Beijing Deregulates Private Economy

For a long time, private businesses have been losing a lot of investment and development opportunities due to their incomplete market entity status and low national treatment. Now, Beijing is working to free private capital from control. A law guaranteeing fair national treatment equal to that available to state-owned enterprises -- Regulations of Beijing on Promoting the Development of the Private Economic Sector (draft) -- has been approved by the municipal government and submitted to Beijing Municipal People's Congress for ratification.

Zhou Jidong, vice-director of the Beijing Municipal Legal Affairs Office, described it as one of the most important local regulations to be issued this year.

In its development plan issued earlier this year for the private economy during the next five year, Beijing will endeavor to have 100 private enterprises with annual output value topping 100 million yuan each and recommend at least 10 with good business performance to make an initial public offering. By 2005, the private sector in Beijing is expected to contribute 30 percent to the city’s revenue, and employ over 30 percent of the urban work force.

This plan is reportedly the first one to include private economic development into the mainstream in China though Jiangsu, Gansu and Shanxi provinces have already promulgated similar law to boost the sector through legislation.

In 2000, Beijing's private economic sector achieved an annual growth rate of 23.3 percent, 17.9 percent higher than that of the state-owned and collective economy sectors.

However, experts pointed out that the sector’s incomplete market entity status and low national treatment remain big obstacles on its way to future development.

Authoritative statistics show that the private economy has been subject to a total of 443 prohibitive and restrictive provisions. Private businesses and self-employed businesspeople are ruled out in 71 trades and commodities, including printing, real estate, gas station and garbage recycling where foreign capital is now granted free entry.

The discriminative ordinances further restrain private capital's development and expansion. In the construction decoration sector, private enterprises cannot gain a Grade Two Quality Assessment or above unless they can manage to affiliate themselves with a state-owned institute, even though the institute may have nothing to do with the trade or the enterprise.

Private enterprises, which usually started with small funds compared with their state-owned counterparts, are generally in great need of loans for expansion and development. But a recent survey showed that only 5 percent of them have got bank loans.

Beijing has an overwhelming public economy. The state-owned and collective economy contributes 68.2 percent of Beijing's gross domestic product. Especially in key industries like transportation, telecommunication, securities and insurance, the public economy holds a hefty 95 percent.

Among all 31 provinces, autonomous regions and municipalities, Beijing's private economy ranks an unenviable 21st. Only 1.7 billion yuan of Beijing’s 34.24 billion yuan of total revenue came from the private sector last year, compared to 5.6 billion yuan in Shanghai

Under-developed private economy also hinders the assimilation of laid-off workers from state-owned enterprises, which are involved in radical reform and need to cut down their work force. In affluent provinces, the private economy usually employs 80 percent of local laid-off workers, compared to less than 40 percent in Beijing.

Local officials admitted that the private economy accounts for a small ratio in the capital's overall economy. Its development lags behind the national average. They attributed this to discriminative market access, lack of government guidance and service and the public's negative conception of the private economy. Private enterprises also have difficulties in financing and guaranteeing the integrity of their business premises.

However, a special legislative group is now working out the details to cut away any restrictions or other removable aspects that prohibit market access.

The Regulations likely to be adopted by the local people’s congress in August or September will give full consideration to those complaints in regard to the use of land, business premises, resettlement compensation, quality assessment, financing and loan provision, foreign currency utilization and protection application after punishment. This will somewhat protect private enterprises from the above-mentioned entanglements.

But analysts remain conservative about the impact of the Regulations as the Beijing municipal government has jurisdiction only over 10 of the 71 prohibitive and restrictive provisions to private capital. The majority is under the administration of state department.

Anyway, this is a good beginning. The private economy in Beijing will gain new development ground.

( by Alex 06/12/2001)

In This Series

Create a New Environment for Non-State Economies

Protecting Private Property Key to Growth of Private Business

Private Enterprises Grow Stronger

Private Hi-Tech Firms Back Beijing Economy


Beijing Regulates Pricing System for Real Estate Industry

Lower Benchmark for Private Enterprises to Do Foreign Trade


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