China to work on developing non-public sector

China has set development of the non-public sector as one of the main tasks in the year ahead. The decision was reached at the annual Central Economic Work Conference. Experts say that a bigger private sector will bring an entrepreneurial vitality, much needed in the transformation of growth model.

The doors to private capital are opening up, albeit slowly. In a series of moves this year, China has lowered the entry standard for private capital in banking and allowed private companies to list on domestic and foreign stock markets, amid other signs of liberalization.

The country has also rolled out specific policies for attracting private capital in sectors such as railway, municipal administration, energy, and telecommunications, among other previous monopolized fields. The just concluded Central Economic Work Conference reaffirms the need to increase and guide private investment.

Li Yong, deputy secretary general of China Assoc. of International Trade, said, "It’s a good opportunity for private enterprises.Their participation in the economy will help boost efficiency due to the competition."

The non-public sector has grown exponentially during the past decade. It now contributes to 60 percent of China’s GDP, pays 50 percent of the taxes and creates more than 70 percent of the jobs.

But most private enterprises are export-oriented. Their production capacity is based on global demand. Their business is taking a hit from the economic slowdown in recent years. Li Yong says private enterprises need to change their focus to get their share in the country’s transformation of its economic growth model.

Li Yong said, "Being exported oriented, the private enterprise do not have existing sales and distribution system, nor established brand, but meanwhile the are exposed to international market, they have a better quality management system. Their experience will help them to do well in domestic market."

Despite the positive policy direction, experts say implementation can at best be incremental. The entrenched position of state enterprises is hard to shake. And financing is hard for some medium and small enterprises due to a lack of transparency in their operations.