China's Communist Party demands private sector's loyalty as external risks rise

China's ruling Communist Party is demanding a show of greater loyalty from the sprawling private sector as the world's second-largest economy grapples with growing external risks, from open US hostility to the coronavirus pandemic.

In recent years, the party has sought to tighten its grip on private businesses, by taking stakes in non-state enterprises or installing officials in large firms, even as President Xi Jinping repeatedly pledged to back the sector key to growth and jobs.

Citing rising risks and diversified values and interests among entrepreneurs, the party issued guidelines late on Tuesday advising private firms how to position themselves politically.

Business people must "maintain high consistency" with the party regarding the political aspects of position, direction and principles, say the guidelines published by the Xinhua official news agency.

"We should build a backbone team of people in the private economy that can be relied on and used at critical moments," it said.

The party also encouraged private firms to participate in reforms of state firms and the "Belt and Road" initiative, while pledging to improve the business environment for them.

In remarks published by Xinhua on Wednesday, Xi said the non-state sector was a vital part of China's economy and reaffirmed his longstanding pledge to give "unwavering" support to private as well as state-owned firms.

China's once-vibrant private firms are struggling to fend off the impact of the virus, despite government pledges to boost credit and tax support and open up more state-dominated sectors, analysts said.

The deepening rift with United States and the pandemic have amplified worries among private businesses over their political status, said Xin Sun, a lecturer in Chinese and East Asian business at King's College London.

"As a result, many private business owners become less confident in China's economic prospects, and presumably, also, the future of Communist rule," Sun said.

"At the same time, the party does still need contribution from the private sector, especially during such difficult times, in various important economic and political areas."