Private firms key to growth
China’s major industrial enterprises registered a profit growth of 31.5 percent year-on-year in the first two months of this year, 29.2 percentage points higher than the growth in December, data from the National Bureau of Statistics indicate. The 31.5 percent growth is appreciable and also seems to testify that China’s economy is stabilizing. However, a closer look shows that the handsome profit growth of big domestic enterprises in January and February was largely stimulated by a drastic profit increase in such State-owned sectors as mining, ferrous metal smelting, oil and natural gas exploration, oil processing and coking, chemical raw materials and chemical products manufacturing as a result of production acceleration and price increases, while private enterprises played a trivial role.
Such kind of growth is also closely related to the large-scale infrastructure construction nationwide over the past year. Governmentled infrastructure construction has been viewed as a main force to stabilize local investment. It is estimated that China’s infrastructure investment will maintain roughly 20 percent growth this year to reach 16 trillion yuan ($2.32 trillion).
However, it will be difficult to realize healthy growth of the Chinese economy with just the expansion of infrastructure investment alone.
To promote its healthy economic development, China should try to boost and expand private investment. Thus, the National Bureau of Statistics was right to classify the big profit growth of major industrial enterprises in the first two months as “restorative growth”. But to really realize and sustain steady economic growth and end its downturn momentum, China still has a lot of work to do.
The key engine of China’s economic growth is its private enterprises. Only after these enterprises regain their confidence and willingness to invest, can China’s economy realize healthy development. In this sense, the country should not be excessively intoxicated by economic growth resulting from short-term government-led investment expansion, but instead take practical measures to boost private investment.