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The misconception is this: SOEs and the private sector are playing a zerosum game. This premise simply supposes that SOEs and the private economy are components under complete market competition. There is no cooperation between the two sectors and one sector’s gain results in the other’s loss. But in fact, both sectors are important parts of China’s socialist market economy, and the relationship between the two is not oppositional, but of mutual promotion and coordinated development.
China’s huge economic aggregate and market scale provide wide space for the development and cooperation for SOEs and the private sector. By grasping opportunities and making innovations, both of them can achieve business success. It is the joint development and common prosperity of SOEs and the private sector that ensures China’s rapid, steady and sound economic growth. Particularly, in the recent global financial crisis, rapid adjustment made by both SOEs and private companies enabled China to be the first to recover from the turmoil.
Through some figures we can see whether the notion “the state advances and the private sector retreats” is tenable.
According to the National Bureau of Statistics, the number of industrial SOEs whose annual sales revenue is above 5 million yuan ($791,139) (above designated scale) has declined from 64,700 in 1998 to 20,300 in 2010. Among all industrial enterprises above designated scale, the percentage of SOEs declined from 39.22 percent to 4.47 percent. In the same period, the number of private industrial enterprises above designated scale increased from 10,700 in 1998 to 272,300 in 2010, and their percentage among all enterprises above designated scale rose to 60.34 percent from 6.46 percent. Seeing from the number of enterprises, it is not “the state increases and the private sector decreases,”but “the state decreases and the private sector increases.”
The number of employees in SOEs above designated scale dropped from 37.48 million in 1998 to 18.86 million in 2010, and the percentage of employees in SOEs above designated scale among all industrial enterprises above designated scale dropped from 57.2 percent to 19.2 percent. During the same period, the number of employees in private companies above designated scale expanded from 1.61 million to 33.12 million, and its proportion of the total number of employees in industrial enterprises above designated scale rose from 2.5 percent to 34.7 percent.
The proportion of the aggregate output value of state-owned and state-holding enterprises above designated scale to that of all industrial enterprises above designated scale dropped from 49.6 percent in 1998 to 26.6 percent in 2010. In the same period, the proportion of private companies above designated scale surged from 3.1 percent to 30.5 percent, an increase of nearly 10 fold.
In 2010, state-owned and state-holding enterprises contributed 71.7 percent to the total sales revenue tax paid by industrial enterprises above designated scale, while private companies only contributed 14.6 percent.
The government has also reduced the tax burden on private companies by initiating a pilot reform of the corporate income tax system in 2007, which has led to a large drop in private enterprises’ contribution of sales revenue tax. The pilot reform, which was expanded this year, is expected to further reduce the tax burden on private companies.
Roles
Since China’s reform and opening up, private companies have entered a golden period of development, and a structure of coexistence, cooperation and competition between SOEs and private companies has been formed, just like a man walking on two legs, which is steadier, faster and more coordinated than hopping with only one leg.
Under the socialist market economy, SOEs and private companies play different roles. The core task of resource-, capitaland technology-intensive SOEs is to become industrial leaders. Meanwhile, private companies, with most of them being labor-intensive enterprises, focus on local markets to create more job opportunities and can effectively facilitate local economic development. Due to their flexibility and creativity, some private companies have already gained reputation nationwide.
The competition and cooperation between SOEs and private companies has spurred their joint development. And that’s why Chinese companies can compete among the world’s top 500.
What should be discussed is how Chinese enterprises compete with international companies. Chinese enterprises are currently facing the situation in which “the United States retreats and China advances.” By 2011, the number of U.S. companies among the world top 500 had dropped from 241 in 1975 to 133, and 61 Chinese mainland-based companies had entered the ranks, up from only two in 1995. This should be attributed to the advance of both SOEs and private companies.
In only seven industries, the number of state-owned and state-holding enterprises has surpassed 50 percent of the country’s total, including cigarette production (99 percent), oil and natural gas exploitation (94 percent), gas production and supply (92 percent), petroleum processing, coking and nuclear fuel processing (71 percent), water production and supply (69 percent) and coal mining and washing (56 percent). These industries are resource industries or those related to public services and infrastructure, requiring SOEs to play a leading role in ensuring product quality, stabilizing product prices and maintaining market order. However, these industries, with clear and strict market access, do allow the entrance of private companies, on condition they observe government rules. In most other industries, state-owned and state-holding enterprises are not holding a leading position.
Strength training
China should develop SOEs and private enterprises in order to strengthen and advance both, instead of letting one advance and the other retreat. The statement that “the stateowned sector advances and the private sector retreats” is completely unfounded.
Among the world top 500, now we see a rise in the number of both our state-owned and private enterprises and a decline in the number of U.S. companies. We believe Chinese enterprises (both state-owned and private ones) will keep advancing amid cooperation and competition, and in the future, the number of Chinese companies among the world top 500 will catch up with that of U.S. companies.
China has already become the world’s biggest exporter and second largest economy, thanks to the contribution of Chinese companies, both state-owned and private ones. SOEs and private enterprises are like the “two legs”of this oriental giant, making it advance faster, steadier and with coordination.
China’s huge economic aggregate and market scale provide wide space for the development and cooperation for SOEs and the private sector. By grasping opportunities and making innovations, both of them can achieve business success. It is the joint development and common prosperity of SOEs and the private sector that ensures China’s rapid, steady and sound economic growth. Particularly, in the recent global financial crisis, rapid adjustment made by both SOEs and private companies enabled China to be the first to recover from the turmoil.
Through some figures we can see whether the notion “the state advances and the private sector retreats” is tenable.
According to the National Bureau of Statistics, the number of industrial SOEs whose annual sales revenue is above 5 million yuan ($791,139) (above designated scale) has declined from 64,700 in 1998 to 20,300 in 2010. Among all industrial enterprises above designated scale, the percentage of SOEs declined from 39.22 percent to 4.47 percent. In the same period, the number of private industrial enterprises above designated scale increased from 10,700 in 1998 to 272,300 in 2010, and their percentage among all enterprises above designated scale rose to 60.34 percent from 6.46 percent. Seeing from the number of enterprises, it is not “the state increases and the private sector decreases,”but “the state decreases and the private sector increases.”
The number of employees in SOEs above designated scale dropped from 37.48 million in 1998 to 18.86 million in 2010, and the percentage of employees in SOEs above designated scale among all industrial enterprises above designated scale dropped from 57.2 percent to 19.2 percent. During the same period, the number of employees in private companies above designated scale expanded from 1.61 million to 33.12 million, and its proportion of the total number of employees in industrial enterprises above designated scale rose from 2.5 percent to 34.7 percent.
The proportion of the aggregate output value of state-owned and state-holding enterprises above designated scale to that of all industrial enterprises above designated scale dropped from 49.6 percent in 1998 to 26.6 percent in 2010. In the same period, the proportion of private companies above designated scale surged from 3.1 percent to 30.5 percent, an increase of nearly 10 fold.
In 2010, state-owned and state-holding enterprises contributed 71.7 percent to the total sales revenue tax paid by industrial enterprises above designated scale, while private companies only contributed 14.6 percent.
The government has also reduced the tax burden on private companies by initiating a pilot reform of the corporate income tax system in 2007, which has led to a large drop in private enterprises’ contribution of sales revenue tax. The pilot reform, which was expanded this year, is expected to further reduce the tax burden on private companies.
Roles
Since China’s reform and opening up, private companies have entered a golden period of development, and a structure of coexistence, cooperation and competition between SOEs and private companies has been formed, just like a man walking on two legs, which is steadier, faster and more coordinated than hopping with only one leg.
Under the socialist market economy, SOEs and private companies play different roles. The core task of resource-, capitaland technology-intensive SOEs is to become industrial leaders. Meanwhile, private companies, with most of them being labor-intensive enterprises, focus on local markets to create more job opportunities and can effectively facilitate local economic development. Due to their flexibility and creativity, some private companies have already gained reputation nationwide.
The competition and cooperation between SOEs and private companies has spurred their joint development. And that’s why Chinese companies can compete among the world’s top 500.
What should be discussed is how Chinese enterprises compete with international companies. Chinese enterprises are currently facing the situation in which “the United States retreats and China advances.” By 2011, the number of U.S. companies among the world top 500 had dropped from 241 in 1975 to 133, and 61 Chinese mainland-based companies had entered the ranks, up from only two in 1995. This should be attributed to the advance of both SOEs and private companies.
In only seven industries, the number of state-owned and state-holding enterprises has surpassed 50 percent of the country’s total, including cigarette production (99 percent), oil and natural gas exploitation (94 percent), gas production and supply (92 percent), petroleum processing, coking and nuclear fuel processing (71 percent), water production and supply (69 percent) and coal mining and washing (56 percent). These industries are resource industries or those related to public services and infrastructure, requiring SOEs to play a leading role in ensuring product quality, stabilizing product prices and maintaining market order. However, these industries, with clear and strict market access, do allow the entrance of private companies, on condition they observe government rules. In most other industries, state-owned and state-holding enterprises are not holding a leading position.
Strength training
China should develop SOEs and private enterprises in order to strengthen and advance both, instead of letting one advance and the other retreat. The statement that “the stateowned sector advances and the private sector retreats” is completely unfounded.
Among the world top 500, now we see a rise in the number of both our state-owned and private enterprises and a decline in the number of U.S. companies. We believe Chinese enterprises (both state-owned and private ones) will keep advancing amid cooperation and competition, and in the future, the number of Chinese companies among the world top 500 will catch up with that of U.S. companies.
China has already become the world’s biggest exporter and second largest economy, thanks to the contribution of Chinese companies, both state-owned and private ones. SOEs and private enterprises are like the “two legs”of this oriental giant, making it advance faster, steadier and with coordination.