Business / Opinion

Starting out with nothing, reaping rich rewards in market

By Chen Dun (China Daily) Updated: 2014-05-20 07:01

China is boosting the role of the private sector with a series of reforms, including the abolition of minimum capital requirements for newly registered companies.

According to the State Administration for Industry and Commerce, new company registrations increased 42.6 percent year-on-year in the first quarter of 2014. Most of those new enterprises were small or medium-sized, with registered capital of less than 10 million yuan ($1.62 million).

Starting out with nothing, reaping rich rewards in market
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Starting out with nothing, reaping rich rewards in market
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In some cases, companies were registered with no paid-in capital at all. That's allowed under the new rules.

Market reaction to the capital requirement reform has been positive, but the first-quarter figures don't necessarily signal long-term success.

Evaluating whether the reform pays off requires a deeper understanding of its significance and purpose. That understanding will in turn help remove any remaining doubts and inspire private entrepreneurs. And it may even help the country attract investment.

The evolution of company law in many countries has followed a similar path to what's going on in China, including the gradual relaxing of capital requirements and allowing more investors to start businesses.

The evolution of the minimum capital requirement is one aspect of the changing boundaries between the government and the private sector over time in China.

The country has made tremendous achievements during 30 years of reform and opening-up. But it's now facing unprecedented challenges.

The economy is developing quickly, but most people have not benefited. That's led to a lack of enthusiasm for further reform.

Reform without adequate public input cannot eradicate longstanding malpractices that built up under old, irrational systems.

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