Recently, the public opinion environment on the development of the private sector in China has seen great improved. After the central leadership repeatedly emphasized on consolidating and developing the public sector, as well as the support on developing the non-state-owned economy, the official media has given high exposure and publicity to the development of the private sector. This is shown in even after the failure of the launch of the Chinese private company LandScape's ZQ-1 rocket, the state television broadcaster China Central Television (CCTV) called for understanding and encouraged private enterprises to make persistent efforts. In addition, in the improvement of the financing environment of private sectors, many specific policies have also been introduced in recent time.
It appears that both political and central policies in China are supportive of and encouraging the development of private enterprises. Actually, the attitude of the central government has not changed, yet why has the development of the private sector in recent years feel that the development environment is getting more and more difficult? Why do private enterprises feel the obvious advances of the state-owned enterprises while the private enterprises are retreating in recent years? Why are private entrepreneurs who used to be confident now lacking of confidence?
If the political status of the private sector and the political recognition of the central government have not changed, it is clear that there must be problems with the specific development environment and policy implementation. Judging from the problems reflected by Chinese private enterprises in recent years, in addition to the market problems that every enterprise must face, private enterprises still face various tangible and intangible development obstacles in the actual development, such as financing problems, market access issues, obstacles in getting the approval, as well as issues concerning tax, cost, policy direction, credit environment, talent, labor law, government rent-seeking, and legal environment. Due to the identity issue, private enterprises are still subject to various constraints. When the economy develops at a high speed and the market expands, both state-owned and private enterprises gained profits, and the difference is not obvious. Once the economy slows down and the market adjusts, the difference in the between state-owned and private enterprises is immediately revealed. While the state-owned enterprises might still be making money, the private ones are not really so.
These problems reflect the actual market economic environment. In the 40 years of China's reform and opening up, the biggest success has come from the introduction of a market economy system. The main feature of the market economy is the allocation of social resources through the market. According to the Organization for Economic Co-operation and Development (OECD), there are three main modes of successful market economy in the world: the liberal market economy model in the United States; the social market economy model in Germany and some Scandinavian countries; and the administrative-oriented market economy model in France and Japan. Generally, the modern market economy has the following common characteristics: (1) marketization of resource allocation; (2) clear definition of the rights, responsibilities and interests of economic actors, that is, the guarantee of property rights under the rule of law; (3) economic operation based on market competition; (4) implementation of necessary and effective macroeconomic regulation; (5) internationalization of economic relations.
In other words, the market economy should be an economy of the rule of law, credibility and fair competition. In China's development practice, in addition to the ownership issue, the development of China's economy has both the characteristics of market economy development and the characteristics of the planned economy in which the state is administratively involved. However, from the development history of the recent decades, it appears there is the law that in places or sectors where the market economy is well developed, there will be many successful cases while in places where the planned or administrative economy is strong, the development would not be as successful.
As a model special economic zone, Shenzhen's development process fully demonstrates the success of the market economy. Shenzhen has developed from a small fishing village to a metropolis with the scale comparable to Hong Kong, and this certainly is inseparable from the long-term support of the Chinese government and the unique space provided by many special policies. However, under the policy space provided by special measures, Shenzhen's sustained development is mainly due to the development of the market economy.
Zhang Siping, the former deputy mayor of Shenzhen, in a recent article on the development of high technology in Shenzhen that the rise of Shenzhen's high technology is attributed to the long-established property rights system with the private sector as the main factor, with state-owned enterprises as the guarantee, as well as the innovation in ownership structures. Among the 12,200 high-tech enterprises in Shenzhen, almost 95% are private and foreign-funded enterprises, and the proportion of state-owned enterprises is very small. In the fierce market competition, the private sector has gradually grown. Compared with the financial policy and land support provided by state-owned enterprises to develop science and technology industries, direct support for the development of private enterprises is rare; the Chinese government mainly creates a market environment and service system with fair competition. The rapid development of private high-tech enterprises has benefited from a few basic factors in the market economy environment. First, private enterprises have clear property rights and responsibilities, and entrepreneurs have greater motivation to pursue innovation and capital appreciation. Second, private enterprises have a good risk-taking mechanism. Third, private enterprises have unified decision-making body, and the decision-making process is simplified and effective.
It is worth mentioning that as the private enterprises develop, the state-owned economy has gradually found its place as well. However, Shenzhen's state-owned enterprises are not in the upstream of the industrial chain, but concentrated in urban infrastructure and public services, which guarantee the urban economy. On the other hand, Shenzhen's private enterprises are not located in the downstream, but in the main positions of the modern industrial system and chain. The latter plays the main role, while the other plays the guarantee role; the two has formed mutual support to uphold the modern industrial system of Shenzhen and the development of its high-tech industries. This also means that in the field of technology industry where private enterprises are the mainstay, market economy rules are working. Shenzhen's survival of the fittest and fair market economy system formed over the years is also an important success factor for Shenzhen's high-tech development.
The Chinese central government affirms and supports the development of the private sector. How then, should this be understood under the framework of institutional reform and how should it be implemented? We believe that the core issue is not complicated. Developing private sector itself is to develop the market economy; the former is the main economic body and the latter is the institutional environment. The experience of China's reform and opening up tells us that if the private sector really develops well, it must be under the institutional arrangement of the market economy.
Final analysis conclusion:
The development of the private sector is not merely a political slogan, but to create institutional arrangements for the market economy through reforms.
