China's PRIVATE economy has developed from a MINOR player into one of the MAJOR components of the socialist market economy.
China's non-state-owned industry is steadily growing. Its average rate of increase has kept abreast with the overall development of China's industry. The non-state sector of the economy is facing more opportunities for growth as the government has promised to open up important markets to foreign and private investment. They include the telecommunications, retail and banking sectors. However, private enterprises are often troubled by a lack of funding and technology as well as weak management. What do they have to do to adapt themselves quickly in an ever-changing economic picture? Let’s take a look at how some private enterprises in South China are reacting.
The increasing role of the NON-STATE sector of the economy is helpful for resolving many problems on China's road to a market economy. It will not only relieve the pressure of unemployment and boost the urbanization process, but also promote overall economic growth.
Late senior leader Deng Xiaoping made an important speech during his tour of southern China in 1992, saying that China should further open up and deepen reform. In the same year, the fourteenth congress meeting of the Chinese Communist Party confirmed the goal of establishing a socialist market economy. Non-state-owned enterprises were able to grow in light of this situation. By the 15th party congress, the non-state-owned economy was declared the major part of China’s socialist market economy.
A series of policies were later issued in favor of non-state-owned enterprises, which have shown the momentum of development in terms of management and scale over the past decade.
Weng Rongjin is the founder of the largest private enterprise in Yiwu City, Zhejiang Province. Early in the morning, he arrived at his textile factory to discuss market information with his technicians. Weng’s three brothers run the factory. In a span of seven years, Weng’s enterprise has grown into the largest sock manufacturer in China. It’s products have the largest domestic market share and are being exported to Russia, Japan and the United States. Their next goal is, in their own words, to be “the Socks Manufacturing King and Establishing World Brand Names.” Weng Rongjin, chairman of the Board of Langsha Textile Co. Ltd in Yiwu City, said, “It used to be a street market. A real market was established in 1985. As the Yiwu market targets domestic consumers, its merchandise can cover the entire domestic market.”
Xinguang Parrel Accessories Co. Ltd. is the leader in the industry. Its founder, Zhou Xiaoguang, has this to say about the assistance he gets from the government. He said, “Yiwu has a very good investment environment. The local government, in particular, delivers service at your door. I have never had any deal with the government. They will help you going through many procedures, including processing a business license, and put them in our hands. I don’t know exactly how to get the documents. They have a good awareness of service to people in Yiwu.”
Zhejiang is one of the earliest places where private business began. Their products feature small commodities. The local government offers guidance and supportive services in an effort to boost the non-state-owned economy. At present, 90 percent of the local economy are in the private industry sector. Lou Guohua, one official of Yiwu City, said, “Government policies to non-state-owned industries are constantly updated according to development. Government support focuses on creating a favorable environment for private industry. The market was created as a result of the growth of small commodities. For instance, now we have “the fifth-generation market.” Our service is to create conditions and an environment in terms of giving them favorable policies to support their development and give them room for innovation and growth in the future.”
The Yiwu market has 100,000 varieties of small commodities in 28 primary categories. The number of daily visitors reaches 160,000, including more than 2,000 foreign purchasers. The market enables non-state-owned industries to grow and this, in turn, has boosted the local economy and created 500,000 jobs. Annual tax revenue exceeds 600-million yuan. Luo said, “The next five years will be the time for fast growth in Yiwu’s economy, which requires the government to build a platform for the non-state-owned economy to perform. This is important in bringing out their incentives.”
The non-state-owned economy is a creation under the socialist market economy. It is a very good supplement to the state-owned economy. From the time it was granted the right of existence to being encouraged for development, non-state-owned industries have been on the right track for development for the past two decades.
Weng Rongdi, General Manager of Langsha Textile Co. Ltd., said, “To us, it is like taking a pill that calms our nerves. Reform and opening-up policy is long-term. For our entrepreneurs, we are pursuing our cause and we represent the image of our country. Especially when I travel overseas, I want to represent this spirit of a Chinese. So, first, we want to thank the government and its policy for giving us these opportunities.”
The 1990s were marked by major breakthroughs in the growth of China’s non-state-owned industries. These industries have experienced continued growth for ten years and have begun to invest capital in high-tech fields.
In 1996, Computer expert Yan Wangjia from the US established his own IT company in Beijing. His company was obliged to conduct more than 20 research-and-development projects for the state. As a founder of a private high-tech company in China, Yan said he is very impressed by the government’s support in terms of taxation, the choice of talented personnel and related policies given to scientific research. He said, “Judging from the present situation, managers of non-state-owned enterprises can communicate with the government through many channels, including CPPCC and the Industrial and Commerce Union. In fact, we have a good channel for communication and have a say in policy-making and discussion. While a policy is being made, our suggestions will be taken into consideration.”
All of these have helped create room for non-state-owned enterprises to perform and become more competitive in the marketplace. An increasing number of young people are making private industries their first choice when looking for jobs. Since the middle of this year, many enterprises have set up training schools and offered lectures on enterprise culture. The teachers come from municipality officials and professors in colleges and universities.
Xu Xihua, vice president of Yixing Training School in Jiangsu Province, said, “It is a process of mutual help and improvement. Through the learning process, the quality of employees can be improved and they can gain knowledge, and the enterprises will eventually benefit economically. For the school, it can greatly enrich the experiences and offer a lot of new cases to study. It will add more live cases to our teaching materials.”
The courses include the enterprise-managing concept, development strategy, marketing and sales, as well as related laws and regulations.
Here is a lit bit of history of the Jiansu Yuandong Group. It was established in 1990. Seven years later, it was transformed into a shareholding company and then emerged as a private enterprise in 2001. It is a typical domestic enterprise that is able to adjust according to different policies at different times. Chen Jinlong joined the group after his graduation in 1997. He has experienced the company’s rapid growth during the last five years. Now as an employee of Yuandong Group in Jiangsu Province, Chen said, “Our party’s policy is for the cause of its people. If taking a different path instead of following the party’s policy, firstly, it is against the overall demand resulting from the economic situation and against government policy. If an enterprise continues toward the wrong path, in due time it will be derailed. It will limit its growth.”
The president of the group, Jiang Xipei, a representative to the current 16th Party congress, had this to say about his feelings. Jiang said, “Many of our friends in the private sector of the economy share the same view that our present policy and environment is in our favor. An enterprise is extremely small in the global market. Judging from the development, it has experienced four stages of change. And all of these changes aim at readjusting production to suit the needs of future development. I believe the quality of employees determines the future of an enterprise. If they don’t have a good political awareness, a good professional quality, and don’t want to improve, then the enterprise will have no way out.”
The past history of Beijing Huiyuan Drink and Food Stuff Group is a case in point. The company has a library for its employees plus all sorts of training classes in an effort to create a good learning atmosphere. Now, it has become the leader in its industry. President Zhu Xinli was awarded the national May First award this year for his excellent job. The reward is the highest honor for workers in China. Zhu said, “I am fully confident and I will make even more effort in work and make greater contributions. As an award-winner, I am like any of the others who have received the award. I will use my diligence, intelligence and physical work to demonstrate that I will live up to the honor entrusted by the Party and the country.”
Supported by government policy, the private sector of China’s economy has been experiencing tremendous growth in recent years. Statistics from the State Economic and Trade Commission show that, by the end of 2001, non-state-owned enterprises in China had exceeded 2-million, creating job opportunities for 20-million people. Registered capital is well over 1.8-trillion yuan. Its total output value comprises one-fifth of the country’s gross domestic product, or GDP, and almost half of domestic retail sales. In a word, it has grown into a primary force in the nation’s overall economy.
The private sector's share of China's gross domestic product (GDP) is estimated to have reached 33 percent, a little lower than the 37 percent share of the state-owned economy. The other 30 percent comes from agriculture, the collective economy and the foreign-invested sector.
The development of the Chinese private economy started in the early 1980s, and grew at an annual rate of 20 percent, much faster than the 9.5 percent growth rate of the national economy over the past two decades.
Editor: Wang Yin
(Nov 30th, 2002)
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