In China, the phenomenon of “the state advances, the private sector retreats”, known as "guójìn míntuì" in Chinese, refers to the pattern where, over time, state-owned enterprises (SOEs) gain prominence, while private enterprises weaken or lose influence.
The term has been around for quite some time. Tracing its origins through information analysis, it appears to have first been introduced in 2001 by financial commentator He Wannan, in two articles published on November 10 of that year, namely “Restructuring: ‘The State Advances, the Private Sector Retreats’ Becomes a Trend”, and the other, “When Facing Collapse, Only the Government Can Step In”, published in the financial media Eefoo and Business Times, respectively. Both pieces discussed how, during the restructuring of listed companies at the end of 2001, state capital was expanding while private capital was being pushed out. The author noted that in the restructuring of PT MinMinDong, priority was given to protecting state-owned assets and excluding private participation. In this case, Fujian Deya Group, a Minying enterprise, signed a share transfer agreement for PT MinMinDong, a state-owned listed company, with the SASAC (State-owned Assets Supervision and Administration Commission of the State Council) Fujian Bureau, and its chairman became CEO. A year later, the Fujian Department of Finance suddenly transferred the state's 36.32% stake for free to another SOE, Fujian Electronics & Information Group, pushing out the Minying enterprise and stripping it of control. Since then, in the span of 24 years, the debate over "state advances, private sector retreats" has steadily gained traction.
To this day, however, it is still difficult to definitively conclude from macroeconomic data that this is a universal reality in China. For example, when looking at social financing, the share taken by SOEs has actually been declining (note: a considerable part of financing by the private sector actually reflects hidden debt taken on by SOEs or private entities acting on their behalf). In 2024, private economic actors made up 96.37% of all market entities, a year-on-year increase of 3.93%. The number of private enterprises reached 55.5423 million, a 6.02% year-on-year growth (note: many private businesses register multiple companies for strategic purposes). On the surface, the data all seem positive; this is why the debate over “state advances, private retreats” remains contentious.
Yet here lies the problem: although the economic data look good, the public’s real-life experience feels completely disconnected. Countless people have asked why this is the case, but most answers are unsatisfactory. Many economists suggest the data are “inflated”, but this issue has always existed. The core reason, in fact, is that the concentration of economic power has grown excessively high.
Today, the problem with “state advances, private retreats” is that economic concentration has reached such a level that the main players are now state-owned enterprises and their affiliates. Private enterprises and most of the market economy have been marginalized, or even excluded. The “good” parts of the economy no longer involve the private sector, while the “bad” parts are not reflected in official statistics. For this reason, statistics and reality keep drifting further apart. For example, many defunct businesses remain officially open or have not been deregistered; a significant portion of the unemployed are reclassified as “flexibly employed”. At this stage, favorable statistics can be relatively easily achieved by initiating major national projects, which can produce the targeted figures quickly.
Thus, China’s current market is a relatively narrow one, and the macroeconomic environment is also relatively constrained. The entire economy has become somewhat distorted. Statistics no longer reflect the social reality, but only describe a distorted, narrowed, and partial segment of the market landscape.
In fact, just a quick glance at the past two decades of economic development makes it clear that “state advances, private retreats” is all too real. At the tail end of the real estate boom, most of the end buyers of land at auction were already SOEs. By 2022, the number of private firms among China’s top 100 real estate companies dropped from 46 to 30, and their market share in sales fell from 32.0% to 25.0%. Conversely, SOEs, including mixed-ownership types, grew from 54 to 70 companies, with their sales share rising from 68.0% to 75.0%. News reports make it clear: the once-flourishing private real estate giants have mostly either gone bankrupt or are barely surviving. From 2021 to 2023, the share of private enterprises by market capitalization among China’s top 100 listed companies fell from 55.4% to 39%.
But the more severe issue is not just with these large private firms. If past “state advances, private sector retreats” merely reflected a shrinking market space for medium-to-large private enterprises, then the impact was largely limited to upper-tier private companies. Now, the situation has worsened: the effects are reaching deep into the grassroots, affecting broader regions, more families, and more individuals.
With so many companies now barely hanging on, more and more people in China are opting to “lie flat”, i.e., give up striving. Many simply take on leisure trips around the country and are not being productive. The difference is that those with money travel in recreational vehicles with luxury gear, while the rest go on “budget trips”, eating, sleeping, and traveling in the same car, which also serves as their home. They go wherever the road takes them.
Some small business owners along the Qinghai-Tibet route report that although the income was never high in the past, it was at least stable, thanks to passing tourists. Now, though there are still many vehicles on the road, business is drying up. A shop owner recalled that in the past, on a scorching summer day, every tourist who got off the bus would buy an ice cream. Now, seven people may get off the same van together and buy just one ice cream, with seven spoons to share it. Scenes like this have become common. Consumption has downgraded across even the remotest areas. “State advances, private sector retreats” has reached the point where there is no further room to retreat.
Private enterprises are the main contributors to employment in China. According to the 2024 Statistical Yearbook and related 2025 reports, private enterprises, including individually-owned businesses, account for more than 80% of urban employment. Some reports even estimate that the figure may be as high as 90%. In other words, the livelihoods of the majority of Chinese people depend on the private sector. When the private economy thrives, employment is stable. But when the private sector suffers, employment becomes a major issue.
When “state advances, private sector retreats” leads to excessive economic concentration, the private sector struggles. That in turn affects the job market, reduces household incomes, and inevitably triggers consumption downgrading. Enterprises naturally look to “go global” in search of larger markets. Foreign capital, too, finds it increasingly difficult to survive in a shrinking Chinese market and begins to relocate elsewhere. This is a chain reaction that reflects a contracting market and over-concentration of economic power.
It may now be time for the Chinese authorities to adopt more cautious and balanced macroeconomic policies, because the private sector has nowhere left to retreat.
