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Private Firms Increasingly Strong, Valuable in China

Qiu Jibao, the owner of a nationally-renowned sewing machine enterprise group has been elected as a delegate to the upcoming 16th National Congress of the Communist Party of China (CPC), which is scheduled to open on Nov. 8.

"It's a great honor for me to attend the national congress, and I'm aware of my commitment and obligation," said Qiu, chairman of the board of the Feiyue Enterprise Group based in the prosperous private economy of east China's Zhejiang province. The group also boasts 18 sub-firms in Japan, Germany and other countries, which have so far hired a total of 200 foreign employees.

Qiu is the only delegate from the private sector in Zhejiang province, but by no means an isolated case.

In May this year, 18 delegates from private sector enterprises, including private companies, Sino-overseas funded and joint stock firms, were represented at the Ninth Congress of the CPC Provincial Committee in southern Guangdong province, which borders Hong Kong.

Electing delegates with non-state-ownership backgrounds to a CPC congress was never thought of and out of the question in the past, as the private sector was regarded as part of the exploitative capitalist system, which the country was working hard to replace with socialism.

But the value of the non-state economy has been gradually recognized since China launched its pragmatic reform and opening up in late 1970s.

According to statistics released by General Administration of Industry and Commerce, the number of private firms totaled 2.0285 million by the end of 2001, with 27.1386 million employees and an accumulated capital of 1.8212 trillion yuan (about US$220 billion).

Some experts, however, put the number of work force for the private sector as high as 100 million.

In the competitive industrial sectors in Zhejiang, non-state owned economy accounts for about 95 percent, up from 38.7 percent in 1978, the year before the reform and open-up was launched.

In Shanghai, the country's leading industrial and economic center once dominated by the state-owned economy, more than 30,000private firms were set up during the first half of this year.

The overall registered capital of private firms, excluding foreign-funded companies, in the municipality exceeded 30 billion yuan (US$3.6 billion).

Gu Yikang, an expert on regional agro-economy with the CPC Zhejiang Provincial Committee, noted that the private sector in China is becoming even more significant for economic development, job creation and increasing tax revenue.

It is both vital and indispensable to encourage the growth of the non-state-owned sector to improve the socialist market economy, he noted.

The report delivered in 1982 to the Party's 12th National Congress emphasized for the first time since the founding of new China in 1949 that the development of the private economy in state-designated areas is an essential and useful supplement to the state-owned economy.

The Party's 15th National Congress held in 1997 described the private sector as an important part of the country's socialist market economy.

Zhang Yurong, secretary of the CPC Daxi Town Committee in Wenling city in Zhejiang, attributed the Party's change of attitude towards the private economy to the result of the Party's progress with the time.

The towns is the biggest manufacturer of pumps, big or small, in China with over 2,500 private pump companies with an annual output of 50 million units and a sales volume of 5 billion yuan (US$600 million).

Its farming pumps makes up 45 percent of the national market.

"Most of the private firms here were operating by using names of state-owned firms as a cover. The situation has begun to change after the 15th congress," said Zhang.

Xu Guanju, president of the private chemical firm Chuanhua Group, was elected president of the province's Federation of Industry and Commerce in July this year, becoming the federation's first president selected from a private company in the past 52 years.

The group is the largest private company in the province, with a net asset of 338 million yuan (US$41 million). It paid 5.5 million US dollars in tax last year.

With the improvement of the country's mechanism of a market economy, the system for private firms to compete on an equal footing is taking shape.

Some government policies discriminating against private enterprises are being abolished.

A growing number of private firms have been granted the legal right to export their products directly over the past several years.

Nevertheless, in the past only selected state-owned firms and overseas-funded firms were allowed to engage in foreign trade.

In Shanghai, the number of private firms with the right to do foreign trade has been increasing at a rate of 3.5 companies per day in the past year.

The deregulation has resulted in a rapid rise in exports by private firms.

Exports by private firms in Shanghai topped 100 million US dollar mark during the past 12 months following August last year, three times more than that during the same period of the previous year.

Prof. Bai Hejin, a prestigious professor with the Institute of Macroeconomics under the State Development Planning Commission, said that China's 14 percent growth in exports during the first half of this year, in spite of a stagnant global economy, is partly attributable to the extraordinary fast increase in exports by private firms.

(People's Daily September 26, 2002)