2020, included fines and forced restructurings designed to curb corporate power. That came alongside the enervating effects of Beijing’s draconian zero-Covid measures. Business confidence remains downbeat, private investment has been flat since 2022 and net FDI fell by $168bn in 2024, the biggest recorded outflow.
Raising business activity is an imperative for Beijing right now, with the economy seemingly trapped in a deflationary cycle. Another trade war with America is brewing. US President Donald Trump has already lumped an additional 10 per cent tariff on Chinese imports. Further levies are anticipated. With the economy still recovering from a real estate crunch, Beijing wants — and needs — domestic innovation to power the nation’s economic growth.
This all suggests Xi will need to pair his soothing words with action. Otherwise, investors and venture capitalists are likely to remain reticent. (Similar business symposiums in 2018, during the first Trump trade war, were followed by the tech crackdown a few years later). Indeed, the undertone of last week’s meeting was that Xi wants to incentivise innovation in the service of the state, which will keep business wary of Beijing’s heavy hand. The tech sector also needs China’s broader business ecosystem — and foreign investment — to keep ticking. The guest list for last week’s conference focused mostly on domestic tech companies, including electric vehicle maker BYD and robotics firm Unitree.
Businesses will hope that Xi actually follows through with his promises to cut unreasonable fees or fines against private firms and level the competitive playing field with state-owned enterprises. With consumer confidence low, Chinese investors are also still waiting for a substantive demand stimulus from the government. Beijing is focused on boosting the economy by ramping up green tech and AI innovation. But China needs to raise domestic consumption to diversify its export-led model, and secure sustained high growth rates. Investors both at home and abroad will also keep a close watch on government decisions for signs that policy clarity and stability has indeed returned before making big commitments.
Beijing cannot reach its longer-term vision of building a fully developed and prosperous economy by 2049, without the enterprise and innovation of private businesses. The carefully choreographed forum with tech leaders shows that the state understands this. But it will take consistent efforts to win back investors. The optimism around China has undoubtedly picked up in recent months, but Xi is likely to find that confidence is much harder to regain than it is to lose.
