China issues guideline to spur growth of private economy with concrete measures
Published: Jul 19, 2023 07:18 PM
Workers and automatic robots make new-energy vehicle (NEV) parts at a factory in Huzhou, East China's Zhejiang Province, on May 4, 2023. China has been the largest NEV producer for eight years in a row. The nation produced 674,000 NEVs in March, up 44.8 percent year-on-year. Photo: VCG

Workers and automatic robots make new-energy vehicle (NEV) parts at a factory in Huzhou, East China's Zhejiang Province, on May 4, 2023. China has been the largest NEV producer for eight years in a row. The nation produced 674,000 NEVs in March, up 44.8 percent year-on-year. Photo: VCG

China on Wednesday issued a guideline on boosting the growth of the private economy, highlighting that it will ensure that enterprises of different ownership will operate in an arena of fair competition and be protected by the laws equally, in a bid to promote high-quality development of the private economy, further boost market confidence and consolidate the foundation for economic recovery.

The guideline promised to improve business environment, enhance policy support, and strengthen the legal guarantee for development of private economy, which came after a recent series of meetings held by the Chinese leadership and multiple government departments including the top economic planner, with private company representatives to discuss and learn about their business situations and operating difficulties. 

The necessary and timely guideline sends a clear message that the central government wants to revitalize the private sector, a crucial message for instilling confidence in the economic recovery in the latter half of the year, Chinese experts and private enterprises said. 

The guideline is also a refutation of the "crackdown on private economy" hyped by the foreign media as China continues to improve the business environment, which will make the private sector, although facing some short-term headwinds, still see new opportunities for further development, Chinese analysts added.   

Supportive measures

The 31 measures included in the guideline, which is issued by the Communist Party of China Central Committee and the State Council, highlight that they will insist on the policy of "two unswervingly," namely unswervingly consolidating and developing the public sector and unswervingly encouraging, supporting and guiding the development of the non-public sector. They will accelerate the creation of a first-class business environment that is market-oriented, ruled by law and internationalized, and optimize the environment for the development of the private economy.

The guideline specifically addresses the major challenges faced by the private economy, which will provide much needed confidence for mass market entities, encourage their expansion, allowing them to hire more staffers and set the economy on track toward a virtuous cycle, given the importance of the private sector in the overall Chinese economy," Hu Qimu, deputy secretary general of the digital real economies integration Forum 50 told the Global Times on Wednesday.

To provide an improved environment for the private economy, China will work to remove barriers in market access and fully implement policies and mechanisms for fair competition and maintain equal treatment for all forms of ownership, according to the guideline.

As for policy support, the guideline vows to support qualified private small, medium and micro enterprises to raise funds in the bond market, and support qualified private enterprises to go public for financing and refinancing.

Improving the normalized prevention and clean-up mechanism for delinquent accounts are also highlighted in the guideline, including that any public institutions shall not refuse or delay the payment of invoices to small- and medium-sized (SMEs) enterprises and individuals for arbitrary reasons. 

"This measure is targeted," Tian Yun, a Beijing-based veteran economist, told the Global Times on Wednesday.

For example, delays to settling invoices are now the main reason why private enterprises are struggling. Whether this problem can be solved will directly determine the quality of private economic operations, he said. 

The National Development and Reform Commission (NDRC) said on Wednesday that it will take measures including the coordinated promotion mechanism to further strengthen the level of coordination between the central government and locals to boost the development of the private economy.

The NDRC also said it will keep a close watch on the implementation of the guidelines, and continue to solve problems with the implementation.

Continuous efforts

"The guideline has come out timely," Wang Yu, chairman of private-owned Spring Airlines, told the Global Times on Wednesday. 

The guideline addresses a series of concerns from the private economy and entrepreneurs and provides a direction and action plan for high-quality development of the private economy, he added. 

"Under the guideline, support is given in various aspects, such as optimizing the development environment, increasing policy support, strengthening legal protection, and promoting high-quality development," Wang said. "Now we private enterprises can unload the burdens, gear up, and boldly move forward," Wang said.

The guidelines detail institutionalized arrangements and offer guidance on issues such as the business environment, policy support, regulatory orientation, legal protection, and the public opinion atmosphere, said Ma Huateng, CEO of Chinese Internet giant Tencent, according to on Wednesday night.

The implementation of "equal use of production factors, fair participation in market competition, and equal legal protection" has been put into practice, which has strengthened confidence among enterprises, Ma said.

China's private economy has emerged as a crucial driving force behind the country's development. They generate over 50 percent of tax revenue, over 60 percent of GDP, over 70 percent of technological innovation achievements and over 80 percent of urban employment. They also account for 90 percent of the total number of enterprises, according to official data.

The first meeting of the Central Commission for Comprehensively Deepening Reform under the 20th Communist Party of China Central Committee held in April focused on innovation as a crucial step toward achieving sci-tech self-reliance, as well as support for the private economy.

However, the private sector, particularly SMEs, is still lagging behind in China's economic recovery.

China's key first-half economic statistics showed the resilience of the world's second-largest economy despite multiple headwinds, with a GDP growth rate of 5.5 percent for the first half. Fixed-asset investment was up 3.8 percent year-on-year but private sector investment was down 0.2 percent compared with the same period last year. 

To boost market confidence, multiple Chinese government departments have vowed recently to further enhance support for private enterprises.

The latest example is that the National Association of Financial Market Institution Investors held a meeting on private enterprise financing on Friday to listen to the opinions and suggestions of these enterprises on expanding the service scope of the bond financing support tool, known as the "second arrow," as well as better promoting the sustained and healthy development of private firms.
Chinese authorities have also stepped up their efforts to boost the healthy development of platform economies.

Chinese Premier Li Qiang presided over a meeting with platform operators including Alibaba, Douyin and Xiaohongshu on July 12 and called on relevant authorities at all levels to create a fair and competitive market environment, along with improved policies, and establish a sound, transparent and predictable regulatory system for normalized regulation.

However, as the country has encountered challenges in its economic recovery, some Western media alleged that a lack of private investment is dragging down China's economy. 

The IMF said on July 13 that China's economy is slowing due to weaker private investment, slowing exports and reducing domestic demand, Reuters reported.
Reading from the past and current measures, China attaches great importance to supporting private sector, and they are never mere lip service as hyped by some foreign media, Li Changan, a professor at the Academy of China Open Economy Studies of the University of International Business and Economics, told the Global Times on Wednesday.

The guideline states the property rights of private enterprises and rights of entrepreneurs will be protected, including preventing and correcting the use of administrative or criminal means to intervene in economic disputes, as well as local protectionism in law enforcement and justice. 

They will support the improvement of scientific and technological innovation capabilities and encourage private enterprises to continue to increase R&D investment on key core technology research, and undertake major national scientific and technological projects.

International competitiveness, including supporting private enterprises to expand businesses in the Belt and Road Initiative, should be encouraged, the guidelines state.

China will continue to create an atmosphere that cares about promoting the development of the private economy, and any rhetoric that aims at weakening private economy development should be dispelled in a timely manner, they said.