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China's private businesses, fast becoming a powerful engine driving the Chinese economy, should be given wider market access to more industries, the nation's top advisers said.
Greater scope for development by these firms is crucial to maintaining the country's high economic growth rate and job creation, members of the Chinese People's Political Consultative Conference (CPPCC) said.
The members also said the opening of the financial sector to non-State firms, in particular, was greatly needed. They believe the establishment of small non-State banks would be the most efficient way to solve the problem of funding shortages for private firms.
"China's economic development will rely more on private companies in the coming few years," said Wu Jinglian, a renowned economist with the State Council Research Development Centre.
He said he highlighted the private sector because government investment cannot be expanded further and domestic consumption, handicapped by the low incomes of rural residents, has little scope for achieving a much more rapid growth immediately. Instead, the pace is likely to continue as at present.
Wu, a CPPCC member, said many people attributed China's 8 per cent gross domestic product (GDP) growth last year to government policies aimed at stimulating the economy through investment. But an increasingly dynamic private sector was also a factor in the economic achievement, Wu noted.
The private sector now accounts for about one third of China's 1 trillion yuan (US$120 billion) economy.
"If the private sector can become ever stronger, (China's) GDP growth would be at least 7.2 per cent this year... and there would be no problem in maintaining it at this level in the coming three to five years," said Wu.
Private business was also an important job creator for those employees trimmed by the restructuring of State firms and migrant workers from the countryside, he said.
But Wu said the development of private business is still constrained by a number of difficulties including the limited access afforded to some industries, such as banking and insurance, and insufficient funding support from existing financial institutions.
In seeking ways to solve the fund shortages experienced by private firms, it is not realistic to expect the huge State banks to make particular efforts to support the non-State companies. The big banks are generally interested in large corporations, whereas the non-State businesses are mostly small, said Justin Lin Yifu, an economist with Peking University and also a CPPCC member.
Development of small non-State banks which serve local business is a highly recommended way to alleviate the private firms' thirst for capital, he said.
"Such banks would be able to know the local companies very well and serve them well," Lin said.
The banking sector has, until now, just opened slightly to private firms. At present, there is only one non-State bank in China, the China Minsheng Banking Corp, founded in 1996.
With US$30 billion in assets, the small joint-stock Minsheng Bank has one of the lowest non-performing loan rates among the Chinese banks - an encouraging 2 per cent. That is a factor that China's private business people often cite for allowing more private banks to open.
In addition to establishing share-holding banks, Zheng Yuewen, an official with the country's chamber of commerce for private businesses, said shares in reorganized State banks and city commercial banks and the takeover of rural co-operatives should also be feasible options for private companies participating in the banking sector.
Zheng, vice-president of the All-China Federation of Industry and Commerce and also a CPPCC member, said private companies should also be allowed to issue corporate bonds if they can meet the standards for such issuance.
(China Daily March 17, 2003)
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