Non-State Sector Faces New Growth Chances in China

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Last updated at: (Beijing Time) Wednesday, March 13, 2002

Non-State Sector Faces New Growth Chances in China

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Following the country's accession to the World Trade Organization (WTO), the non-state sector of the economy in China is facing more opportunities for development as the government has promised to open up important markets like telecommunications, retail business and banking to both foreign and private investment, said deputies to the National People's Congress attending the current session of the legislature.

They believed that with restrictions on the sector being reduced or removed, non-state firms are facing enormous opportunities to participate in the ongoing economic restructuring, expansion of foreign trade, use of foreign funds, and increasing exchanges with international enterprises and research and development (R&D) institutions.

"Non-state enterprises are expected to tap their huge potentials," said Wu Zhengde, an NPC deputy.

The government is helping non-state companies go global. According to the Ministry of Foreign Trade and Economic Cooperation, currently over 1,000 private firms have been granted the right of exporting and importing, while the ministry plans to further relax the policy and after a three-year transition period, all private companies will be able to have the right to import and export.

Meanwhile, private companies have been allowed to join in the ongoing reform of state-owned enterprises (SOEs) in various forms like contracting, leasing, merger and acquisition of small and medium-sized SOEs. They are also allowed to enter the international capital market, which will help ease the problem of difficulties in financing for these companies.

According to official figures, China has more than two million non-state-owned businesses, contributing 50 percent of the GDP in 2000.

The increasing role of the non-state sector of the economy is helpful for resolving many problems on China's road to a market economy, promoting economic growth, reducing the income-gap, and boosting the urbanization process, said Wu Jinglian, a noted economist.

Wu stressed, "The private sector is facing rare historical opportunities of development, and we hope it will grow rapidly, to infuse greater vitality into China's social and economic development."

He urged the government to accelerate the improvement of the environment for investment and business operation, help them work out development strategies and train personnel, and provide them with the same judicial protection as the state sector enjoys. The government should increase financial assistance and adopt favorable policies on taxation to protect the enthusiasm of private entrepreneurs in their efforts to develop their own businesses, he noted.

However, Xu Gengsheng, a research fellow at the Chinese Academy of Social Sciences, pointed out that China's private enterprises have certain "congenital deficiencies" such as confusion in property rights, lack of funds and technology, small scale and capabilities, and an incomplete internal management mechanism.

The private businesses have to speed up their own restructuring and adopt the modern corporate system, to improve their overall quality and competitiveness, he noted.

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