Our Era and Social Environment

After decades of economic dividends from China’s reform and opening-up, the country is now entering a phase where these dividends are dissipating. Simultaneously, the Chinese real estate sector has peaked and begun to decline, with nearly all private real estate companies facing survival challenges. Amid this economic backdrop, societal sentiments have shifted. In the past, leading private entrepreneurs were widely admired, even idolized by younger generations. However, many entrepreneurs are now labeled as “capitalists” in public discourse, a term that carries negative connotations in China. The agility and ambition once associated with private enterprises have lost some of their luster. In specific industries, state-owned enterprises are leveraging their status as a selling point, implying greater reliability compared to private firms.

However, upon closer examination of various enterprises, I believe that state-owned enterprises still struggle to achieve robust decision-making incentives and effective mobilization. In state-owned enterprises, decision-makers are not owners, meaning the penalties for poor decisions and the rewards for good ones are insufficient. In private enterprises, particularly large ones, the ability to mobilize mid- and lower-level employees is waning. As the economic “pie” stops growing, the traditional top-down profit distribution model limits expected gains for lower-level employees, with widespread salary cuts and layoffs occurring during economic downturns. This has made the conflict of interest between enterprise owners and employees more explicit, exacerbated by shifting societal sentiments. The optimistic visions of enterprise growth once shared by entrepreneurs are increasingly perceived by employees as “painting a big picture” (implying exaggeration or empty promises). The relationship between employees and enterprises is gradually becoming a simple transactional relationship – labor for wages.

With the rising average educational level among China’s younger generation, there is growing resistance to low-paying, poorly working conditions jobs. Many young people, unable to find satisfactory employment, choose not to work. In addition, slowing economic growth has hindered wealth accumulation among young people, exacerbated the wealth gap and class divisions, fueled populism, and reduced the potential for consumption. Growing distrust of private enterprises, with entrepreneurs being labeled “capitalists,” and intensified class tensions have heightened business owners’ insecurity, leading to industrial relocation and reduced investment.

In summary, both state-owned and private enterprises in China are hitting development ceilings due to mobilization limits and declining incentives. Globally, wealth inequality remains a challenge without effective solutions, and the rise of populism and value conflicts continues to dominate.