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Implementation key to boosting private sector

By Li Yiping | chinadaily.com.cn | Updated: 2023-08-02 14:36

An employee works on a circuit board production line of an electronics company in Zhangzhou, Fujian province. [Photo/Xinhua]

The National Development and Reform Commission, along with several ministries and departments, rolled out on Tuesday a series of 28 detailed measures to tackle prominent problems facing private enterprises. This was the latest concrete step after the Communist Party of China Central Committee and the State Council, China's Cabinet, recently issued a guideline to promote the development of the private economy. Prior to this, the State Council had issued two sets of 36 guidelines in 2005 and 2010 aimed at fostering the growth of the non-public sector, which unfortunately fell short of expectations, prompting the need for a higher-level guideline to strengthen the private economy.

The new guideline, accordingly, carries more weight, presents a broader vision and provides ways to overcome both current future challenges.

The new guideline, for instance acknowledges the significance of the private economy as a driving force behind China's modernization and critical to developing "China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful".

Hence, there is reason to believe the new guideline will be effectively implemented. For that to happen, it is necessary to analyze why the previous two sets of 36 guidelines issued by the State Council were not so effective. The lessons learned from the not-so-successful implementation of the earlier guidelines will help the authorities to comprehensively implement the 31 provisions in the new guideline.

One major obstacle to the successful implementation of the earlier guidelines was the authorities' strong belief in the socialist theory of public ownership and planned economy. This belief was evident during the socialist transformation of private enterprises, which consolidated the idea of State-owned enterprises being the favored children of the State.

As Chairman Mao Zedong said, once a political line is established, the officials become the decisive factor. No matter how favorable the policies of the CPC Central Committee and the State Council are for the private economy, their implementation relies on officials at different levels. Some officials, obsessed with their own interests and safety, hesitate to take decisive actions to promote the private economy. They choose to selectively implement the policies, which may not address the core issues. Regrettably, these decisions often go unaccounted for despite the adverse social effects they cause.

In 2018, when some netizens started criticizing and smearing the private economy, the relevant departments were slow to react despite Chinese leadership emphasizing that the private economy and entrepreneurs were integral to China's economy. 

To successfully implement the new guidelines, it is essential to address the issues at the grassroots level. Many private businesses still struggle to get payments from some local government departments. This problem must be addressed promptly and effectively.

Also, the authorities need to adhere to economic laws when implementing the new guideline. After Chinese leaders emphasized the importance of the private economy in 2018, many departments intensified their efforts to promote the development of the private economy. But in their urgency, some regions and sectors failed to abide by economic laws, leading to less effective outcomes.

For example, mandating State-owned banks to support small and medium-sized enterprises through administrative orders may not be the most conducive approach to promoting the private economy. In contrast, some regions asking rural banks to support SMEs have better promoted private enterprises, because rural banks have a much better understanding of the economic situation, industrial prospects, creditworthiness and financial condition of the SMEs they serve, which enable them to offer efficient and tailored services.

Recognizing that banks are also businesses that need revenue to survive, it becomes clear that supporting the private economy demands a structural approach that provides financing for SMEs.

Besides, it is necessary to fully understand the concept of "common prosperity". Common prosperity is an essential embodiment of socialism, reflecting the unyielding pursuit of the Party and the Chinese people. It emphasizes a "common" approach to prosperity, not egalitarianism. As former Chinese leader Deng Xiaoping asserted, poverty is not socialism; development is its essence.

Common prosperity acknowledges that disparities exist, but it does not advocate strict egalitarianism. In a market economy, market participants must continuously expand the scale of production in order to remain competitive. Otherwise, the entire society's development will be affected.

Common prosperity is not about redistributing limited wealth but finding an optimal balance that stimulates social production while ensuring the psychological well-being and harmony of society. A flourishing market economy fosters a vibrant entrepreneurial spirit, resulting in improved living standards and embodying the principles of common prosperity.

In addition, discussions on aiding and developing the private economy involve both internal and external factors. Entrepreneurs in the private sector must be at the forefront of the era, leading the way and continuously creating products and services demanded by the market. When a product gains market acceptance, funds will rapidly flow back to the enterprise, and banks and financial institutions will willingly offer their support to it. Ultimately, the foundation of success lies in entrepreneurs' ability to excel. Without viable products and market demand, an abundance of funds alone cannot guarantee success.

The world fears those who are truly serious about their endeavors. It is therefore hoped that the guidelines of the CPC Central Committee and the State Council will be comprehensively implemented to promote the development of the private economy.

The author is a member of the academic committee at the Research Center for Socialist Political Economics with Chinese Characteristics, Renmin University of China.

The views don't necessarily represent those of China Daily.

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