Perils to the Private sector in China: Delayed payments, Deflation, and the State
While the rest of the world experienced a resurgence of the private sector in the post-pandemic era, majorly due to the base effect, leading to expansion in hiring and capital expenditure by the private sector, China has been sailing in the opposite stream ever since. The private sector in China is not all right.
China has been squeezing out its private enterprise, which impacts a large section of the population as 80 percent of the workers are employed in the private sector. The private sector has lost confidence, and as a result, we see the private sector is reluctant to expand, and as a result, private capital expenditure is dropping. Interestingly, the gap in profits earned between the private sector and SOEs (state-owned enterprises) has fallen since 2015.
There are multiple re...