BEIJING, CHINA, October 18, 2000 --
The private sector in China has grown exponentially in the past two decades and now contributes almost as much to the economy as the state sector, according to the first major international report on private enterprise in China. The study, conducted by the International Finance Corporation with funding from the Australian government's Agency for International Development (AusAID), finds that, despite difficult conditions, the output of the private sector has grown an average of 71 percent per year since 1980, and non-state employment has risen an average of 41 percent per year.
Privately owned enterprises currently account for 33
percent of the Chinese gross domestic product, compared to the state-sector's 37 percent. However, including privately owned agribusiness brings the total to 51 percent; and with the contribution of collectives, which are in various intermediate forms of non-state ownership, the total non-state contribution to the GDP of China amounts to some 62 percent.
The Chinese government now officially recognizes private enterprise as an important component of the national economy and worked with IFC on the study in order to understand the status of, constraints to, and prospects for the development of the private sector. The Chinese State Economic and Trade Commission (SETC) supported and facilitated the study.
China's Emerging Private Enterprises: Prospects for the New Century
finds that the emergence of the domestic private sector is the most important result of the reform process in China and the domestic private sector is increasingly important in contributing to output and the creation of new jobs. The critical constraint to growth of the private sector is access to financing, especially long-term financing, the study finds.
The report recommends that, in order to encourage continuing private sector growth, the government should create a level playing field for all enterprises by intervening less and focusing on improved commercial legislation and more open markets. Financial institutions must develop to serve the private sector, and private enterprises need to mature and improve their corporate governance, in order to derive the most benefit from improvements in the business environment.
Research for the study began in June 1999 and is based heavily on field work in four main cities in China: Beijing, Chengdu, Wenzhou, and Shunde, as well as visits to Chongqing and Shanghai. Fieldwork involved structured interviews with more than 200 CEOs and senior managers in private companies, some 600 mailed-out questionnaires, and discussions with industry associations and government officials.
Assaad Jabre, IFC Vice President of Operations, who launched the study in Beijing, said the report underlines the fact that new private businesses are likely to be the main agents of change in China. He said China's private sector has emerged as an important source of income and employment growth that can mitigate the social costs of reforms. He predicted that private sector development in the interior could be one way of narrowing the economic gap between the interior and the coast.
The World Bank Group emphasizes improvements to the business environment as a main condition for sustained growth and poverty reduction. This report was designed to provide a roadmap for China to achieve a strong business environment.
The study also underpins IFC's extensive program in China, which is cued by, and encourages, the development of the private sector in this transitional economy. IFC provides long-term project financing that not only supports individual enterprises but also creates prototypes that will attract future commercial investment. IFC finances local financial institutions, indigenous industrial and infrastructure enterprises and plans to become involved in the financing of small and medium enterprises in China.
The study, based on fieldwork as well as IFC's international experience, was carried out by Dileep Wagle, Neil Gregory, Stoyan Tenev, Davin Mackenzie and Jianguo Cui of IFC, with the support of IFC's Beijing office. It draws on a technical report by the Asia-Pacific School of Economics and Management of the Australian National University, which conducted the fieldwork with the assistance of the China Center for Economic Research, Peking University. The technical work was led by Ross Garnaut, an economist and former Australian ambassador to China.
IFC, part of the World Bank Group, fosters economic growth in the developing world by financing private sector investments, mobilizing capital in the international financial markets, and providing technical assistance and advice to government and businesses.
AusAID, the first western bilateral donor to provide development aid in China, delivers and manages the Australian overseas aid program. Its goal is to help developing countries reduce poverty and achieve sustainable development.
For further information on the report please contact, in Washington: Dileep Wagle, E-mail:
dwagle@ifc.org
, Phone: 1(202) 473-8068 or Stoyan Tenev, E-mail:
stenev@ifc.org
, Phone: 1(202) 473-1392 or Neil Gregory, Phone: 1(202) 473-8559, E-mail:
ngregory@ifc.org
.
