China's Richest 2020: Private Sector Dynamism Blunts Impact Of Trump's Trade War

The private sector has been indispensable to China’s economic success over the past 45 years.

As Nicholas Lardy at the Peterson Institute for International Economics documented in his 2014 book Markets Over Mao: The Rise of Private Business in China, the private sector has been the primary source of growth in both productivity and em

ployment,

and powered China’s transformation into a manufacturing powerhouse. 

Today, private businesses are blazing new trails in the service sector, and most significantly in China’s world-leading digital economy. Intriguingly, the trade war is also giving China’s private business sector a powerful boost.

The dynamism and competitiveness of China’s private sector are key reasons the trade war has not led to the widely expected collapse of China’s exports. In the nine months ending in March—a period that saw a major escalation in the trade war between China and the U.S. exports by China’s private sector grew by an average of 15% a year, even as exports by China’s state-owned enterprises (SOEs) shrank, according to an August analysis by Aletheia Capital.

The tough market conditions created by the trade war are equivalent to a stress test, and China’s private businesses, with their more efficient operations and strong bottom-line focus, have outperformed their state-owned counterparts in an increasingly stormy global market.