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The Rise of Private Enterprises
Special> The Rise of Private Enterprises
UPDATED: August 10, 2008 No.33 AUG.14, 2008
Private Economy Thriving

This year marks the 30th anniversary of China's reform and opening up, which has changed the country irrevocably. One of the biggest changes in the country's economic and social life is the emergence and thriving nature of privately owned enterprises (POEs). Once a taboo in China, POEs have grown up step by step eventually seeking a niche for their own, thanks to the new policy.

When reviewing the past 30 years, it's easy to find the dramatic evolvement of POEs' role in China's national economy. From a supplement of the country's public-owned economy, to an important component of socialist market economy, POEs have gradually been acknowledged and gained a foothold.

In February 2005, the State Council released the “36-opinion guideline” on encouraging, supporting and promoting the development of private and other non-state enterprises, which was a harbinger of a new era of POEs' booming. This is featured by POEs having wider market access, gaining more financing support, and enjoying better social services.

So far, the POEs have become a vital force in driving the country's fast economic development. Statistics show that POEs contributed about 40 percent to the country's GDP in 2007, and 9.6 percent to the tax paid by all enterprises. As many POEs are manufacturing exporters, their export value last year accounted for about 20 percent of the country's total. POEs also created many jobs and are vanguards in technological innovation. Some of them have emerged as worldwide big-name companies such as Haier and Lenovo.

Despite of this, the majority of POEs are small and medium-sized companies. They are the first to feel the pinch of financing difficulties as the country tightens its monetary policy to combat inflation. They are also obsessed with rising costs, shrinking global demand, renminbi appreciation, and reduction of export tax rebates.

The recent good news is, however, that the central bank raised the annual loan quota of commercial banks to aid small and medium-sized enterprises. Before that, a pilot project of microcredit had been designed by the provincial government of Zhejiang, helping solve the financing difficulties of POEs.

All in all, it's up to the POEs to help themselves. How to set up modern management systems? How to create their own brands and build up their core competitiveness? These are what most POEs, especially small and medium-sized ones, should be considering for their survival and development.

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