By Xin Bei

A robust growth of giant State-owned enterprises (SOEs) would certainly help boost China's economic development. But the progress of China's market-oriented reforms should also be measured by the growth of the private sector.

A recent report indicates major private companies as a whole have worked more efficiently than State-owned enterprises. The top 500 private firms made an average profit of 4.7 percent with turnover of an average 116.3 percent, while State-owned firms stood at 3.5 percent profit and 31.9 percent turnover, joint research by the economic department of the All-China Federation of Industry and Commerce and the Stock Exchange Executive Council of China has found.

A thorough analysis of the difference between leading state-owned enterprises and major private companies can spotlight the underlying changes of the country's economic structure.

In a list for 2004 issued by the China Enterprise Confederation & China Enterprise Directors' Association, state-owned enterprises made up most of the 500 firms with the largest turnover.

Eighteen of the 500 firms have found their way into the top 500 firms in the world. Last year there were 12.

Size matters in global competition. But size is not all.

While most of the world's top 500 companies come from competitive industries, leading domestic private companies which focus heavily on competitive sectors are still fighting their way to secure a place in the country's top 500 firms.

The number of private firms in the list has increased over three consecutive years to 74.

Generally smaller than SOEs, private firms exceed in number and in profit margins.

As it gets integrated into the world economy, the Chinese economy is rapidly shifting from a centrally-planned to a market economy.

To maintain its competitiveness, China needs to tap the private sector better as it has clearly been doing so much better. The Chinese Government has taken a series of tough measures to curb excessive investment in some overheating sectors this year.

While the remarkable profit growth that major SOEs have registered so far this year shows that the State sector has virtually escaped the swathe of macroeconomic control, a large number of private firms have been complaining about the ongoing credit screw.

It is too early to determine the actual effects of those credit-tightening measures over various sectors of the national economy. But one thing for sure is that changes in future lists of the country's top 500 enterprises and 500 largest private firms will tell if the booming private sector has born the brunt.

(China Daily November 15, 2004)