Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
The author is a fellow at the China Analysis Center at the Institute for Policy Research in Asia Association
Over the past few months, tough patterns have emerged on Chinese business pages. The once vibrant entrepreneur’s name appeared in obituaries rather than in company profiles. The man at the height of his career jumped off the roof, shocking the industry and the community. Their deaths have been accurately described as a mental health tragedy four times in the last three months. But the story avoids something else. China’s entrepreneurship lies under extraordinary tensions when it is most needed.
The wave of suicide comes against the backdrop of a more hostile macroeconomic environment. The sector, the most visible real estate, has shifted from expansion to painful contractions. The once stable revenue stream has disappeared. Safe bets have once gotten worse. The old growth model driven by real estate, infrastructure and cheap labor has reached its limits. Xi Jinping is driving what he calls a “high quality” growth path, with Tech leading. The next step calls for exactly what Chinese private entrepreneurs have been offering for a long time. It’s merciless innovation, unbeatable drive, and the ability to find and seize emerging markets. While Chinese entrepreneurs have always faced a cycle of risk and reward, now a single regulatory survey, a change in local political climate, or a narrowing down of liquidity can turn challenging quarters into existential threats.
XI likes to declare private companies as essential, and the numbers show that. The private sector contributes by half of its tax revenue, over 60% of GDP, over 70% of innovation, 80% of city employment and over 90% of registered companies. Despite the contribution of this feature, the living reality for many entrepreneurs is one of the precarious privileges.
They may now command wealth and influence, but their long-term position is not safe. The life cycle of private companies in China is known for being under four years for small and medium-sized enterprises, with eight in the US and more than 12 in Japan. And there are often no institutionalized ways to protect founders from a totally financial and reputational abandoned from when businesses fail.
Beijing recently moved to reassure the private sector by enacting laws on promoting the private economy. Compared to a few years ago, when “common prosperity” was a consensus, regulatory crackdowns shaking the entire sector, with slogans like Jie Fu Ji Pin (“Rob the Rich to help the poor”) gaining currency. Now, it is essential that US-China competition is critically competing for technology, reinforcing private sector ingenuity. It is Beijing’s best and perhaps only sustainable power source.
But that’s not enough. Entrepreneurs need concrete and enforceable protection. Fair access to credits. and a legal framework that allows businesses to fail without destroying the lives of founders. This is not about protecting incompetent people and corrupt people. It’s about allowing risk takers to survive and try again. If a person with vision and courage cannot rely on fair treatment or dignified departures when things go wrong, then a reasonable choice is to avoid risk entirely. It marks the true end of China’s miracle and creates political risks that Beijing cannot stand.
The legal framework required is clear. Establish a national personal bankruptcy regime that allows honest but insolvent employers to release debts while maintaining essential assets and allow them to resume careers. Limits corporate loans, particularly personal guarantees for small and medium-sized businesses, to prevent the automatic merging of business and personal liability.
Beijing needs to ensure transparent and predictable regulations, so enforcement measures are guided by clear rules rather than changing political orders. Appropriate process protection for those under investigation must be enhanced to avoid long-term uncertainties that can be as damaging as formal penalties.
Chinese leaders must treat entrepreneurs not as consumables for growth but as partners shaping the country’s future, and implement the principles by radically rewiringing bureaucratic compensation structures. Paper laws are so far only. In China, political motivations that guide bureaucrats ultimately decide enforcement. China’s economic management is judged not only by the rewards of success, but also by the justice given to failure. What opportunities does the average citizen have when someone with influence and resources can’t secure a fair hearing, a legitimate process, or a dignified way to start again?
