If you pay close attention to what Liu Junhai, a professor and head of commercial law at Renmin University of China in Beijing, has to say on China’s efforts to enact a new law to promote the country’s private sector, you can’t but be mightily impressed.
“We should reject State-owned companies portraying themselves as heroes, and private-sector companies portraying themselves as victims, and multinational corporations acting as if they have the right to dominate,” Liu said recently.
His view sums up very well the challenges faced by China’s business entities in an economy where State-owned enterprises, due to their dominant position, appear to lack motivation to innovate, while private-sector companies tend to wallow in the narrative that they are at the receiving end of unfair treatment.
In China, SOEs often dominate sectors considered strategically important: energy, telecommunications and defense. Private firms have a large presence in consumer goods, technology and the services sector.
To be sure, China needs both public and private sectors to grow at a healthy clip. That underscores the need to foster a more balanced and fairer economic environment for both sectors to flourish.
Earlier this month, the third plenary session of the 20th Central Committee of the Communist Party of China resolved to further deepen reform comprehensively, to advance Chinese modernization. In many ways, deepened reform could be the answer that can balance the two sectors.
The plenum’s resolution said that China will enhance the long-term mechanism for private companies to participate in major national projects. The country will also support capable private enterprises in leading national initiatives to make breakthroughs in major technologies and provide private enterprises with greater access to major national scientific research infrastructure.
Wu Haitao, general manager of Kejian, a private producer of sealing tapes, noted that in the aerospace sector, which has very high requirements for components, SOEs hardly cooperated with private enterprises before.
But thanks to a coordination mechanism between several local governments, the company has successfully reached the procurement process of planemaker Commercial Aircraft Corporation of China.
Two of high-temperature resistant vacuum tapes developed by Kejian have successfully entered the supply chain of China’s domestic large aircraft industry, Wu said.
“With the momentum, the output of the company this year is expected to increase by more than 30 percent year-on-year,” he said.
Industry experts said that private enterprises and SOEs can supplement each other well, as private firms are more agile, innovative and efficient, while SOEs often have more resources and support from the government.
However, private firms are more vulnerable to fluctuations in supply and industry chains, as seen during the COVID-19 pandemic and its aftermath, they said.
A document released by the Ministry of Industry and Information Technology and 10 other ministries seeks to help private firms. The document said China will boost the full integration of all aspects of SMEs, including industry, supply and data chains, to promote advantageous interaction.
It also proposed guiding large enterprises to share their design and development abilities, and to open up their equipment and laboratories to smaller counterparts.
Xu Xiaolan, a former vice-minister at the MIIT, told a news briefing: “More efforts will be made to help private enterprises lower operating costs, ease their difficulties in accessing funding and debt collection, and assist them in growing demand.”
With the country’s latest resolution, future policies are expected to address the need for both private enterprises and SOEs, and ensure that both sectors can thrive and contribute to the country’s economic growth.