In his report delivered at the 17th National Congress of the Communist Party of China (CPC) last Monday, General Secretary Hu Jintao stressed that China will unwaveringly consolidate and develop the public sector of the economy, and unswervingly encourage, support and guide the development of the non-public sector, ensure equal protection of property rights, and create a new situation in which all economic sectors compete on an equal footing and reinforce each other.
"Equal protection" and "equal competition" were the main points mentioned about the non-public economy at the congress.
All previous Party congresses in the past 30 years have given a new understanding of the non-public sector economy. There have been three major breakthroughs in the theoretical understanding of the non-public economy.
The first breakthrough witnessed the transition of the non-public sector from "the tail of capitalism" to "a complement to the public sector economy". The non-public sector was called the "tail of capitalism" in China before 1978. The number of self-employed people was only 140,000 in the country in 1978. At the Third Plenary Session of the 11th Central Committee of the CPC held that year, Deng Xiaoping put forward the concept of "letting some get rich first and then help the poor to get rich" and pointed out that the government should allow some regions, enterprises, workers and farmers to get rich first through their industrious work.
The report of the 12th National Congress of the CPC in 1982 pointed out that in the countryside and cities, the State should encourage self-employed businesses to develop under the administration of the industrial and commercial department as a necessary and useful complement to the public sector economy. In 1987 the report of the 13th National Congress of the CPC said that the private sector was a complement to the public sector under socialist conditions and further development of the non-public economy should be encouraged.
In 1992, the 14th National Congress of the CPC made it clear "to retain a dominant position for public ownership and to develop diverse forms of ownership side by side". During this period, the forbidden zone of the non-public economy was broken through, private economy gained rapid growth.
The second breakthrough saw the transition of the non-public economy from "complement" to "an important component" of China's socialist market economy.
The report of the 15th National Congress of the CPC positioned the non-public economy as an important component of China's socialist market economy, which was a milestone in the understanding of the non-public sector. The Constitution amended in 1999 made it clear for the first time that "in the primary phase of socialism, the State adheres to the basic economic system with public ownership playing a dominant role and diverse forms of ownership developing side by side.
"Non-public economy including individual economy and private economy, operating within the limits prescribed by law, is an important component of the socialist market economy." This included the non-public sector into the country's basic economic system. But socialist economy and socialist market economy were two different categories. Non-public economy was still placed in a discriminated frame. Its development still faced various restrictions regarding market entry.
The third breakthrough saw the transition of the non-public economy from "an important component" to a principal sector of the market that enjoys national treatment equally. The report of the 16th National Congress of the CPC in 2002 pointed out that it was necessary to consolidate and develop unswervingly the public sector of the economy; it was necessary to encourage, support and guide the development of the non-public sectors of the economy; and we must stimulate the development of the non-public sectors while keeping the public sector as the dominant player, incorporating both into the process of the socialist modernization drive instead of setting them against each other.
This paved the way for the development of the non-public economy at the institutional level. It symbolized that the non-public sector had entered a new stage of development. At the same time, a series of new concepts about the non-public economy were written into the report, such as "all legitimate income, from work or not, should be protected" and "we should improve the legal system for protecting private property".
Reform and opening up are inexorable requirements to emancipate and develop social productivity as well as to make constant institutional innovations. The gradual reforms in the past 30 years have conformed to the changes in people's thinking, reduced conflicts during the transitions, and constructed a unique road of socialist reform with Chinese characteristics.
The history of gradual reform in the past 30 years is a history for China's non-public sector to develop from small to large and from weak to strong. It is a process for constant development of the socialist market system with Chinese characteristics. The non-public sector has played a significant role in the establishment and completion of the socialist market system.
The non-public economy has created strong engines for economic growth and fully mobilized social capital for developing productivity. It has broken the monopoly of public economy and urged the public sector to improve their operation. The non-public sector and public sector have also formed a complementary relationship in the division of work, which has created conditions for the reform of State-owned enterprises and enterprises of collective ownership. The economic structure of diversified ownerships has enabled the smooth development of China's socialist economy. The private sector contributed 40 percent of China's GDP in 2006 with an average annual increase of over 25 percent from the 0.9 percent in 1978.
At the new historical starting point, we should follow the concept of "two equals" to create a new situation in which all economic sectors compete on an equal footing and reinforce each other. We should break the inequality in the entry level, create an environment where all economic sectors can use factors of production equally, and get rid of all glass ceilings restricting the development of the non-public economy.
The author is vice-chairman of the All-China Federation of Industry and Commerce
(China Daily October 22, 2007)