MNI INTERVIEW: China Law To Reaffirm Status Of Private Firms

Chinese authorities have started drafting a “private economy promotion law” to reaffirm the equal status of private companies and state-owned enterprises in a new law as it seeks to re-energise investor confidence and boost investment, a policy advisor and National People’s Congress delegate told MNI following the government’s 2024 work report, which he said heralded a bigger role for the private sector.

The law should ensure fair treatment for private companies in terms of regulations, access to market, financing, and resources and will reiterate the sector’s key role within the socialist market economy, Cai Jiming, professor of economics at the School of Social Sciences, Tsinghua University and a delegate to the National People’s Congress from Fujian province, said in an interview.

Cai told MNI during the annual national legislative meetings known as “Two Sessions” last week that the government restating the “common prosperity” slogan in recent years should not be misunderstood as “robbing the rich to aid the poor”, he said, adding the main task in the primary stage of socialism should be to develop productive forces, and to “make the cake bigger.”

The work report prioritised the development of “new productive forces.” Cai believes so called “unicorn” startups can help meet this priority, noting half of the world’s top 10 unicorns in 2023 were from China.

DISCRIMINATION

He added private entrepreneurs often face unfair accusations from those who argue that their high incomes are inconsistent with the socialist principle of “distribution according to work”.

Efforts to narrow the income gap should be made via taxation he said, arguing business leaders not only provide job opportunity but also contribute management expertise, capital, technology and data. This is in line with the principle of “distribution according to contribution of production factors”, as recognised since the 16th National Party’s Congress in 2002, he said.

“Authorities must refute remarks that deny the country’s socialist market economic system or vilify and weaken private business in a timely manner to dispel the concerns of entrepreneurs,” he said.

A fairer judicial environment which separates economic disputes from crimes would also significantly lift confidence, according to Cai, who stressed it was crucial that authorities refrain from using criminal prosecution to intervene in civil cases, and officials found to have done so improperly should be punished.

“The state should be responsible for compensating for the economic losses caused by miscarriage of justice and hold relevant officers legally accountable,” he added.

The government work report came as a demand shortage accompanied by a property recession weighs on the Chinese economy. Despite a series of supportive policies introduced last year, the confidence in the private sector, which contributes over 50% of tax revenues, 60% of GDP, 70% of technology innovation, and 80% of urban jobs, needs further boosting. (See MNI: China's Renewed PPPs To Lift Investment, Curb Debt Risks)

URBAN-RURAL INTEGRATION

On better supporting China’s 300 million rural migrants' access to urban public services, Cai said that excessive house prices remained the biggest obstacle, more than access to compulsory education. But recent measures to increase public rental and affordable housing through targeted measures will make real progress this year, he said.

In January, the People’s Bank of China said it was providing CNY500 billion in pledged supplementary lending to fund projects including affordable housing through policy banks, and set up a CNY100 billion loan plan for rental housing pilot schemes.

The work report’s emphasis on urban-rural integration would lead to much needed liberalisation of idle rural residential land to a greater extent to attract urban residents to the countryside, Cai said, who has long advocated such measure. “Freeing up access to idle rural land would attract private investment in rural territories, allow urban retirees to migrate, thus freeing up living space in the cities for migrant workers and help with rural-urban integration,” he added.