The private sector is a pivotal part of China’s economy. More than 30 million private businesses contribute over 60 percent of the country’s GDP. They also account for more than half of government tax revenue and more than 80 percent of urban employment.
But their development is still facing chronic obstacles in market access, financing, property rights protection and other areas. On July 19, the Communist Party of China Central Committee and the State Council issued a new guideline on boosting the private economy.
The new 31-point action plan recognizes the private sector as an important foundation for the country’s high-quality development and its role in promoting modernization of industries. The document pledges to build the nation’s private economy “bigger, better and stronger,” akin to the support given to state-owned enterprises (SOEs).
Fair play
According to the National Bureau of Statistics, China’s fixed assets investment rose by 3.8 percent year on year in the first half of 2023 (H1), while private investment dropped 0.2 percent during the same period, in stark contrast to an 8.1-percent growth in investment from state-owned and state-holding companies.
“It indicated a lack of confidence on the part of private companies,” Xu Hongcai, Deputy Director of the Economic Policy Commission at the China Association of Policy Science, told Beijing Review.
“Although China showed a steady economic recovery in H1, the economy features insufficient demand and excessive production capacity under lingering pandemic impacts,” Xu said. Against this backdrop, private entrepreneurs felt uncertain about their future. The new guideline has now reassured these entrepreneurs and shored up their confidence for development.
Former Vice Minister of Commerce Wei Jianguo said in a recent interview with The Beijing News that although the private sector plays a major role in China’s social and economic development (see graphics), its handling has not reflected that importance.
The guideline, for the first time, associates the private sector with China’s first and foremost task of high-quality development, describing it as “a new force.” “It is an unprecedentedly high assessment of the private economy’s status,” Wei said.
Among all of the guideline’s 31 points of action, Xu highlighted the importance of promoting fair competition. “In many sectors, the SOE’s monopoly status has remained unchanged, making it difficult for private enterprises to enter and compete on an equal footing,” he said, “The guideline’s underlining of the essential role of competition policy sends a strong signal of greater reforms in market access.”
The guideline also underscores the improvement of the business environment, increasing policy support to the private sector and strengthening the protection of intellectual property rights, the property rights of private firms and the legitimate rights and interests of entrepreneurs, among others.
Injecting confidence
“As China’s macro economy keeps restoring vitality and private enterprises seek breakthroughs for high-quality development, this guideline is a shot in the arm for us private entrepreneurs,” Zhou Mingqiang told Beijing Review.
Zhou started his hydrogen fuel cell startup, China Hydrogen Energy Technology Co., in 2016 when the technology was still a fledgling field. A hydrogen fuel cell uses the chemical energy of hydrogen to produce electricity. It is a clean form of energy with electricity, heat and water being the only products and byproducts. Fuel cells offer a variety of applications, from transportation to emergency backup power, and can power systems as large as power plant or as small as a laptop.
“The new supporting policies strengthen our confidence and willingness to invest in innovation, employee training and other programs essential to our future business expansion,” Zhou said.
As part of the policies, the National Development and Reform Commission, China’s top economic planner, on July 24 unveiled detailed measures on to encourage private investment, recommending that private investment goes into a selected number of industrial segments with great market potential such as transport, water conservancy, clean energy and new infrastructure. This particular point further lifted Zhou’s confidence in his industry.
The news also inspired Qiu Jialin, CEO of Weimai, an online provider of comprehensive medical services. “With more than 10 years of experience running a business in the healthcare industry, I had a deep understanding of the hardships facing entrepreneurs,” Qiu told Beijing Review. “Different business development phases come with different obstacles—from market expansion to financing to business transformation, etc.”
Weimai is a managed care organization. This kind of organization is a healthcare company that utilizes managed care, an originally American model describing a group of activities, such as economic incentives for physicians and patients to select less costly forms of care, intended to reduce the cost of providing healthcare. Qiu is seeking to adapt this imported business model to Chinese market situations, an effort he believes will help Weimai further thrive.
“The timing of the guideline is perfect for us,” Qiu said. “People’s healthcare demand, aside from basic medical services, is yet to be fully satisfied, and as private healthcare service providers, we take the opportunity to give full play to our advantages and the initiative to innovate customized services to meet the new demands and inject new impetus to the sector.”
The founders of several giant Chinese private enterprises, including Pony Ma from tech titan Tencent, Li Shufu from automobile manufacturer Geely and Lei Jun from consumer electronics and smart manufacturing company Xiaomi, have also shared their positive outlook on the latest action plan. And many small and medium-sized enterprises, too, have voiced their great expectations regarding the implementation of these measures. –The Daily Mail-Beijing Review news exchange item
