In the early summer of this year， the All-China Federation of Industry and Commerce （ACFIC） welcomed a special “investigation team”. Xu Shaoshi， who was just appointed chairman of the National Development and Reform Commission， led a team consisting of 20 senior governmental officials and held a conference with private entrepreneurs.
　　This is an unprecedented team of people of importance. Not only the high-ranked officials were present， Li Shufu， Dong Wenbiao， Nan Cunhui， Liu Yonghao and several other famous private entrepreneurs participated in the conference as well.
　　In the conference， Xu Shaoshi entrusted the ACFIC to make a review of the implementation of the “36 rules about private investment” which was issued three years ago. Three months after the conference， the report was given to the State Council. Li Keqiang， premier of China， required each governmental department to work out measures of improvement with detailed plans.
　　Meanwhile， the congress of China founded an investigation team of “promoting the coordinated development of state-owned enterprises and private companies”. The team consists of several senior governmental officials in the industrial and commercial administration and other departments and made several on-the-spot investigations in Shanghai and Hubei.
　　All these investigations had the results that led to one direction – contributing ideas to the third session of the 18th CPC Congress that is destined to direct the economic development of China in the next ten years.
　　President Xi Jinping said in Wuhan that the state-owned economy should be revitalized and improved， while the development of non-public economy should be guided， encouraged and supported – this is considered to have set the tone for the coming CPC congress session.
　　Chen Yongjie， who is now the vice secretary-general of China International Economic Communications Center， was once the director of the research office of the ACFIC. He has been studying into the private economy for a long while. In his opinion， the private economy is the most vigorous and potential part in China’s economy. The State Council once held a meeting to talk about opening more industries to the private economy， which is considered to be an important source of the internal driving force for China’s economic upgrade.
　　However， the “36 rules about private investment” is not well implemented. Urged by China’s former premier Wen Jiabo， the engaged governmental departments barely worked out 42 implement rules， but none of them was effective enough. Therefore， people wonder whether the new government can change the situation is an answer everyone expects in the coming CPC Congress. 　　 The Long Way to Break Monopoly
　　After successfully investing in Zaysan Oil Gas Block in Kazakhstan in April 2009， Guanghui Energy was haunted by the “invisible hurdle” for the importation of crude oil.
　　Guanghui Energy transmitted the natural gas from Zaysan Lake in Kazakhstan to Jeminay County in China through a 110-kilometer-long crossborder gas transmission line. In Jeminay County， there is an LNG factory with the annual output of 500 million cubic meters of LNG. However， Guanghui Energy cannot find ways to bring the crude oil produced in Zaysan Lake di- rectly back to China for processing.
　　China allowed non-state-owned enterprises to take the crude oil importation trade as promised to WTO in 2002. The Ministry of Commerce could work quotas about the oil imports for private companies. However， such a way is not the same as promised.
　　Concretely， the private companies need to possess the “certification of production” from Sinopec and CNPC– the two state-owned oil companies in China – if they want to import the crude oil. Otherwise， the General Administration of Customs will not allow the oil into China. In addition， the imported crude oil can only be re-sold to CNPC and Sinopec after being processed.
　　“Such as policy should be worked out and carried out by the national governmental department. However， it was actually administrated by the stateowned oil companies， which have no administrative power，” Chen Yongjie says.
　　The qualification of importing crude oil is controlled by CNPC， Sinopec and CNOOC， another state-owned oil company in China. There were some private oil processing companies which once became the partners of the tree companies and got the qualification of importing oil. However， Guanghui Energy， which is a pure private company， is not given such a privilege，


　　Against this background， Guanghui Energy has to spend money entrusting China United Oil Co.， Ltd， a subsidiary company of CNPC， to import the oil from Kazakhstan and then sell the oil to CNPC at the price fixed by the latter. The involvement of CNPC means that Guanghui Energy could earn many fewer profits than they could do with the free trade rule. Even though it invested in the oilfield in foreign countries， the crude oil it produces also needs to be sold to CNPC.
　　CNPC has been standing in the way of Guanghui Energy for years. Even though Guanghui Energy， as well as other private oil companies， is told several times that the trade of crude oil is going to open， they are not given any permission in the detailed policies as Guagnghui Energy never got the qualification of importing oil. 　　The dilemma of Guanghui Energy represents the harsh situations of many private oil trade and processing enterprises. A research shows that even those private companies which have got the qualification of importing oil are not very active in that field. Some of them transferred the quotas to state-owned enterprises and some of them even laid waste of them. In these years， the quota for private companies to import oil just exists in name only.
　　Chen Yongjie says that the private companies and ACFIC have required releasing the import control of crude oil and deleting the “production plan”of CNPC and Sinopec. However， their voices and requests were ignored with the two state-owned giants objecting their proposals. Therefore， it is increasingly difficult for the private companies to develop the overseas oil resources.
　　The stagnancy is not only seen in the oil industry. The other industries also face the same predicament when it comes to the overseas investment. Chen Yongjie says that several private companies have controlled important resources in foreign countries， but they cannot take them back to China. They either process these resources and sell the products in foreign countries or sacrifice a large amount of profits to work with state-owned enterprises to bring them back to China.
　　Ren Xiangkun， a researcher into the petrochemical industry， sighs at the fact that private companies are always greeted with difficulties when they want to get into the crude oil business， thanks to the governmental policies.


　　Ren works for a local company in Ningxia. This private company’s main business focuses on the oil processing and refinery. It always wants to the get into the upstream link， which refers to the crude oil trade. But there are so many invisible factors keeping them at bay.
　　An estimation made by the ACFIC says that Chinese government totally worked out 780 rules to drive the development of private economy， but the result is a disappointment， which could be easily seen from the complaints of private entrepreneurs.
　　According to Zhuang Shengcong， vice president of the ACFIC， one of the biggest complaints from private entrepreneurs is concerning the opaque way of the government to open the monopolized industries.
　　He says that many monopolized industries neither give out a clear access for the private capital nor clarify the managerial and operational patterns after that. The telecom industry is a good example. The value-added sector is a pretty good place for private investors， but the dominance of state-owned enterprises resurfaces again when it comes to the fundamental telecommunications. The details of opening that field only include some principal points without any definite access or guarantees. 　　In addition， the inappropriate mar-ket and reform renders some industries completely inaccessible to private investors even though they should be open in the documents. These industries include the supply of water， electric power， heat and gas， whose price are so severely regulated that the investment returns cannot be guaranteed. Therefore， these industries are not popular among private investors even though they have been open for 10 years. Presently， the private investment only takes 13% of the total market.
　　 Finance as the Pioneer of Opening Up
　　Chen Yongjie was not optimistic about private capital’s entry into monopolized industries because the unfair treatment private companies meet in market access and resource distribution is not a flash. A complicated network of profits is involved in this. The new Chinese government cannot break down this condition unless they are resolved to make sacrifices.
　　What’s worrying him more is that the anti-monopoly polices are regressing instead of progressing in some fields.
　　But the news from the State Council’s meeting on September 6 excited him as the feasible measures of promoting private economy is intensively discussed in this meeting.
　　The State Council of China required each department to actualize the measures of improvement following the requirements of “fixing the goal， establishing the projects， setting up the schedule and proving the result”.
　　Chen Yongjie was excited because this is the only meeting the State Council held exclusively for the private economy in recent years. The two meetings where the “36 rule about private economy” was discussed also included other topics. In Chen Yongjie’s opinion， this meeting shows the government’s determination to actualize the measure for the development of private economy.
　　In the meeting， people put forward that the finance， oil， electric power， railway， telecom and resources must be opened up as soon as possible for the upgrade of the industrial structure and the betterment of the Chinese economy.
　　Li Keqiang once emphasized the importance of opening up the aforementioned industries to private capital in the Davos Forum in September. Simultaneously， there came out the reports about Suning and Tecent’s applications for setting up private banks for the experimental purpose.
　　The finance is expected to be the first one to be open to private investment. UBS China published a report titled “Can Expectations Come True”， saying that the regulations and control in the financial industry are going to be eased after the third session of the 18th CPC Congress. 　　In the report， UBS details that the opening of financial industry already saw the completion of theoretical preparation and pilot reforms in the past two years. In addition， the opening up provided the local authorities and stateowned enterprises with more fundraising channels. Therefore， the resistance might be smaller and substantial progress is expected.
　　Zhou Dewen， head of Wenzhou Institute of Managerial Science， says that his organization has already proposed to the State Council that the detailed rules about applications for setting up private-funded banks should come out as soon as possible.
　　Zhou says that the private capital was now getting into the financial industry in a roundabout way in recent years. For example， they are investing in securities， insurance and small credit companies or buying stakes of local banks and town-level banks or financial cooperatives. The statistic data shows that the private sector takes 9.6% of the financial industry of China， but the real private-run bank is far from being finalized.
　　Early in 2010， several private companies in Wenzhou formed a consor- tium to apply for setting up a “private bank”. The businessmen at least submitted four applications， which were all turned down. Zhuang Congsheng says that many private entrepreneurs are also complaining about the incomplete opening up of the monopolized industries – these sectors accessible to private capital are those in great need of capital or those that are unprofitable， while these lucrative sectors are closed in front of private investors.
　　This phenomenon is the most ap-parent in the financial industry， where there are mandatory rules about turning the owners of town-level banks and financial cooperatives into existing commercial banks， preventing the private investors from setting up small banks.
　　Some changes have occurred， fortunately. The State Council published the Guiding Suggestions about the Financial Support for Economic Structural Change and Upgrade （commonly known as the 10 Financial Rules）， which explicitly contains the clause of “expanding the access of private capital to the financial industry”and “attempting to allow private investors to set up banks， financial leasing companies and consumer finance companies which can independently assume risks”.
　　Zhou Dewen says that the file already erased the last preventive policies for setting up private banks. After the issuance of the “10 Financial Rules”， two private companies submitted the applications of setting up private banks. 　　Since there are no corresponding management rules coming out for the establishment of private banks， these applications are still staying at the level of local authorities without being sent to the central government. Zhou Dewen states that the rules about the setup requirements， shareholders’ qualifications and shutdown of financial institutions should be worked out as soon as possible， based on which governments and enterprises can take actions.
　　“If detailed rules can come out this December， we might authorize one or two private banks for experimental purpose，” says Zhou Dewen.
　　Rumors had it that the required registered capital of private banks should be at least RMB 500 million – 1 billion or even higher. Zhou Dewen does not think so. In his opinion， private banks should target small enterprises， individ- ual vendors or peasants as their clients， thus they do not need to be large in size. The registered capital should be RMB 10 million to 100 million.
　　 Hurdles from Concept and Profit
　　There is indeed good news about private capital’s access to the monopolized industries. At the beginning of September， the LNG station ENN Energy built in Zhoushan， Zhejiang was approved by the government， marking the presence of private companies in the transmission and acceptance of marine natural gas.
　　Back into years， ENN Energy once planned to build a LNG imports port in Wenzhou， but its application was turned down because it collided with similar plans of state-owned enterprises.
　　The government says that the national security， including the financial security and energy security， is the biggest concerns of the government to open up the monopolized industries. But such a statement is just an excuse for the “alliance” between the government and state-owned enterprises.
　　Chen Yongjie says that the high profits of Chinese banking industry are a result of their privileges given by the government. The central government also protects such monopolization from foreign and private capital， allowing Chinese domestic banks to enjoy high profits and pay high income tax. This further lessens the government’s determination of breaking up the monopolization.
　　“The ‘alliance’ is a result of the system，” Chen says. China features the multiple roles of businessman and politicians， which mean that the leaders of state-owned enterprises are not only merchants， but also governmental officials. Such a system prevents the governmental departments from listening to advices of private companies and makes them be biased towards stateowned enterprises.
　　The decision-makers are inclined to ignore private banks， says Zhou Dewen. Even the latest rules require the private banks to assume risks independently， which is not a mandatory requirement for state-owned banks. “Because of this， private banks are considered to be riskier and less reliable”.
　　Zhou Dewen also says that the deposit insurance system is a precondition for setting up private banks， but not an essential one. One or two banks that are set up for experimental purpose need not worry about this problem， which has been proven by the successful cases of the credit cooperatives in Wenzhou. The government’s worries go too far.
　　“The vested interest is not going to quit without a fight and it is still very difficult for private capital to get into the financial industry，” Zhou says.