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UPDATED: April 4, 2007 Web Exclusive
The Private Sector Grows Stronger
The registered capital of private enterprises reached 8 trillion yuan, equaling 70 percent of the central state-owned assets or the aggregate assets of local state-owned assets
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The private sector, which has grown and developed during the reform and opening-up process, constitutes one-half of the Chinese economy. Now, after 20 years of development, what role does the private sector play in the overall economy? What problems does it face and how are they solved? People's Daily Overseas Edition spoke to Bao Yujun, Chairman of the Chinese Society for Private Economy Studies, on these issues as follows:

Private enterprises making contribution in five ways

People's Daily: What role do private companies play in the national economy?

Bao Yujun: In 2006, the number of employees in Chinese private enterprises accounted for 42 percent of all employment. The registered capital of private enterprises reached 8 trillion yuan, equaling 70 percent of the central state-owned assets or the aggregate assets of local state-owned assets. The above-mentioned figure demonstrates that the domestic private economy (excluding joint-stock companies and mixed ownership companies) has created 40 percent of the total GDP.

Private economy contributes to national economy in the following ways:

First, it increases the development of the regional economy. Take Zhejiang Province for example. The total economic volume jumped to fourth place from 12th a decade ago. This is largely attributed to the robust development of private economy. Currently, the private economy makes up over 70 percent of the total economic volume of the whole province.

Furthermore, the rapid growth of the private sector has been the major cause for regional economic development especially in the relatively fast-growing areas.

Secondly, the private economy helps augment state-owned assets. The biggest beneficiary of a developing private sector is our country and the society.

After the reforms and opening up of China, the provinces with the fastest growing state-owned assets are provinces with the fastest growing private economy.

Up till now, four provinces including Guangdong, Zhejiang, Jiangsu, Shandong and Shanghai Municipality have the most state-owned assets, while they also boast the most private enterprises. The number of private enterprises in Jiangsu Province is the biggest, numbers over 500,000, while the state-owned assets of Jiangsu Province grew over 460 billion yuan.

Private enterprises are helpful for state-owned assets appreciation and efficiency. Moreover, the rapid development of private enterprises contributes tax revenue to local governments which provides the local government more funds to invest in the construction of public infrastructure.

In terms of employment, the private enterprises hired many laid-off workers from state-owned enterprises which underwent a large-scale downsizing at the end of 1990s.

Thirdly, private enterprises are the major driving force for the construction of the new socialist countryside. During the process of building a new socialist countryside, part of the surplus rural labor force will go to the cities and towns while the remainder will stay and take on the work of non-agricultural production.

This requires the establishment of local township and rural enterprises. At present, the private enterprises contribute most to the economic development of the Top 100 counties which excel in economy in the country. For example, the cigarette lighter factory in the city of Wenzhou City, and the small commodities companies in Yiwu City provide thousands of jobs for local workers.

Fourthly, private enterprises help boost technology innovation. Over 80 percent of companies in 53 high and new technology development zones of China are private enterprises. In Shanghai, private-owned science and technology companies account for 30 percent of all science and technology resources and their inventions take up 70 percent of all. The Zhongguancun, China's silicon valley, is made up mostly of private enterprises.

Fifthly, private enterprises boost China's export. By the end of September 2006, the export value created by private enterprises reached US$175.1 billion, up 4.6 percent compared with the same period of the previous year. Although the export volume was low the growth rate was very high.

To conclude, private economy has become an important part of the socialist market economy which, in turn, is enriched by private economy.

Talents crucial

What problems are private enterprise facing?

Internally, the greatest problem confronting private enterprises is the lack of management personnel. The investor, decision-maker, and manager of a private company is usually one person.

The lack of scientific management restricts the development of the private enterprises. There are lots of private enterprise bosses, but few of them can be called entrepreneurs. Real entrepreneur can create fortune for the society by running a company in accordance with international and domestic demands in a scientific and rational way. This breed of people is most wanted in the current China.

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