CHINA / National
Private firms powering China economy
By Zhao Huanxin (China Daily)
Updated: 2006-09-22 07:21
After creating half the country's wealth in 2005, private enterprises are
poised for an even bigger role in the years ahead, a key government
think-tank said yesterday in Beijing.
"The non-State-owned sector is projected to contribute three- fourths of
China's GDP in five years, when at least 70 per cent of the country's
firms will be privately owned," the Chinese Academy of Social Sciences
predicted in its annual report.
While the private sector lurked in the shadows only a quarter-century
ago, its current high profile is a testament to the country's support
policies, but more equitable treatment is needed, industry
representatives said at a seminar to mark the release of the report.
Based on data from the National Bureau of Statistics, the "Blue Book of
the Non-State-Owned Economy" revised earlier estimates that domestic
private businesses have contributed one-third to China's GDP in recent
years.
The latest findings raised their contribution to 50 per cent last year.
They also provided eight out of 10 new jobs in non-agricultural sectors.
If the quantum contributed by overseas-funded ventures is added, the
private economy accounted for roughly 65 per cent of the national economy
in 2005 and the ratio is expected to jump to 75 per cent by 2010, the
report says.
Private enterprises have proliferated, especially in recent years, when
the government set out constitutional guarantees and policy incentives to
buoy the healthy development of the sector and protect the property of
entrepreneurs.
As a result, they have galloped into industries once dominated by
State-owned enterprises.
For example, private firms generated sales of 797.3 billion yuan (US$101
billion) last year an annual growth of 55 per cent since 2000 in smelting
and processing of ferrous and non-ferrous metals alone. They have also
invested in sectors such as post and communications, power and coal gas,
according to the report.
In tandem, the growth rate of taxes paid by the private sector has by far
surpassed that of State companies and the sector has become a major
contributor to State coffers.
Over the past five years, taxes paid by private firms grew by at least 40
per cent a year, compared with an annual increase of less than 7 per cent
by State businesses.
"In many a local region in China, tax revenue generated by the private
sector accounts for over 80 per cent of local government revenue," the
report says.
Despite their stellar performance, said Gu Shengzu, vice-chairman of the
All-China Federation of Industry and Commerce, private companies still
face barriers in securing financing, which was hobbling their development.
Less than 10 per cent of total bank lending goes to domestic private
firms while overseas-invested businesses enjoy preferential treatment in
taxation and financing, he pointed out.
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