“When you see a virtuous person, follow his example,” Xi was quoted as saying by Chinese media, calling on private entrepreneurs to “strengthen their feelings for the country and assume social responsibilities.”
While China’s crackdown has been most visible in the tech industry, the country’s property billionaires have also come under increased pressure in recent years. Authorities have steadily restricted the industry’s access to funding in an attempt to rein in home prices and reduce systemic risks to the financial system. China Evergrande Group Chairman Hui Ka Yan has been among the biggest casualties of the campaign this year, losing $6.7 billion, or nearly 30%, of his fortune as Evergrande’s stock tumbled on concerns the company faces a liquidity crunch.
A more subtle sign of billionaires’ waning influence can be seen in their shrinking share of political appointments. Data from the Hurun Report, which produces wealth rankings, shows that rich entrepreneurs accounted for 5.8% of delegates in the Chinese People’s Political Consultative Conference and the National People’s Congress, the lowest in at least eight years and down from 15.3% in 2013.
“There is an evolution in the thinking of which type of people should be within the mix,” said Rupert Hoogewerf, the Hurun Report’s chairman. “It’s becoming much harder for entrepreneurs.”
The big question is whether all of this will be good for China in the long run. One risk is that the onslaught of regulatory probes and rule changes undermines investor confidence, HKU’s Zhang said. That could make it less likely that the entrepreneurs behind the next potential Alibaba or Tencent get the funding they need to make their ideas a reality. Global venture capital firms will likely think twice about investing in Chinese companies if Beijing prevents them from listing overseas, a crucial exit route for early international backers.
Yet some of Beijing’s new policies may foster competition in the oligopolistic tech industry, clearing the way for a new class of billionaires to rise. Stricter regulations on fintech firms will help reduce systemic risks, even if they slow down innovation. China’s crackdown on Ant won praise last month from Berkshire Hathaway Inc. Vice Chairman Charlie Munger, who said in an interview with CNBC that the “Communists did the right thing” by letting Ma know he couldn’t “wade into banking...and just do whatever he pleased.”
Either way, China’s entrepreneurs will have little choice but to embrace the “new normal,” said Chen Long, a partner at consulting firm Plenum. “The good old days of savage growth are gone.”
This article was provided by Bloomberg News.