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China’s Market Economy

Private sector also a pillar of the economy

By Liu Yingqiu | China Daily | Updated: 2021-08-18 08:26
A worker checks the operation of a carbon fiber production line at a factory in Lianyungang, Jiangsu province. [Photo by Geng Yuhe/For China Daily]

Some foreign media outlets have interpreted the recent measures China has taken to streamline certain sectors such as the platform economy and private tutorials as a crackdown on the private sector, which is a gross misrepresentation of facts.

In a meeting on July 30, the Political Bureau of the Communist Party of China Central Committee made “stepping up efforts on reform to further revitalize market entities” a major task to spur national economic growth. Since more than 90 percent of the market entities are private enterprises, boosting the private sector is key to meeting that goal.

A more vibrant market is needed to develop market economy with Chinese characteristics and reform the country’s economic system.

China’s private sector has been growing rapidly over the more than four decades of reform and opening-up, developing from “a supplementary part” to “an essential part” of the economy. The private sector is also a big source of tax revenue and fixed-asset investment, and a major player in foreign trade. It also plays a vital role in boosting socialism with Chinese characteristics.

By the end of 2019, the number of private enterprises had increased to about 19.81 million, accounting for 93.9 percent of the total enterprises in China. The private sector provides more than 80 percent of the jobs, and accounts for over 60 percent of tax revenue, 55.7 percent of fixed-asset investment and 46.6 percent of foreign trade. Private industrial companies also saw a higher ratio of return-of 130 percent.

Despite the Sino-US trade war and the COVID-19 pandemic, private enterprises bounced back in the first half of this year, playing an important part in boosting China’s economic recovery.

As President Xi Jinping said, private businesses have become an indispensable driving force of economic growth, a major field of start-ups and job creations, a main body of innovations, and a big source of taxes. It has also helped transform government functions, absorbed surplus labor from rural areas, and ventured into the global market.

But given the external uncertainties, the impacts of the pandemic, Sino-US trade frictions, slowing growth, and the demands of economic restructuring, China needs to further revitalize the private sector. This is also important because some or all of these factors have dealt a serious blow to many private companies.

So more reforms are needed to energize market players, and boost private businesses and economic growth. To begin with, there is a need to enhance the Party’s leadership and enhance the government’s governance capacity so it can further promote the private sector’s development.

Second, it’s necessary to eradicate governance ills such as the misuse of authority and monopoly, in order to ensure the market plays a deceiving role in the allocation of resources, which is necessary for private businesses and the economy to prosper.

Third, it’s necessary to make the world realize that China is, and will remain, in the primary stage of socialism for a long time, and it is still the world’s largest developing country.

And top priority should be given to solving the contradiction between people’s growing desire for a better life and the country’s unbalanced and inadequate development.

In short, it’s important to further ease the plight some private enterprises are facing today, and expedite reforms to boost their confidence in future prospects. By doing so, the government can greatly energize private businesses and spur economic growth.

The author, specializing in private business, is the former dean of the Graduate School at Chinese Academy of Social Sciences.

The views don’t necessarily represent those of China Daily.

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