Fosun Group founder Guo Guangchang says the ‘days of runaway growth have gone’, with China’s private firms suffering from high debt and heavy asset loads
Juneyao Group chairman Wang Junjin also says entrepreneurs should ‘refuse lying flat’, and instead follow China’s going global strategy
Some of China’s most prominent tycoons have been committed to reining in debt, and are also eying the overseas market for increased growth this year, despite Beijing’s attempt to play up domestic economic prospects and calls for more private investment.
“The economic recovery last year was not as fast as we expected. Private firms are still facing huge pressure,” said Guo Guangchang, founder of Fosun Group, one of China’s largest private conglomerates.
The 56-year-old is a respected voice in China’s entrepreneurial circles, with a net worth calculated by Forbes to have shrunk to US$4 billion in 2023 from a high of US$8.1 billion five years earlier.
“However, the worst is behind us. Only those who can survive can reap more opportunities,” he told an annual gathering of the Zhejiang Chamber of Commerce in Shanghai over the weekend.
China is widely believed to have reached its annual economic growth target of around 5 per cent for 2023, despite many sectors, including private firms, calling for more policy support to help weather a host of challenges.
Private investment dropped by 0.5 per cent from a year earlier in the first 11 months of last year, while private property developers are heavily exposed to the ongoing debt crisis.
Guo attributed the hardships suffered by many private firms to their business strategy of high debt and heavy asset loads.
Such a business model is seen as particularly vulnerable when Beijing switches to deleveraging to tackle financial risks, and also as it relies on consumption and tech innovation to drive growth.
Fosun was once one of China’s most prolific buyers of global assets, but since 2022 it has sold its stakes in several firms, ranging from steelmaking to breweries.
Its pivot to an asset-light strategy was evident by the sale of its 60 per cent stake in Nanjing Iron and Steel last year, having held it for 20 years.
“The days of runaway growth have gone … Profitability in the future can only be extracted from craftsmanship, technology and good management,” said Guo.
Guo also encouraged more Chinese firms to expand into the international market.
“Once you can survive the ferociously competitive home market, you can probably thrive almost anywhere,” he added.
“The key is to derive profits from overseas markets by shipping and selling across the globe.”
A key area for overseas expansion lies in the Belt and Road Initiative, China’s ambitious plan to cast its economic influence in more than 60 countries in Asia, Europe, Africa and South America.
Wang Junjin, chairman of the Shanghai-based Juneyao Group, said local entrepreneurs would still actively explore business opportunities overseas despite the current economic difficulties.
“We must refuse lying flat,” he said at the gathering over the weekend, referring to the social trend of doing the bare minimum to get by and striving for nothing more than what is absolutely essential for survival.
“Instead, we need to comply with the country’s ‘going global’ strategy, stick to our main business and actively embrace changes.”
China’s non-financial outbound direct investment rose by 12.7 per cent year on year to US$115.7 billion in the first 11 months of 2023.