Promoting private enterprise
By Tang Min (China Daily)
Updated: 2004-03-11 14:47

Of all the issues being discussed at the on-going sessions of the 10th National People's Congress (NPC) and the 10th National Committee of the Chinese People's Political Consultative Conference (CPPCC), promoting the development of private enterprise is among the least contentious.

A unanimous agreement to promote the development of private enterprise is the solution to bailing out some deficit-riddled State-owned enterprises (SOEs) and injecting new energy into local economies.

NPC deputies, many of whom are also senior regional officials, grasp the opportunity to openly woo private investment. They have denounced their previous attitudes to place State-owned enterprises over private enterprises and are instead promising a freer investment environment in their new role as service facilitators for private enterprise.

Remarks by Wu Xinxiong, NPC deputy and the Party's vice-secretary for East China's Jiangxi Province, reflected that vision. He said a good investment environment capable of attracting private investment from both home and overseas is essential for the future of a local economy.

And one important indicator of a good investment environment is an efficient government ready to provide services to investors, he said.

Although the role change from private enterprises' "big bosses" to service providers might not come naturally, smoothly or quickly, it seems closer than ever to bringing about a radical change in the operation of governments at different levels.

After over two decades' reform and opening-up in China, it is obvious direct manipulation of enterprises, no matter State-owned or private, can no longer keep local economies on the fast track toward development.

The example of Northeast China's Liaoning Province illustrates the change of attitude by officials towards private enterprise.

Over the past few years private capital has grown substantially in Liaoning, home to 10 per cent of the country's large and medium-sized SOEs, and contributed 45 per cent of the province's gross domestic product (GDP) in 2003.

And in regions of the country with a more advanced market economy, contributions from private enterprises comprise an even greater proportion - as high as over two-thirds in East China's Zhejiang Province and South China's Guangdong Province.

Generally speaking, the shift in attitude by local government officials, while very sincere and voluntary, can better be interpreted as a logical consequence of the decision by the Third Plenary Session of the 16th Central Committee of the Communist Party of China last October to actively guide the development of the private sector.

It fits into the general atmosphere of the on-going NPC session as well. China's top legislators are discussing an amendment to the Constitution aimed at better protection of private property rights.

"Private property obtained legally shall not be violated," the suggested Constitution amendment says.

If the amendment is passed, the development of private enterprises will get a new boost. Many private entrepreneurs, such as the Forbes "richest" Chinese Liu Yonghao, have hailed the amendment proposal, saying it has prompted them to consider more aggressive business expansions.

It is estimated that as many as 20,000 billion yuan (US$2,415 billion) non-governmental capital is waiting to be invested in China.

The investing desire of private entrepreneurs seems to match perfectly with the government's more encouraging attitude towards private enterprises.

But merely abdicating the role of enterprises' "big boss" is not a good enough offer from the government.

Many private entrepreneurs are demanding equal footing in competition with SOEs. They want the thresholds to certain industries, especially civil aviation and oil, to be lowered. They view "welcoming private funds into less or non-lucrative sectors, but barring private funds from lucrative ones" as a kind of discrimination.

They believe unified market access standards for all sectors of the economy is essential to maintain the nation's speedy and healthy development.

More preferable is a clear timetable spelling out when different industries will open to private enterprise, just as the World Trade Organization (WTO) has stipulated a schedule for China to open to foreign competition.

The private entrepreneurs need time to prepare for the opening-up by reserving enough funds and landing suitable professional managers.

Some of them are also worried that the revision of related legal clauses will not come around soon in accordance with the new Constitution amendment, if the proposal is passed.

They believe the lagging-behind of corresponding revision of supporting laws and regulations will lead to operational disorders and cause unnecessary extra cost to private economy.

The arbitrariness and extortion of local governments in the enforcement of administrative laws has also been under attack at the sessions because local officials have actually wasted the good policies of the central government and created an unfavourable environment for the development of the private sector.

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