In a landmark statement yesterday, the country's cabinet encouraged deeper reforms and further development of the private sector. The statement was made public yesterday following a forum of the State Council.

Private investors can put their money into any sector not forbidden by law, the State Council announced.

In a written statement, Premier Wen Jiabao said the private sector is a very important component of China's socialist market economy, and all levels of government should draft policies to "encourage, support and guide" it.

Vice Premier Zeng Peiyan said that entrepreneurs can invest in infrastructure, public undertakings and other sectors on equal footing with other types of enterprises.

Zeng said prospects for the non-public sector are promising, as the country is not only offering support but also institutional changes. With the improved political status of entrepreneurs and a constitutional amendment to provide stronger protection of private ownership, the country is transforming its preferential policies toward the private sector into concrete institutional guarantees.

He said the private sector has made rapid progress, but some problems remain.

The All-China Federation of Industry and Commerce reports that every day about 1,500 new privately owned enterprises register with capital of 3 billion yuan (US$361 million).

In 2003, about 570,000 new privately owned enterprises were set up, with a total registered capital of 1 trillion yuan (US$120 billion).

The development of the private sector is a firm policy of the Chinese government, Zeng said, noting that both the state-owned and private sectors form the basis of the national economy.

Experts said the private sector is emerging and gaining clout in China but more effort is needed to help them develop healthily.

"This round of opening-up policies toward the private sector is quite good, but reinforcement is a demanding job," said Lin Yueqin, a researcher with Chinese Academy of Social Sciences. Lin added that entrepreneurs have long been worried about their political rights and the protection of private ownership.

He noted that China has enhanced legislation to protect private property and created greater incentives for people to establish their own businesses. However, private enterprises will encounter three hurdles despite the new encouragement from the government.

Local governments are likely to lose many opportunities for administrative intervention, but will probably continue to pursue blind profiteering. Also, the private sector -- primarily medium-size and small businesses -- will face financial difficulties because banks are unwilling to lend them money.

"Finally, some private companies are still challenged by themselves," said Lin. He said most private companies in China are small and short of research and development capacity.

(China Daily July 27, 2004)