China’s new bureau for private firms aims to ‘unleash their vigour’ and shore up national growth
- Despite announcing dozens of policies to make China’s private sector ‘bigger, better and stronger’ like state-owned firms, Beijing has struggled to restore confidence
- New government body could help answer market calls for assurances that the central government’s economic policies are implemented at local levels
In a bid to piece together the shattered confidence of the nation’s private entrepreneurs and return them to their former economy-driving glory, China has created a special new department under its top economic-planning agency.
Tasked with keeping tabs on the employment-vital sector, a so-called private economy development bureau is being chartered under the National Development and Reform Commission (NDRC) and will shoulder the responsibility of coordinating a raft of new support policies.
“The supportive policies [rolled out in the past two months] and the establishment of such a bureau will further unleash their vigour and growth momentum of the private economy,” NDRC deputy chairman Cong Liang said at a press conference on Monday.
China vows private firms, like state firms, will be ‘bigger, better, stronger’
China has more than 47 million registered private companies – the vast majority of which are small players – plus more than 100 million self-employed businesses.
In the past two months, the NDRC convened several face-to-face meetings with private entrepreneurs to address their problems and concerns.
Zhao Xijun, a finance professor at Renmin University in Beijing, said there is always an issue when it comes to the local implementation of central government policies.
“That’s why Beijing set up such a separate body,” he said. “The market performance also suggests it needs a separate body.”
Some academics had long called on Beijing to set up such a body to support the private sector.
Li Daokui, a Tsinghua University professor and also former central bank adviser, proposed at a forum in May that a regulatory body be set up to oversee the private sector, with responsibilities like those of China’s state-assets watchdog, the State-owned Assets Supervision and Administration Commission.
With Beijing encouraging more private investment, local governments have planned more than 3,500 projects, which would require a total investment of 3.7 trillion yuan (US$509 billion), to court the participation of private investment, according to the NDRC’s Cong.
The formation of a new government department suggests that private firms have not yet received enough help from the previous round of supportive policies, according to Tang Dajie, a visiting research fellow at Wuhan University.
“Many small and medium-sized enterprises are still unable to participate in government procurements,” he added.
More needed for drastic reversal after China’s ‘mild but comprehensive’ measures
Analysts have grown more doubtful that China will be able to achieve its economic growth goal this year of “around 5 per cent”, with authorities releasing weak economic data for recent months.
China’s property investment fell 8.5 per cent in the first seven months of 2023, year on year, according to official figures. And private investment during that span fell by 0.5 per cent from a year earlier, compared with a rise of 7.6 per cent seen by state-owned enterprises.
Profits among private-run industrial firms also dropped by 15.5 per cent, year on year, in the first seven months.
The private sector accounts for more than 50 per cent of China’s tax revenue, 60 per cent of gross domestic product, 70 per cent of technological innovation, 80 per cent of urban employment, and 90 per cent of market entities.
