China Private Enterprise Development Report NO.1 (2004) with Disc

Author: Huang Mengfu
Publisher:
Publish Date: 2005-07-01
Features: This is the China Private Enterprise Development Report initiated and organized by the All-China Federation of Industry and Commerce. Therefore, this report not only provides a detailed description of the current development status of private enterprises but also offers a relatively comprehensive review of the entire development history of private enterprises since the founding of New China. As the ancients said, "To understand the past is to know the future." When we reopen the pages of history, we indeed gain many new insights. Although this history may not be unknown to many, when we re-examine it from a fresh perspective, we realize how important it is to "learn from history." From the nationalization of private enterprises to the privatization of state-owned small and medium-sized enterprises, our country has experienced ups and downs. In this process, we have learned painful lessons, experienced poverty and backwardness, lost development opportunities, and encountered too many confusions. This confusion still haunts people even today. As the book states, "During periods of major changes in ownership structure and economic environment, the value of enterprise property rights is extremely difficult to determine—it is something that no one can clearly define. This is because there is no common reference standard between two different ownership systems." "Private enterprises and the market economy coexist and are interdependent. Without market freedom, the meaning of enterprise property rights loses significance, and enterprises no longer hold their original value. This is also why national capitalists quickly gave up their enterprises and achieved rapid and easy nationalization." Similarly, for today, "market liberalization and competition have led to the substantial devaluation of the property rights of state-owned small and medium-sized enterprises, resulting in their widespread privatization. At this time, who owns the enterprise property rights depends primarily on market choice, on who can dominate the market competition, and on who can allocate various market resources more reasonably." Therefore, such confusion is inevitably widespread during the current transition period. This is because of the clash between the concepts of planned economy under nationalization and market economy under privatization, as well as the contradictions and conflicts between two different systems and their operational rules in reality. Due to China's gradual development and the lagging traditional mindset, this contradiction is particularly prominent. Hence, Deng Xiaoping proposed not to debate but to recognize that "development is the hard truth." As another famous saying goes, if we keep entangling ourselves in past and present issues, we will lose the future. Therefore, for our society, it is more important to look forward, establishing a unified market economy and corresponding equal competition rules as the key to successfully achieving the transition. Now that we emphasize building a harmonious socialist society, what is the economic foundation of such a society? If we do not have unified rules and everyone acts independently, collisions are inevitable, and harmony will be difficult to achieve. Just as public transportation requires unified rules, the economy does too. During the current transition period, it is especially important to emphasize this point. Otherwise, everyone accustomed to the old tracks will instinctively revert to old habits, hindering our operation on new tracks and the implementation of new rules. Private enterprises can only develop and grow healthily in the soil of the market economy, becoming the foundation, pillar, and backbone of the socio-economy. Therefore, supporting the development of private enterprises must first ensure the fairness of market competition. The government must strive to be a fair referee in the market and must not control all resources, as this will greatly encourage rent-seeking corruption like "power-for-money transactions," undermining social harmony, development, equality, and stability. The book's summary of historical review mentions: "Marketization and the corresponding development of private enterprises are crucial for China's future. This is about whether China can completely break free from the stagnation of development over the past thousand years. The government must clearly recognize this point—not merely treating private enterprises and marketization as temporary measures but clearly aiming to establish the institutional foundation of the market economy as the fundamental strategy for China's long-term development." These may be the most important lessons we should learn from the historical review. It is encouraging that under the guidance of the spirit of the Party's 14th, 15th, and 16th National Congresses, the principle of "two unwavering commitments" has been proposed, pointing the way for the coordinated development of state-owned and private enterprises. Another feature of this book is its detailed description of the development and characteristics of private enterprises, based on extensive empirical data, and its comparative and analytical study of private enterprises alongside other types of enterprises, leading to several important conclusions supported by empirical evidence. First, as the marketization process develops, the output share of state-owned enterprises in the national economy shows a continuous decline, while the share of private enterprises gradually rises. According to the statistical criteria for enterprises above a certain scale, the proportion of private enterprises and state-owned and state-controlled enterprises in the national economy is becoming increasingly close, and private enterprises above a certain scale have quickly reached the same output level as foreign-invested enterprises. This indicates that private enterprises have not only rapidly increased total output but also significantly expanded in scale, forming a development pattern with three types of enterprises—state-owned, private, and foreign-invested—acting as pillars. Second, from the perspective of employment contribution, private enterprises have greatly surpassed state-owned enterprises in the employment of all urban areas. Since 1997, the employment of private enterprises has continued to grow, far outpacing that of state-owned and foreign-invested enterprises. By 2002, the employment share of private enterprises accounted for two-thirds of total urban employment. It is clear that to maintain social stability and meet employment growth goals, promoting the continuous development of private enterprises, especially small and medium-sized private enterprises, is an essential and important policy objective for the government. Third, from the comparison of enterprise efficiency, private enterprises and Hong Kong, Macao, and Taiwan joint ventures have the strongest positive correlation with efficiency; shareholding cooperative enterprises and other foreign-invested enterprises also have a relatively strong positive correlation with efficiency; collective enterprises and limited liability companies have a similar level of positive correlation with efficiency and are also positively effective; while state-owned enterprises and shareholding companies dominated by state ownership have a relatively lower positive effect on efficiency. The book also provides many cases of private enterprise development, attempting to show through these vivid examples the difficult trajectory of private enterprises' development and the hard-won achievements, how they relied on the dynamic advantages of their systems to achieve rapid development and expansion, how they moved forward through sharp conflicts or controversies, how they broke through numerous obstacles to gain some space for development, how they benefited from market liberalization but also fell into the traps of blind market expansion—just as looking back at the "arrest and release" of the eight kings of Wenzhou in the early 1980s seems absurd today, perhaps in a few years, looking back at the series of events happening today will evoke similar feelings. Therefore, these are historical records, the best witnesses of our transition era. Lastly, I thank all the authors of this book for their hard work, which made its timely publication possible; for providing us with rich data and vivid enterprise cases, thus offering a historical record; for conducting thorough analyses of the various problems encountered in the development of private enterprises, providing meaningful policy references for government departments; and for proposing positive suggestions through the analysis of private enterprise development and confusion, enabling private enterprises to learn from the lessons and better achieve development in the future. On this occasion, I also thank all the editorial, organizational, and coordinating staff who participated in this book, whose joint efforts made its publication possible in the shortest time possible. Since the reform and opening-up, the rise and rapid development of private enterprises have been the most dynamic and noteworthy part of China's economic development, as well as the primary driving force behind China's economic transformation and sustained high-speed growth. A comprehensive review and evaluation of the development process, current status, and issues of private enterprises are objective requirements for promoting their continuous, stable, and healthy development. This report, based on a large amount of facts, data, cases, and in-depth theoretical analysis, describes the full picture of private enterprise development since 1949, especially since the reform and opening-up in 1978, and its current status, providing rich historical materials and documentary records for China's transition period, as well as a comprehensive development history and trajectory of private enterprises. These reports not only provide researchers with detailed data and analytical foundations for studying the development of China's private enterprises but also offer objective bases and theoretical references for government departments in formulating policies for private enterprise development, and they also serve as an invaluable textbook for private enterprises themselves.