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Better Legal Environment Boosts Private Sector

The vigorous growth of private businesses during the past two decades is partly the result of the consistent efforts to build a sound legal environment for the sector, according to analysts, attorneys and entrepreneurs attending a legal protection forum in Suzhou.

Many of China's most important laws, such as the Constitution, civil code, criminal law, corporate and partnerships laws, and those on the promotion of small and medium-size businesses, have included clauses defining the development of private businesses.

A number of developments in the law have occurred so far in 2004.

This March, clauses concerning state support of the private sector and protection of private property were added to the Constitution.

In June, the draft corporate bankruptcy law was submitted to the Standing Committee of the National People's Congress (NPC), China's top legislature, for an initial review. The proposed law would place all 8 million companies in China under a unified corporate bankruptcy law.

"It means that China's SOEs, private enterprises and foreign companies will become equal competitors in the market economy," said Li Shuguang, vice president of the Postgraduate School of the China University of Political Science and Law.

On July 1, the Law on Administrative Licensing came into effect. Government intervention in the market was reduced, giving private businesses a more equitable and efficient environment in which to operate.

The draft amendment of the Corporation Law -- one of the most important for China's market economy -- is expected to be submitted to the Standing Committee this October for a first review.

Professor Jiang Ping, of the China University of Political Science and Law, was a consultant for the drafting of the amendment. Jiang said that the draft includes clauses on reducing registered capital requirements and government intervention in the market, which will lower market entry barriers.

"I have run my own business for almost 20 years and have watched the government steadily enact more regulations and policies to encourage private enterprise development," said Huang Jianlin, chairman of the board of the Suzhou-based Aoyute Silk Company. "Currently, I think private businesses enjoy equal status with foreign companies in Suzhou."

"Although the legal environment for private businesses has improved a lot, problems still exist," said Xu Yajun, a lawyer at the Damingda Law Office. "For example, some local regulations and policies for the private sector are constantly changing, making it difficult to safeguard the interests and rights of private businesses."

Xu also pointed out that the current tax collection and exemption systems in most parts of the country favor foreign companies over private Chinese businesses, which conflicts with the equal competition principle.

In general though, he acknowledged that the steadily improving legal environment has greatly promoted the development of private enterprise.

The All-China Federation of Industry and Commerce reports that the number of registered private businesses surpassed 3 million in 2003, an increase of 570,200 from the previous year. The registered capital of private enterprises amounted to 3.5 trillion yuan in 2003, up 42.6 percent from the same period in 2002.

(Xinhua News Agency August 2, 2004)

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