Demand for delivery services was growing as online shoppers in China hit a new sales record on Nov. 11, Singles’ Day, the country’s biggest online shopping day of the year. Photo: XINHUA

At a recent symposium on private enterprises, Chinese President Xi Jinping, also general secretary of the Communist Party of China (CPC) Central Committee and chairman of the Central Military Commission, affirmed the status and role of the private economy in China’s economic and social development and expressed the resolution to encourage, support and guide the development of the non-public sector.

Over the past four decades of reform and opening up, the private sector has become indispensable for promoting China’s development. In the country’s entire economic system, the private sector contributes more than 50 percent of taxes, more than 60 percent of the GDP, more than 70 percent of technological innovations, more than 80 percent of urban labor employment and more than 90 percent of enterprises. China’s private enterprises on the list of the world’s top 500 enterprises increased from one in 2010 to 28 in 2018.

Private firms usually start with the processing, manufacturing and production of light industrial products, and they develop by meeting the perceived market demands in the daily life of their community, contributing to overcoming shortages rapidly, said Zhang Huiming, director of the Research Institute of Enterprises at Fudan University. On this basis, private enterprises have gradually expanded, adapted to market changes and constantly adjusted for development.

Zhao Xikang, vice president of Guangdong Academy of Social Sciences, said that for the Chinese economy to develop further with more international competitiveness and more market vitality, and for it to shift from high-speed to high-quality growth, the private sector needs to make tremendous contributions.

Due to some significant changes in the internal and external environment of China’s economic development, some private enterprises have encountered practical problems and difficulties, such as insufficient funds, market risks and fluctuations in foreign investment, said Xu Kangning, a professor from the School of Economics and Management at Southeast University.

Zhao said that the majority of private enterprises are small and medium-sized, characterized by the ability to respond rapidly to the market but by a weak ability to avoid risk. Compared with large enterprises, they have less financing capacity, fewer channels and lower quotas.

Huang Qunhui, director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences, said that the rise in the industrial product price index, the changes in the financial environment and the shift of the economy to high-quality development have created challenges for private enterprises and require private enterprises to cultivate core competitiveness and accelerate the transformation and upgrading of industrial structure. At the same time, they have created opportunities for the development of private enterprises, since the transformation and upgrading of China’s consumption structure will certainly bring greater market potential.

To help private enterprises overcome their difficulties, Zhao said it is necessary to reduce their tax burden, administrative costs and the costs of factors of production.

In terms of financing policies, Xu said it is imperative for banks and financial institutions to treat private enterprises without prejudice, ensuring that private enterprises can use loans as a financing tool under the premise that their products meet market demand. In addition, Xu suggested encouraging and supporting more private enterprises to directly finance themselves through the market to reduce the cost of financing.

On the other hand, private enterprises must also strengthen themselves and continuously improve their own management capabilities to avoid excessive market risks.

“In the field of economics, innovation is the core and most important driving force for economic growth, and the heart of innovation is entrepreneurs,” said Huang. The key issue for the development of private enterprises is improving their technological innovation capacity. This requires the government to deepen the reform of the science and technology system, allow private small and medium-sized enterprises to participate in the entire process of scientific research and innovation, and further support them through industrial policies.

As the national mechanism for supporting the private sector improves, the innovation capability and core competitiveness of private enterprises will be continuously enhanced, Zhao concluded.

Mao Yanhua, deputy director of the Institute of Free Trade Zones at Sun Yat-sen University, proposed to establish a cooperation mechanism among industry, universities and research institutes to promote the development of private enterprises by scientific research institutions and public R&D platforms in universities. In addition, it is necessary to create a good intellectual property environment and better protect their intellectual property rights.

Furthermore, Mao suggested providing legal consulting, information services, risk assessment and other services for private enterprises to reduce their risks in the process of “going global.”