Boost the Private Sector*
November 1, 2018
The key to coping with all kinds of risks and challenges lies in staying focused, enhancing confidence, and pooling efforts to manage our own affairs well. Currently, our economy is growing steadily, while maintaining overall stability and keeping major indicators within a reasonable range. At the same time, it is faced with increasing uncertainties, mounting downward pressure, and growing difficulties with business operation. These are inevitable on our way forward.
We should be conscious of potential opportunities amidst the challenges we face, and have full confidence in our economic development.
First, our economy is solid and resilient. It has great potential and significant scope for adjustment, with a domestic market of more than 1.3 billion people. The country is boosting and synchronizing new industrialization, information technology applications, urbanization, and agricultural modernization. An expanding middle-income group is generating enormous demand as consumption moves up market. The imbalance between urban and rural areas and between regions present immense space for development.
Second, our country enjoys favorable conditions and has solid material foundations for development. It has the world's most complete industrial system and a growing capacity for innovation in science and technology, and its gross savings rate remains high.
Third, our country has abundant human resources. Among its workforce of more than 900 million, 170 million have received higher education or have vocational skills. Every year over 8 million students graduate from universities. The comparative strength of its workforce remains obvious.
Fourth, our country has a vast territory rich in land resources and potential for intensive land use, providing enormous space for economic development.
Fifth, comprehensive analysis shows that the fundamentals of China's economy remain sound and stable, the factors of production supporting high-quality development remain unchanged, and growth built on stable economic performance remains on an upward trend. China's economic growth continues to rank among the highest compared with other major economies.
Sixth, our system has its unique strengths. The Party's strong leadership makes it viable in our country to pool all our resources to complete major missions. Further reform across the board provides an infinite driving force for development. The state's capacity for macroeconomic regulation and control continues to improve.
The world economy continues on its path to recovery. Peace and development remain the themes of our times. In the first three quarters of this year, our country's imports and exports maintained steady growth and the total trade volume with all major trade partners was on the increase. As the Belt and Road Initiative moves steadily forward, cooperation in trade and investment between China and the other countries involved has accelerated, providing greater opportunities for China's economy.
In short, as long as we maintain our strategic resolve, uphold the underlying principle of pursuing progress while ensuring stability, take supply-side structural reform as our main task, and further reform and opening up on all fronts, our country will be able to speed up its transition to high-quality development and embrace brighter growth prospects.
In the course of economic development, we should create a better environment for the private sector by addressing their difficulties and supporting their reform. We need to help the sector transform pressure into impetus, tap innovation as a lasting source of growth, and give full play to its creativity. Therefore, it is imperative to implement the following six policy measures:
First, taxes and fees on private enterprises should be reduced to effectively ease their burden. For this purpose, we should push forward supply-side structural reform, with a focus on lowering costs for private enterprises. To increase their sense of gain, it is necessary to extend tax reductions and make substantial cuts to the rates of VAT and other taxes through easily applicable measures. Universal tax exemptions can be provided for micro and small enterprises and technology startups.
The nominal rates for social insurance contributions should be lowered in accordance with the actual conditions of private enterprises. The methods of collecting social insurance premiums currently in operation will remain unchanged. Premium payments by private enterprises must be substantively reduced. While applying the most stringent standards to prevent tax evasion, we should remove inappropriate taxation that disrupts the normal operation of enterprises.
We need to further review and streamline administrative approval procedures concerning private investment management and fees charged to enterprises. Intermediate processes and intermediaries should be regulated to lessen the burden on enterprises, and efforts to eliminate government-levied fees on enterprises should be expedited, to lower their costs. We should move more rapidly to promote good local practices nationwide.
Second, measures should be taken to address the difficulties and high costs of finance for private enterprises. We should give priority to facilitating access to finance for private enterprises and in particular small and medium-sized enterprises (SMEs) while reducing financing costs step by step. To make financial institutions more willing to offer loans to private enterprises, we need to reform and improve the regulation, evaluation and internal incentive mechanisms for financial institutions, and evaluate the performance of banks by taking account of the support they provide to the private sector.
Access to the financial markets should be broadened to expand the fundraising channels of private enterprises and tap into channels such as private banks, small-loan companies, venture capital, stock shares, and bonds. Relevant authorities should design special measures to help private enterprises at risk of defaulting on their stock-based loans and changing ownership, and restore them to equilibrium. Local governments should be provided with guidance to grant the necessary financial aid to those private enterprises that contribute to the country's economic upgrading and have good prospects. On the condition that they take strict measures to prevent illegal fundraising and the loss of state assets, governments of provinces and equivalent administrative units and cities specially designated in the state plan can pool resources to establish policy-based funds and employ multiple means to assist local leading enterprises, major job providers, enterprises in strategic emerging industries, and other key private enterprises in difficulty. We should be keenly alert to debt chains, and rectify the misconduct of government departments and large enterprises that default on payments to private enterprises or abuse small enterprises by exploiting their position and strength.
Third, the playing field should be leveled. Hidden restrictions and hindrances for private enterprises should be eliminated. An environment of fair play should be created in market access, administrative approvals, business operations, tenders and bids, and civil-military integration to give them more space to expand their business. Private enterprises are encouraged to participate in the reform of state-owned enterprises. Differential and selective industrial policies should be replaced by inclusive and functional ones. Policies that run counter to fair, open and transparent market rules should be abolished. Law enforcement must be reinforced to combat monopolies and unfair competition.
Fourth, policy implementation should be improved. Any policy, no matter how well-intended, might have a potential downside, a discrepancy between expectations and practice, or a multiplying effect in combination with other policies. We need to take account of all these factors to better implement our policies. All provincial authorities and central departments should improve their methods and management skills, to better coordinate the implementation of policies and refine policy measures with quantitative indicators based on their actual conditions. Supportive steps should be taken to ensure that these policies can take root, become more specific, and produce substantive results, so that private enterprises can reap more tangible benefits.
In the process of cutting overcapacity and deleveraging, equal and uniform standards should be applied to all enterprises, whatever their forms of ownership, while indiscriminate reduction and cancelation of loans to private enterprises should be avoided. It is wrong to look at private enterprises through tinted glasses when applying policies. Government departments should improve their ability to perform their duties and follow the direction of macroeconomic regulation. In law enforcement involving workplace safety and environmental protection, authorities should see things as they are, do everything on the basis of reality, and avoid a one-size-fits-all approach. In implementing inspection reform to encourage the development of private enterprises, we should prioritize the special inspection of reform programs for protecting property rights, inspiring entrepreneurship, and undertaking fair competition review, as per the meetings of the Central Commission for Further Reform.
Fifth, a new type of cordial and clean relationship between government and business should be established. To this end, Party committees and governments at all levels should make solid efforts to support the development of private enterprises as a priority, and spend more time and energy genuinely attending to the needs of private enterprises and entrepreneurs rather than paying lip service. Officials must stick to principles and conduct themselves appropriately in their relations with entrepreneurs. This does not mean that officials can ignore their legitimate requests or refuse to protect their lawful rights and interests. On the contrary, officials should take proactive steps to provide the services they need. The departments concerned and principal leaders of local authorities should listen to their opinions and appeals and in particular take prompt action to help those in difficulty and solve their problems.
Supporting and guiding state-owned enterprises and private enterprises, especially SMEs, in overcoming difficulties and pursuing innovation-driven development should be an important part of officials' performance evaluation. People's organizations and federations of industry and commerce should reach out to private enterprises, find out the real situation, convey their difficulties in operations and management to the Party and government, and support their reform and resolve to break new ground. To better guide public opinion, major principles and policies of the Party and state should be explained correctly, and false assertions should be promptly cleared up.
Sixth, entrepreneurs' personal and property safety should be protected. Ensuring their security is the precondition for them to maintain an expectation for stability and put their entrepreneurship into full play. A more intense fight against corruption is essential for the Party to exercise effective self-supervision and strict self-governance. It aims to punish corrupt officials, foster a sound political environment, and oppose and rectify violations of Party discipline and state laws, such as abusing power for personal gain, trading power for money, embezzlement, bribery, creating obstacles to solicit bribes, and abusing the public. Success in this fight is conducive to the healthy development of the private sector.
When performing their duties and seeking entrepreneurs' cooperation in investigations, while endeavoring to solve individual cases, Party discipline inspection commissions and supervision departments should protect the legitimate personal and property rights of the entrepreneurs and ensure the lawful operation of their enterprises. We should look at the past irregularities of some private enterprises from a long-term perspective, and follow the principles of "no conviction or penalty without law" and "when in doubt, favor the accused", relieving entrepreneurs of their concerns and enabling them to move forward with full confidence. As I have emphasized on many occasions, unjust and misjudged cases involving infringement of the property rights of enterprises should be identified and corrected. Recent retrials of several such cases by the people's court have won a positive response from the public.
As I have said before, the healthy development of the non-public sector of the economy depends on those working in the sector. I hope that these people can dedicate themselves to self-study, self-development, and self-improvement. Entrepreneurs should cherish and maintain a positive social image, love the motherland, the people and the Party, practice the core socialist values, and promote entrepreneurship. They should set a good example of dedication to their work, abiding by the law in doing business, entrepreneurship and innovation, and making a contribution to society. Entrepreneurs should practice integrity and keep to the right path, focusing on growing their business, observing discipline and the law in business dealings, and strengthening corporate competitiveness in lawful operations. Abiding by the law is an overriding principle that all enterprises should uphold and the key to their long-term development. Entrepreneurs should enhance their approach to running their business by raising their operational and management capabilities, and improving their corporate governance structure. Private enterprises with the right conditions are encouraged to establish a modern corporate system. To make their enterprises stronger and better, the new generation of entrepreneurs should carry forward their predecessors' spirit of hard work, enterprise, professionalism, and focus more on their main business. Private enterprises should broaden their international horizons and improve their innovation capacity and core competitiveness, endeavoring to become world-class, globally competitive corporations.
* Part of the speech at a meeting on private enterprise.
(Not to be republished for any commercial or other purposes.)