On February 17, 2025, China’s President Xi Jinping called a meeting of prominent tech leaders in the country, including Alibaba’s co-founder, Jack Ma, Huawei’s founder, Ren Zhengfei, DeepSeek’s founder Liang Wenfeng and BYD’s CEO, Wang Chuanfu. The meeting indicated the government's softening stance on the private sector, especially technology, which plays a key role in driving the economy.
An End to Private Sector Crackdown?
The Chinese government had initiated a “regulatory blitz" on the technology sector in 2020, which led to a massive sell-off in tech stocks, wiping off trillions of dollars in market value from technology firms. The crackdown stifled innovation and led to several high-profile tech leaders, such as Jack Ma, retreating from the public eye. However, the Chinese economy has been struggling over the past few years, failing to meet the official growth targets against the backdrop of sluggish consumption and a real estate sector crisis.
Several efforts have been made by Beijing to support the economy, with the stimulus measures of 2024 being the latest attempt. While such measures might gradually bear fruit, the threat of a trade war has once again emerged with the Trump administration raising tariffs on Chinese imports. This has led Beijing to look at new avenues to drive growth. The tech sector, especially AI, appears to be the route by which the government hopes to break out of the prolonged deflationary trend and strengthen business confidence.
The Role of the Private Sector in China’s Economy
The private sector accounts for more than 60% of China’s economic output, about 70% of the nation’s technological innovation and over 50% of its tax revenue, as of 2025. Plus, 80% of urban employment is due to the private sector. Therefore, private entities play a critical role in the economic and social stability of the nation. In fact, companies like BYD, Nio, Huawei and DeepSeek have spearheaded innovation despite trade restrictions imposed by the US on semiconductor exports.
Given the challenges faced by the economy, including sanctions on China’s technology companies, Xi Jinping’s efforts to leverage the potential of domestic tech firms is being seen as a “strategic move to counter external economic pressures.” And this isn't the first time that the government has made such attempts. In 2018, President Xi held a similar symposium in response to the US-China trade war during Donald Trump's previous term in office.
Reviving the Chinese Economy via Tech Innovation
The launch of DeepSeek has given China fresh hope of driving economic growth through tech innovation. Goldman Sachs expects the positive impact of AI adoption, led by DeepSeek, to reflect on the Chinese economy by 2026. The analysts believe that by 2030, AI adoption could boost the nation’s GDP by 20-30 basis points.
Local authorities across the country have been promoting the use of AI tools to support governance since early February. DeepSeek’s success has also had a positive impact on investor sentiment, raising hopes of increasing Chinese enterprise demand. DeepSeek’s unparalleled adoption has also sparked a fierce race in China to develop advanced AI tools, including chatbots.
To strengthen confidence within the business community, Chinese lawmakers proposed a draft law in February 2025 that established legal protection for private sector firms. However, analysts have expressed concerns that Beijing's support for the private sector tends to last only as long as it serves the government’s strategic goals. This was seen following the 2018 support for private businesses, which ended in two years with the government launching multiple anti-competition and anti-monopoly charges against these firms.
Impact of Xi’s Meeting on the Markets
The February meeting gave rise to hopes of China’s tech sector outperforming the broader market with the government’s support for innovation, supportive macro policies and other favourable initiatives. As a result, the Hang Seng Tech Index surged 2.5% to reach a 3-year high, while the overall Hang Seng Index, or HK50, rose 1.6% to its highest level since October 2024. Market sentiment on the index continues to be bullish, as seen in Acuity’s AssetIQ widget. The HK50 index was up 20.51% YTD on March 27, 2025.
Alibaba Group's stock, one of the heavyweights on the index, jumped 3.3% to close in on a 3-year high after the state media released visuals of Jack Ma shaking hands with President Xi at the meeting. Tencent's stock surged 2% to reach its highest in 4 years, while Xiaomi rose more than 7% to touch a new record high. Despite some correction in the Chinese stock markets in the week of March 25, sentiment towards tech stocks remained positive. Acuity's AssetIQ widget reflects continued bullish momentum for Alibaba. The stock was up 61.13% YTD on March 27, 2025.
Now, what remains to be seen is the extent of regulatory easing and control given to the private sector. Investors and entrepreneurs will need positive action, in the form of tangible policy changes, from the government before their confidence strengthens.