A research tour brings together top advisers, leading economists and influential business people with the common goal of seeking the best way to advance private enterprises, a vital driving force behind China's economic development.

To their surprise, both in Liaoning, an old industrial base in Northeast China and in Guangdong, one of the earliest provinces to benefit from reform policies, private enterprises are facing almost the same developmental roadblocks-- limited financing sources, double taxation, lagging information services and legal vulnerabilities.

"But another thing that surprised me is that in Liaoning Province -- home of 10 percent of the country's large and mid-sized State-owned enterprises, private capital has grown so rapidly," said Chen Mingde, a member of the investigative team.

Chen said that in his China Democratic National Construction Association, one of the eight non-Communist democratic parties, about one in ten members are private entrepreneurs.

"The CPPCC is increasingly aware of the current role of domestic private capital in the national economy, and that's why we did the investigation," he said.

Actually, during the second session of the 10th National People's Congress which opens today, China’s top legislators are expected to discuss an amendment to the Constitution that aims to inject stronger protections for private property rights.

Analysts believe that, if passed, it will be another breakthrough for domestic private enterprise, much like the Third Plenary Session of the 16th Central Committee of the Chinese Communist Party in late 2002 which decided to actively guide the development of the private sector.

Together with Chen, leading economist Li Yining and President of New Hope Group Liu Yonghao, plus other members of the 10th National Committee of the CPPCC -- China's top advisory body -- also joined the investigative team.

During their two-week tour, they visited more than 20 private enterprises in seven cities in the two provinces and met with nearly 100 private entrepreneurs.

Dong Xia, the president of Shenyang Dalu Group, a private high-tech product company with registered capital of 30 million yuan (US$3.6 million), told the visitors that for Liaoning's rapid growth of its private sectors, a more nurturing regulatory environment is needed for a better and more productive future.

"They (local officials) still need time to improve their awareness of service," he said, complaining that to accelerate market-oriented reforms and increase business efficiency is an urgent task for local officials.

In Liaoning, statistics indicate that private enterprises contributed 45 percent of the Gross Domestic Product (GDP) of the province last year. In Guangdong, private enterprises account for 73 percent of the import and export enterprises in the province.

Yang Chongchun, a member of the investigative team and also a CPPCC member, recalled that during the visit to Zhuhai in Guangdong, some private entrepreneurs complained about double taxation for private enterprises.

According to the current tax system, in addition to paying 33 percent corporate tax, private entrepreneurs are also subject to personal income taxes of 20 percent.

Yang indicated that both in Liaoning and Guangdong, private entrepreneurs called for a fair and reasonable taxation policy so as to create an environment for fair competition for private enterprises.

In the final investigative report, the difficulties in loan policies for private enterprises are listed as a top priority.

Statistics show that in the country, 70 percent of loans go to State-run companies, although they account for just 30 percent of the nation's industrial output. However, 77 percent of private enterprises face the problem of getting bank loans, partly because they lack a credit record and employ poor accounting practices.

The report argues that controls should be loosened to help medium and small-sized enterprises and private firms obtain bank credit more easily.

Suggestions initiated by the investigative team called for early establishment of a national credit system and more private banks to help the private sector raise money.

Liu Yonghao said that as a private entrepreneur, he was encouraged by the frankness he encountered.

He said that during past decade more space had been opened for private enterprises but speedy reforms are required to reduce the limitations on market access for domestic private capital and to create a fair and competitive environment for private enterprises infields like investment, the land use and foreign trade.

(China Daily March 5, 2004)