China’s recent slowdown in GDP growth is unsettling global markets and exercising the communist party leadership. Beijing is determined to keep its economy stable, but doing so means tackling the politically sensitive issue of its private sector. Private enterprises are China’s economic mainstay, contributing about two-thirds of output and investment and the lion’s share of jobs. They drive the prosperity on which the communist party’s legitimacy rests. Yet President Xi Jinping has favoured state-owned firms since he took power in 2012 and clipped the wings of several high-flying private entrepreneurs. Now, as Beijing seeks to stiffen its resolve in the US-China trade war, the private sector’s dynamism is flagging, creating economic headwinds. In November, Xi invited some of China’s top entrepreneurs to dinner in the Great Hall of the People to reassure them that “private enterprises and private entrepreneurs belong to our own family”. But the key question is whether the private sec...

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