Private enterprises not leaving the stage
Awidely circulated article on the internet, which asserts “the private sector has completed its task of assisting the development of the public economy and therefore should gradually exit the economy”, has triggered heated discussions online. But a closer scrutiny would reveal the author turns a blind eye to China’s economic reality.
China’s economic history is proof that the private economy is a historical choice the country has made. The 15th National Congress of the Communist Party of China in 1997, for the first time, explicitly said that “the non-public sector is an important part of China’s socialist market economy”, and confirmed “the joint development of the multi-ownership economy with the public sector as the main player” would be a priority in the primary stage of socialism.
This shows the private economy is the result of the theoretical explorations of several generations of Chinese leaders, and an informed choice China has made.
The private economy plays a vital role in the country’s economy. At the end of last year,
China had more than
27 million private enterprises and more than 65 million individual businesses, with a registered capital of 165 trillion yuan
($25.82 trillion), and the private sector now accounts for more than 60 percent of China’s GDP.
True, the State-owned enterprises enjoy some advantages when it comes to the industrial chain, capital and licensing. But the private sector embodies the entrepreneurial talent and spirit of the Chinese people, and its ability to adapt to market changes reflects its efficiency, which in turn helps the SOEs to grow bigger and more powerful. As such, the forced demise of the private sector will lead to inefficient resource allocation, affecting the overall development of China’s economy. The 18th National Congress of the CPC in late 2012 advocated that economic entities under various ownerships should be guaranteed equal use of the factors of production according to law, fair participation in market competition and equal legal protection.
A year later, the Third Plenum of the 18th CPC Central Committee said that China, by adhering to the principles of equality of rights, opportunities and rules, will abolish the unreasonable provisions, eliminate the hidden barriers, and formulate specific measures for nonpublic enterprises. And at a March 2016 meeting, CPC Central Committee General Secretary Xi Jinping stressed that China’s basic economic system must “unwaveringly” consolidate and develop the public sector, and “unwaveringly” encourage, support and guide the development of the non-public sector. He also reiterated the leadership’s “unchanged” attitude toward the non-public sector vis-à-vis the status and role of the nonpublic sector in China’s economic and social development; the policy of encouraging, supporting and guiding the development of the non-public sector; and the policy to create a favorable environment and create more opportunities for the development of the non-public economy.
These assurances have further boosted the confidence of private enterprises, encouraging them to play a vital role in China’s economic transformation and future development.
In a report delivered to the 19th Party Congress late last year, Xi said China must uphold and improve its basic socialist economic and distribution systems, reiterating the leadership’s “unwavering” stance. He also said the country will support the development of private enterprises, in an effort to achieve higher-quality, and more efficient and sustainable development.
Moreover, China has implemented a series of policy measures to encourage nongovernmental investment and promote the healthy development of entrepreneurs, which have helped create a fairer, more open and more relaxed environment for the development of the private economy.
China has an enormous productive force. But to increase productivity and promote the building of a community with a shared future for mankind, Chinese enterprises, both public and private, need to “go global”. As an important part of China’s economy, private enterprises can adapt to the rules and pace of economic globalization faster than the SOEs. Which means the private sector cannot and should not be allowed to die an unnatural and untimely death.
As such, the absurd argument of the controversial article should be seen more as “political speculation” than an insight into China’s economic reality.
The article was first published in Beijing News.