China’s Entrepreneurs Are Wary of Its Future
Chen Tianyong, a Chinese real estate developer in Shanghai, boarded a flight to Malta last month with no plans to return anytime soon.
After landing, Mr. Chen, a former judge and lawyer, shared on social media a 28-page article explaining himself. “Why I Left China,” read the headline, “An Entrepreneur’s Farewell Admonition.”
“China’s economy is like a giant ship heading to the precipice,” Mr. Chen wrote. “Without fundamental changes, it’s inevitable that the ship will be wrecked and the passengers will die.”
“My friends,” he urged, “if you can leave, please make arrangements as early as possible.”
It is unclear how many people saw the article before it disappeared from China’s heavily censored internet. But Mr. Chen said publicly what many businesspeople in China are saying privately: China’s leadership has mismanaged the world’s second-largest economy, and China’s entrepreneur class is losing confidence in the country’s future.
For more than a generation, China has been fueled by optimism that, despite its problems, tomorrow will be better than today. Now, the prevailing view is best summed up by an online meme made popular by Wang Xing, the founder and chief executive of Meituan Dianping, the online delivery and takeout company. The year 2019, goes the meme, may be the worst year in this decade, but it will be the best year in the next decade.
China’s economy is slowing, and the trade war with the United States has pinched growth. But many entrepreneurs are more broadly worried that China won’t pursue the economic and political liberalization it needs. On the contrary, since Xi Jinping took control of the Communist Party in 2012, the party has increased its dominance in every aspect of Chinese society.
Few are predicting a crash, but worries over China’s long-term prospects are growing. Pessimism is so high, in fact, that some businesspeople are comparing China’s potential future to another country where the government seized control of the economy and didn’t ease up: Venezuela.
Only one-third of China’s rich people say they are very confident in the country’s economic prospects, according to a recent survey of 465 wealthy individuals by Hurun, a Shanghai-based research firm. Two years ago, nearly two-thirds said they were very confident. Those who have no confidence at all rose to 14 percent, more than double the level of 2018. Nearly half said they were considering migrating to a foreign country or had already started the process.
“China is facing a lot of internal and external challenges now,” said Fred Hu, founder of the investment firm Primavera Capital Group and former head of Goldman Sachs’s Greater China business. “We need to realize that all of our achievements in the past 40 years were the results of opening up and economic reform, not because of any unique China development model.”
Mr. Hu’s comments are diplomatic. In private, some businesspeople are talking in angrier and more fearful ways. They asked for anonymity, of course. In today’s tightly controlled environment in China, even the economy — once considered a safe subject — has become dangerous to talk about.
“The most important cause of their pessimism is bad policy and bad leadership,” said Minxin Pei, a professor at Claremont McKenna College in California who is in frequent contact with business figures. “It’s clear to the private businesspeople that the moment the government doesn’t need them, it’ll slaughter them like pigs. This is not a government that respects the law. It can change on a dime.”
Many members of the business elite are unhappy that the leadership’s economic policies favor state-owned enterprises even though the private sector drives growth. They are angry that the party is trying to put a Mao-era ideological straitjacket on an economy driven by private enterprises and young consumers. They are upset that the party eliminated term limits last year, raising the prospect that Mr. Xi could become president for life.
Many businesspeople feel increasingly insecure, especially as some entrepreneurs are “disappeared” by the government to assist in the anticorruption campaigns.
“In the eyes of some senior officials, even people like Jack Ma and Pony Ma are just small-time businessmen,” Mr. Chen said in an interview, referring to the founders of Alibaba and Tencent, two of China’s biggest private enterprises.
Mr. Xi appears to be aware of the unease. Beijing has postponed new rules that would raise business taxes to pay for social benefits and has eased its monetary and fiscal policies.
Still, the party’s priorities appear to be elsewhere. In his December speech commemorating 40 years of China’s opening, Mr. Xi argued that his recipe of guided growth under strong Communist Party control must not waver. In another important speech to the party’s top officials last month, Mr. Xi identified seven major risks for national security, with politics and ideology topping the list, and he called for tighter control of young people and the internet.
China’s power structure lacks a way to counterbalance this trend. A few young hedge fund managers told me over dinner in Hong Kong that the trade war with President Trump could be a blessing in disguise because it might force Beijing to undertake structural reforms to reach a deal. Only Mr. Trump can save China, it is often said at private gatherings, only half-jokingly.
“The trade war is a bad thing to begin with,” said Mr. Hu of Primavera Capital. “But if the final resolutions lead to renewed efforts by China to undertake broad structural reforms, it will be a win-win situation for the U.S., China and the world.”
The relationship between the business elite and the party wasn’t always like this. Some businesspeople cheered Mr. Xi when he came to power, his anticorruption crackdown signaling to them that he was building a rules-based society. But disillusioned executives told me that tighter government control means more bureaucrats have a say in business matters, and corruption simply takes different forms.
Can it be stopped? Some businesspeople are pessimistic. Mr. Chen, the real estate developer, says the solution is to leave.
It’s impossible to say how many people agree. Even those who have left China may still run businesses there, making them reluctant to speak out. Plus, the country still has many optimists who say this rough patch won’t last.
But many of China’s rich have been voting with their feet. The number of Chinese people moving to the United States on investor visas has surged in recent years. Of the one million foreign students in the United States, one-third are from China.
Now 53, Mr. Chen decided in early 2013 that he had better start looking at places outside mainland China. The trigger was a widely circulated party directive that urged an offensive against liberal political ideas and values. “It was a very terrifying signal,” he said.
He first secured permanent resident status in Hong Kong, a special administrative region of China, but concerns about its autonomy have grown since Beijing responded fiercely to pro-democracy protests there in 2014. He applied for the investor visa to the United States, but the wait time was too long.
He then bought more than a dozen apartments in the Malaysian capital, Kuala Lumpur, and urged his relatives and close friends to do the same. He called it his Noah’s Ark plan, to prepare for the destructive flood that China might experience. But his Malaysia visa was valid for only 10 years.
Mr. Chen said he had finally settled on Malta because it was warm, beautiful and a member of the European Union, which meant he would be able to travel to other countries in the bloc.
For the entrepreneur class, he said, leaving China is the best way to resist Communist rule. Once people leave, they will manage to take at least some assets with them despite the strict capital controls the government has imposed in recent years. They can come back when the circumstances change, Mr. Chen said, much like many overseas Chinese did in the 1980s and ’90s.
Mr. Chen is learning English and exploring his interest in religion. He still has some businesses in China but doesn’t need to tend to them in person. He said he had never really considered changing his citizenship because life was tough for first-generation immigrants. He only wanted to find a safe place for his family, he said, to protect against a worst-case scenario that he believes will materialize unless there’s a miracle.
“I didn’t expect my article would be circulated so widely,” he said. “For the time being, it might be best that I stay out of China.”