Dehydrated Research Report | Special Timing, Private Enterprise Symposium Boosts Market Confidence

On February 17, 2025, a symposium for private enterprises was held.

From a temporal perspective, this meeting has three important backgrounds:

First, the timing is similar to the private entrepreneurs' symposium in 2018, following Trump's inauguration and the implementation of tariffs. The tariffs have brought export shocks, with a generally greater impact on private enterprises than on state-owned enterprises. In 2024, private enterprises accounted for approximately 64.9% of China's total exports. Holding the meeting at this time reflects the central government's support and care for private enterprises, and it also helps stabilize social expectations and confidence.

Second, the timing coincides with significant breakthroughs for private enterprises. Two major highlights during the Spring Festival were the animated film "Ne Zha 2" in the entertainment sector and Deepseek in the technology sector. The former has broken numerous box office records, while the latter has optimized computing efficiency under the pressure of U.S. export controls, indicating that U.S. technological restrictions have not interrupted China's technological progress. Both of these achievements are inseparable from Chinese private enterprises and represent the vitality of the Chinese economy. Therefore, one notable feature of this symposium for private enterprises is its high technological content.

Third, the meeting is held before the Two Sessions, which means that subsequent policies supporting the private economy and technological innovation can be deployed in the government work report. If legal processes are required, this timing can also seize the window of opportunity presented by the Two Sessions.

Overall, holding the meeting at this time sends a positive signal encouraging and supporting the development of the private economy, which is of great significance for stimulating market vitality and enhancing development momentum. Our understanding is as follows:

First, strong rule of law is the foundation for the development of private enterprises. Promoting legislation, strengthening rights protection, and regulating enterprise-related law enforcement are recent focuses for supporting the development of private enterprises. Since the end of last year, there has been a phenomenon of "deep-sea fishing" style illegal law enforcement against private enterprises, which has affected social expectations and confidence. Since the September Politburo meeting, the central leadership has noticed this issue and has begun to address it. For example, the September Politburo meeting proposed "to help enterprises overcome difficulties and further regulate enterprise-related law enforcement and regulatory behaviors. A law to promote the private economy should be introduced to create a favorable environment for the development of the non-public economy." Subsequently, in October, the Ministry of Justice and the National Development and Reform Commission released a draft for public consultation on the "Private Economy Promotion Law," which again clarified at the legal level that the personal rights, property rights, and other legitimate rights and interests of private enterprises and their operators are protected by law. After the Central Economic Work Conference in December proposed "to carry out special actions to regulate enterprise-related law enforcement," on December 16, the State Council emphasized this issue again by accelerating the implementation of the administrative discretion benchmark system and further improving the standardization of administrative law enforcement during the eleventh special study Second, innovation is the driving force for the advancement of private enterprises. In the new type of national system, enterprises are the main body of technological innovation, and platform enterprises must play a leading role in development, job creation, and international competition. During the Spring Festival, Deepseek emerged, once again demonstrating that Chinese private enterprises can also play a leading role in cutting-edge technology competition, rather than merely following in the footsteps of others. In the new type of national system, enterprises are the main body of technological innovation, with their share of R&D funding in society reaching 79.3% in 2023, while the government plays a more organizational role. As early as the 2022 Central Economic Work Conference, it was pointed out that "improving the new type of national system, effectively utilizing the government's organizational role in tackling key core technologies, and highlighting the main position of enterprises in technological innovation."

Third, boosting confidence is essential for the growth of private enterprises. The significant importance of this conference is consistent with the 2018 symposium on private enterprises, referencing the notable improvement in capital market sentiment after the last meeting, which initiated a structural bull market for the ChiNext Index. In early 2018, trade frictions triggered turmoil in the capital market, rapidly increasing the pledge risk for private enterprises, coupled with erroneous statements in public discourse such as the "exit theory of the private economy," which affected social expectations and confidence. The symposium for private enterprises held in November that year had a high overall specification and acted as a "shot in the arm" at a time when confidence in private enterprises and the capital market was continuously weakening. It significantly alleviated market concerns about the prospects of the private economy, enhanced the long-term confidence of entrepreneurs and investors, and boosted capital market sentiment. After the symposium, the government clearly proposed "special measures for private enterprises with equity pledge liquidation risks," and jointly launched relief funds with local governments and financial institutions, easing market panic and avoiding systemic risks, effectively stabilizing the capital market. Following the symposium, the A-shares ended their previous downward trend, and in 2019, the ChiNext Index initiated a structural bull market, with an annual increase of 43.8%.

This symposium will also become the starting point for a new round of development for private enterprises and technology, with the capital market expected to benefit significantly. As of February 14, 2025, the total market value of private enterprises has increased from 29% at the beginning of 2018 to 37%, gradually enhancing the importance of the private economy in the capital market.

In the current context of private enterprises bringing new technological breakthroughs, the convening of this symposium again reflects the determination of the higher-ups to stabilize the economy and market entities. Attention should be paid to the progress of subsequent financial, legislative, and business environment policies to further boost market confidence and sentiment.

Risk Warning:

Risks of misunderstanding policies; slower pace of subsequent policy implementation; the historical context of 2018 may not be fully comparable to the current situation. (Dongxing Securities)

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