Protecting Private Property Key to Growth of Private Business

Developing private business and encouraging individual investment is by no means a stopgap measure, and relevant policies need to be adjusted to create a sound environment for their development.

Chen Qingtai, vice director of the State Council Development Research Center, made these remarks recently at a forum on China’s private economy geared to the 21st century.

According to Chen, priority should be given to the improvement of the property rights protection system.

Many private entrepreneurs felt unsafe when they began their business and listed their personal property under various kinds of names. This feeling became stronger as the business began to develop, and some even transferred their property abroad. One factor in this is that a great number of people are still afraid of becoming conspicuous for their wealth.

Such phenomenon is very abnormal, said Chen.

Following the establishment of the principle that the common development of economic sectors with different ownership is a primary economic system, the provision protecting lawful personal property against infringement should be enshrined in the Constitution, and various related laws and regulations should be revised accordingly to relieve private investors of their worries, he said.

Chen said that, in China, the state-owned economy should play a leading role, but it was impossible to achieve sustained rapid economic development by solely relying on the state sector.

China must cultivate and develop hundreds of thousands of private businesses of enterprising spirit to achieve its goals.

The reality after the introduction of the reform and opening policies has gone against expectations that, the larger the scale of the state-owned economy, the faster the economy would develop. Instead, wherever the private economy flourished, the market became brisk, employment increased, people’s living standards improved more quickly, and economy grew steadily at a high rate.

Chen said developing private business and encouraging individual investment was not a stopgap measure while the state sector was being restructured. Hence, he urged:

-- Abolition of market entry discrimination. Except for industries related to national security, and over which state monopoly was a must, all other industries should be opened to domestic investors, allowing the entry of private investment to prevent a monopoly by large enterprises;

-- Opening more financing channels. Chen encouraged commercial banks to extend more loans to private businesses, and urged support for the establishment of financial institutions mainly serving the non-state-owned economic sector so as to assist private enterprises in their endeavor to go public, issue bonds and buy or merge with other businesses, as well providing a guarantee fund for the development of medium and small enterprises;

-- Improvement of the market environment. Chen called for modification of various policies not conducive to the development of the private economy, lowering the industrial threshold barring private investment, simplifying the registration formalities with the administration of industry and commerce, prohibiting arbitrary collection of money and fees from private businesses, removing regional and industrial barriers, relaxing limits on the proportion of technology investment, and getting rid of all factors restricting the development of private businesses in terms of taxation, use of land, and import and export;

-- Development of the social security system. As private enterprises are small in scale and lack financial strength, it is the government’s responsibility to organize social forces to set up a security system for medium-sized and small private enterprises.

(CIIC 12/14/2000)

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