China's Private Enterprises look to the 21st Century

The Forum on the Development of China 's Private Economy in the 21st Century was the place with the loudest applause during the recent First China Private Enterprises Fair, according to Beijing Review.

For four consecutive days beginning December 8,2000, 57 specialists, scholars and top executives of enterprises delivered speeches in Kunming, Yunnan Province. They covered a wide range of topics including £º¡°World Trade Organization (WTO) Accession and China 's Private Enterprises," "How Should Private Enterprises Partake in State-Owned Enterprise (SOE) Reform," "Private Enterprises and Globalization," and "Positioning of Private Enterprises in the 21st Century," etc. All seats were occupied and the 2,000-plus audiences were captivated.

  • From Experts and Scholars:


    • National treatment should be granted to private enterprises.

    National treatment was the most popular term among the entrepreneurs at this Private Enterprises Fair. It refers to no discrimination against the private sector in domestic competition. China ' s accession to the WTO will bring about opportunities and challenges to small and medium-sized enterprises in China. But at the moment, China 's private sector is not strong enough to compete with big foreign companies.

    Dong Fureng, a renowned economist.

    Dong Fureng, a distinguished Chinese economist and Vice-Chairman of the Subcommittee of Finance and Economics of the National Committee of the Chinese People 's Political Consultative Conference £¨CPPCC£©, said national treatment should be granted to the private sector. China, he said, will give foreign enterprises national treatment after it joins the WTO, so it is unreasonable to deprive the private sector of such treatment. Private enterprises are entitled to national treatment. If they compete with heavyweight foreign companies while being restricted, they would never win the game.

    When talking about how to deal with problems private enterprises will face in the wake of China's WTO entry, Dong suggested that they develop their strong points while avoiding their weaknesses. In terms of industrial structure, they should take the initiative to retreat from sectors where they enjoy no competitive edge, such as car manufacturing, or readjust their direction of operations. Meanwhile, they should raise their technological standards as soon as possible. As well, they should try to standardize their operations.

    Entrepreneurs are human society 's most precious resource.

    Some experts put forth the view that entrepreneurs are a scarce and most precious resource in human society. Despite incomplete information, Chinese private entrepreneurs have managed to maintain the normal operation of the society 's material production by relying on their courage and pioneering spirit. They deserve to be protected.

    Liu Yonghao, president of the Xiwang Group, talked about four kinds of safety at the forum, namely, enterprise safety, entrepreneur safety, personal safety and property safety, all of which require legal protection.

    "Currently," he said, "we are in the transition period between an industrial civilization and an intelligence civilization. We missed the opportunity in the transition from an agricultural civilization to the industrial civilization. We would repeat the same disastrous blunder if excessive restrictions were put on the private sector."

    Owners of capital should receive just treatment.

    Private wealth as financial assets is actually investment. By the end of 1999, the balance of the savings deposits of urban and rural residents had reached 5,962.18 billion yuan, which was equivalent to two times the country 's total investment in fixed assets in that year. Conditions for the rapid development of private investment have tended to mature. Private investment, either in capability or demand, has entered a stage, which allows for no more neglect.

    Dr. Chen Huai, Deputy Director of the Market Institute of the State Council Development Research Center, said that the unequal treatment of private enterprises not only stems from government officials but also other social strata. What is noteworthy is the fact that thanks to the development of the private sector, China 's overall national strength has been greatly enhanced. The capitalization of private wealth is an inevitable outcome in the development of the private economy. The vehement call of entrepreneurs for legislation to protect private property at the fair best demonstrated the urgency to grant just treatment to owners of capital.

    The private sector has"relative advantages."

    Economist Fan Gang, Director of the Institute of National Economy of the China Reform Foundation, put forward a seemingly paradoxical view. That is, backward areas and weak enterprises can also have their relative advantages. He said£º¡°Now, whenever competitiveness is mentioned, new technologies and a large amount of capital are invariably involved. But China is a developing country and if it owned such things, it wouldn't be a developing country or underdeveloped country. In developing economics, the concept of competitiveness does not refer to capital or technology, but the production of the same products with lower costs or the production of more or better products with the same costs. And this is our relative advantage. The most advanced technologies do not necessarily fit a private enterprise and make it more competitive. The top priority of an enterprise is to make a profit, which is the prerequisite of development."

    From Fan's point of view, many traditional industries, even the so-called"sunset" industries, in many developed countries, such as the auto industry and property development, are still new for Chinese private enterprises. The key point is how to make them profitable. Most private enterprises have to consider where to start and how to earn money. Only when it has succeeded in an industry and formed a principal business with long-term strategic significance, can a private enterprise make a profit in a so-called traditional industry. In developed countries, there are many cases in which an enterprise becomes prosperous after hundreds of years of development in a certain industry.

    "Our private entrepreneurs have too much liking for'new challenges' and'new startups, ' which wears them out," said Fan.

  • From Private Entrepreneurs:


    • There are three strategies to "win."

    Li Jian, President of the Kunming Fengchi Star Information Industrial Group, summarized his experiences in running an enterprise. He said there are three strategies for an enterprise to win. The first is the brand-name strategy. This is not a matter of one or two years, but a matter that can only be achieved through continuous innovations. The second is the strategy of core competitiveness, which is a matter of highly qualified personnel. And the third is the consolidation strategy, which means the consolidation of diversified business centering on one principal business.

    Be aware of the rules of others in globalization.

    Zhengtai Group is a private enterprise in Zhejiang Province with more than 100 shareholders. Thus far, its scale of assets has reached 1.1 billion yuan.

    Nan Cunhui, Chairman of the Zhengtai board summarized his experiences since he started the enterprise in 1984. First, he said, a private enterprise must constantly improve its equity system. Second, it must conduct constant innovation to its managerial mechanism. And third, it must attach importance to technological innovation. In an era of market globalization, it is particularly important for an enterprise to get to know the game rules of others and learn to protect itself, he said.

    A global view is necessary.

    Economic globalization is essentially propelled by multinationals. Under such circumstances, Chinese enterprises face the problem of re-positioning in the international division of labor.

    Zhang Hongwei, Chairman of the Heilongjiang Orient Group, noted that private enterprises must have a global vision of development and internationalize the domestic market. To accomplish this, he said, private enterprises should, first of all, raise their own quality and consolidate their strength in competition. Second, they must be capable of blending localization with internationalization and grafting the domestic and international markets. Only when private enterprises entrust their resources and wealth to people capable of ensuring appreciation in the shortest possible time for operation, can they internationalize their capital, transform their assets into negotiable securities and socialize their equity. In doing so, a new management platform will be formed to ensure further development.

    Why does China lag behind the United States and Japan?

    According to experts with the World Bank, many developing countries suffer from a shortage of entrepreneurs. Consequently, this shortage has bogged down the economy of the developing countries.

    A nation with a scarcity of entrepreneurs is one with a gloomy future.

    Over the 20-plus years since the late 1970s, China's private enterprises have gone through ups and downs. So have the entrepreneurs whose fate is closely associated with such enterprises. This is true of the first self-employed individual, Nian Guangjiu, as well as later entrepreneurs including Liu Chuanzhi of the Legend Group and Zhang Ruimin of the Haier Group. Nevertheless, private enterprises and entrepreneurs in China have developed steadily from infancy to maturity, from blindness to rationality, from dictatorship to democratic management, and from the clan system to the modern enterprise system. They have made impressive achievements, in the process of which emerged outstanding figures like Liu Chuanzhi. Even those who have stumbled are pushing on while silently licking their wounds, hoping they can rise again one day. The experiences and lessons of today 's private entrepreneurs will constitute the landmark of successful Chinese entrepreneurs tomorrow.

    There is every reason to believe that China 's private enterprises will carry their brilliance into the 21st century.






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