The Private Sector is Driving China’s Global Dominance

In mid-February this year, Chinese President Xi Jinping met the country’s private business leaders at a symposium in Beijing. Many of the participants in the symposium were from technology companies which, according to the Chinese Party-state’s formulation, were entities under the new development philosophy (xin fazhan linian). As per this philosophy, economic development prioritizes quality rather quantity, and stresses on innovation, coordination, being environment-friendly, and transparency. The ensuing high-quality development seeks to push China up the global value chain.

According to China’s State Administration of Market Regulation, as of 2024, there are over 55 million are private companies in the country. The private sector accounts for over 50 per cent of tax revenue, over 60 per cent of GDP, over 70 per cent of technological innovation, over 80 per cent of urban employment, and over 90 per cent of the total number of enterprises (in comparison, India’s private sector has a share of 36 percent in tax revenue, 91 per cent of GDP, 36 per cent in technological innovation, 11 per cent in employment, and over 95 per cent of the total number of registered enterprises).

One of the important points emphasized by Xi at the symposium, was for the companies to embrace patriotism. This was further underscored by Premier Li Qiang in his Work Report at the annual session of the National People’s Congress in March, calling upon the companies to refine their corporate systems, to assert their distinctive Chinese identity. This vote of confidence from the Chinese leadership is an acknowledgement of the rising importance of the country’s private capital, and their role in not only driving domestic development, but also providing wind to China’s global sails. An apt recent illustration is the unveiling of two open-source models by Chinese Artificial Intelligence company, DeepSeek, challenging the dominance of American rivals such as OpenAI, Meta and Google (it is worth noting that DeepSeek’s CEO Liang Wenfeng was also in attendance at the symposium).

The External Push by Private Companies

Chinese outbound investment is now increasingly driven by the expansion of private companies with global ambitions, whose focus has shifted towards emerging markets than high-income economies. They are also involved in diverse internationalization efforts across value chain segments, such as establishing local manufacturing, sales, and service operations. According to China’s General Administration of Customs, Chinese private enterprises contributed to the country’s foreign trade with transactions totalling 24.33 trillion yuan (about US$3.4 trillion) in 2024.

Chinese private companies, with their sleek and sophisticated products, have been able to connect with global consumers and are pivotal entities in building an ‘industrial diplomacy’ – to borrow the phrase by sociologist Kyle Chan – to re-shape global production networks and make them centered around Beijing. This is visible in a range of modern sectors and industries, that are qualitatively superior and critical in a technologically interconnected world, such as Electric Vehicles, consumer electronics and digital gadgets, lithium batteries, and solar panels. Chinese private companies form vital nodes in global supply chains in these industries, and their inextricability is used by Beijing for competitive advantage. Through these companies, China has remained attentive to building backward and forward industrial linkages – making components and specialized machinery, along with developing skilled personnel with the technical know-how – and holistically dominate the wider ecosystem while also guarding against sharing of technology. The ability of Chinese smartphone companies to endure and build a loyal consumer base in an adverse country like India is testament to their adaptive capabilities.

Zero-Sum Strategy against India

The attractiveness of Chinese investments, especially in the developing world, places Beijing at an advantageous position and helps leverage its centrality. This is well visible in its geopolitical competition with India, whose manufacturing sector’s scale and development trajectory bears potential similarities to that of the Chinese experience. In recent months, China has weaponized its strategic location in supply chains – by curbing its specialized machinery and limiting the mobility of its citizens who are engineers/technical staff working at supplier facilities – to slow down India’s industrial production, especially in electronics. While India is making strenuous efforts to become a viable destination for foreign manufacturing corporations, its ambitions are also intertwined with dependence on China for the nuts and bolts.

While aware of its entanglement, India has begun taking key steps in the medium-to-longer term emphasis on creating indigenous electronics suppliers and achieving self-sufficiency in manufacturing components, in the short term, it is difficult to discount China and its private companies. While aware of its entanglement, India has begun taking the first steps in the medium-to-longer term emphasis on creating indigenous electronics suppliers and achieving self-sufficiency in manufacturing components, in the short term, it is difficult to discount China and its private companies. However, the tariff wars initiated by the Trump administration, primarily targeting China – who have retaliated in kind – has provided avenues for Chinese manufactured goods to get diverted into India and raised apprehensions of dumping. The resultant impact on India’s domestic industries, in turn hurts the country’s manufacturing ambitions. India’s Economic Survey 2023-24 had identified the need to address this vulnerability but also simultaneously collaborate with Chinese investment and technology to boost domestic manufacturing capabilities. In effect, to plug India into the global supply chain, it was inevitable for the country to be plugged into China’s supply chain. While New Delhi has taken steps to engage with all domestic stakeholders in responding to rising global trade tensions, it will have to undertake a tight rope walk by engaging with both Washington DC and Beijing, given the complexities in the economic and trade ecosystem.

In this context, this is more than an opportune moment for the Indian government and the country’s private sector to actively collaborate, build capacity as well as resources, and fund research and development. The role of India’s private sector is thus, critical in the country gaining a position of strength in global manufacturing.

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Originally published as Anand P. Krishnan. 2025.‘The Private Sector is Driving China’s Global Dominance’. The Indian Express. 17 April.