By Tu Haiming
The recent establishment of a private economy development bureau within the National Development and Reform Commission (NDRC) has become a matter of interest at home and abroad. Considering that the new bureau is the first-ever specialized agency for private-sector development within the State Council, its creation reflects the great importance the central government attaches to the private economy and its commitment to promoting the development of the private sector.
In fact, the establishment of the new bureau is only a part of the central government’s broader efforts to expand the country’s private sector. In the past month or so, government agencies have made a concerted effort to spur the growth of the private economy. On July 19, the central authorities issued a set of opinions on boosting the growth of the private economy. Subsequently, the NDRC announced 17 targeted measures; eight departments, including the NDRC, the State Administration for Market Regulation, and the State Administration of Taxation, jointly issued a document containing 28 measures; the Ministry of Finance and the State Administration of Taxation jointly issued a document to extend the value-added tax reduction and exemption policy for small-scale taxpayers; the Supreme People’s Court published 11 typical cases on protecting the property rights of private enterprises and the rights and interests of entrepreneurs — the list goes on. All relevant government agencies have worked together to create a favorable environment for private economic development.
Since the central government called for the prevention of “disorderly expansion” and “barbaric growth” of capital and reiterated the important role and functions of State-owned enterprises in China’s fundamental economic system with public ownership as the mainstay, concerns have been raised about the viability of the private economy in China or the marginalization of the private sector as State-owned enterprises rise to more prominence. Western media even took the opportunity to hype rumors of a “crackdown” on the private economy in China. Such unsubstantiated claims are unconvincing.
China’s Constitution stipulates that “in the primary stage of socialism, the State shall uphold a fundamental economic system under which public ownership is the mainstay and diverse forms of ownership develop together”. Therefore, the country’s fundamental economic system has not shifted.
Besides, the private sector plays a crucial role in China, contributing more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of innovation and technology achievements and 80 percent of urban employment, as well as accounting for more than 90 percent of the total number of firms operating in the country. As of the end of May, there were more than 50 million private businesses on the Chinese mainland, making them a vital economic force.
Even more absurd is the interpretation of the authorities’ move to regulate domestic internet giants as a “crackdown on private businesses”. The authorities have merely acted against the monopolistic tendencies of internet giants that constituted unfair competition; regulatory actions against monopolies are a common practice in market economies. The regulatory actions against monopolies will ensure the overall well-being and sustainability of the private economy. This does not constitute any “crackdown” on the private sector.
Obviously, the central authorities are trying to prop up the private economy, rather than “suppress” it, as some Western media outlets claim. The main duties of the new bureau include: tracking, studying and analyzing the development of the private economy; coordinating and organizing the formulation of policies and measures to promote the development of the private economy; and formulating policies to promote the growth of private investment. A regular mechanism for communication with private firms will be established to facilitate the new bureau tackling the major problems faced by private enterprises and helping enhance their global competitiveness.
This description of the new bureau’s duties does not include the word “regulate” but emphasizes “studying and analyzing”, “formulating policies”, “planning and coordinating” and “communicating” — tasks that are aimed at improving the operating environment of private enterprises and helping them expand and prosper.
It is noteworthy that the private economy development bureau was launched under the NDRC, which formulates national economic policies and is dubbed by citizens the “mini-State Council”. Such an arrangement is further proof of the central government attaching great importance to the private economy.
HK will benefit in three ways
The creation of the private economy development bureau, along with the launch of various initiatives to stimulate the private economy, heralds another blooming season for the private sector. This comes as a great boon, not only to the Chinese mainland but also to Hong Kong, which will benefit in three ways.
First, Hong Kong as an international financial center has ample capacity to provide high-quality financial services, such as fundraising via initial public offerings for mainland private businesses, as well as facilitating foreign capital’s access to the Chinese mainland, and helping them set up businesses or invest in the mainland’s private sector.
Second, as the mainland’s private businesses predominantly consist of small and medium-sized enterprises that have promising growth prospects but lack the experience to explore the international market, it will open the door to business opportunities for Hong Kong’s private and professional service sectors, which can leverage their familiarity with international rules and practices to help these mainland companies to explore international markets, cope with potential risks, and strengthen their corporate governance.
Third, Hong Kong’s young people will find greater potential for advancing their career on the mainland. Rather than State-owned enterprises, private businesses have a greater allure for them. With a promising private sector that accounts for 80 percent of the available jobs on the mainland, the prospect of more employment opportunities will attract more Hong Kong young people to pursue their careers or start businesses on the mainland.
The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.
The views do not necessarily reflect those of Bauhinia Magazine.