The Guangdong Provincial Party Committee and the Guangdong Provincial People's Government recently issued the Implementation Opinions on Promoting the Growth of the Private Economy and Further Advancing High-Quality Development of the Private Economy. Guangdong is one of China's key reform-and-opening-up provinces, with a well-developed market mechanism. Small and medium-sized private enterprises have long been the backbone of Guangdong's economy. At a time when China and the world are working through economic-structure adjustment and industrial-structure transformation, the growth model of the past decades is being tested, and confidence among small and medium-sized private enterprises is shaky. Against that backdrop, issuing a policy in the name of the provincial Party committee and provincial government to encourage the high-quality development of private enterprises is a signal of real weight.
Under the social arrangements now in place in China, the social identity and economic role of private enterprises has always drawn attention. In the long arc of human history, the two forces that have alternated and shaped direction are fairness and efficiency. Fairness is the ideal of human society, the original intention. Efficiency is what happens in the real world of survival and competition.
China's system of public ownership is at once an institutional arrangement and a basis for social security. But before reform and opening up, it did not produce the efficiency required for socioeconomic development, which meant that ordinary people did not really enjoy the fruits of public ownership. The private economy is a product of China's reform and opening up. Its participation has supplied vitality and efficiency to China's economic development. "Fairness and efficiency, public and private, are two faces of one hand, one yin and one yang — this is the Way."
Seen through a social and economic lens, private enterprises are always, in part, a social question. They supply momentum to national development, solve employment and consumption for the broad public, and are an expression of the vitality of the social economy.
In the provincial document on high-quality private-economy development, the real focus is not strictly an economic question. It is more about the social-environment issues that surround the growth of private enterprises.
One — fairness
The document calls for implementing the market-access negative list, fully carrying through a "permitted unless forbidden" approach, applying market supervision fairly and consistently, "putting an end to selective enforcement and to supervision that forces enterprises to 'prove their own innocence,'" and advancing "reform of simplified deregistration to smooth market-based exit channels."
In the early years of reform and opening up, private enterprises could not even register — the private economy had no place to exist. Later, to attract foreign investment, foreign capital was allowed in specific fields and granted many preferences. Today's adoption of a market-access negative list reflects fair entry for economic actors, and that is a major step forward.
The document's push for simplified registration and exit is a real boon for small and medium-sized private enterprises. For a long time, exit was tangled up with tax, debt, and bankruptcy issues and hard to pull off. A zombie-firm state degrades the business environment; it also keeps many entrepreneurs from putting history down and starting over, which works against protecting innovative and entrepreneurial behavior.
Two — operations
The document calls for "a long-term mechanism to prevent and resolve overdue payments," and "concrete measures for inclusive and prudential regulation of new technologies, new industries, new business models, and new modes of operation."
Overdue payments from government and from large enterprises to small and medium-sized private enterprises have become a serious drag on China's business environment, and a serious problem for the domestic circulation of the economy and for building a unified national market. They also damage the bank credit, financing access, and working-capital turnover of small and medium-sized private enterprises. Against a backdrop of economic slowdown, they are a major reason many private SMEs exit the market. That the provincial Party committee and government have targeted this chronic problem with a long-term mechanism shows their determination to address the operating problems of private enterprises.
Inclusive regulation of firms operating in "new technologies, new industries, new business models, and new modes" is another way of saying, encourage innovation. If many new-business-model firms were regulated through traditional frameworks, they would be strangled in the cradle. E-commerce, cross-border e-commerce, digital enterprises, modern services, and other asset-light modes are part of China's important exploration toward the high end of the value chain. Without inclusive administration, the space for new economic exploration in our province gets squeezed, and the opportunity for new-economy development is lost.
Three — entrepreneur development
The document calls for "fostering the healthy development of private entrepreneurs," "cultivating and promoting the entrepreneurial spirit," encouraging entrepreneurs to "actively assume social responsibility," and "guiding the refinement of governance structures and management systems."
Entrepreneurs are among the most important forms of wealth in modern commercial society. In modern commerce, entrepreneurs use innovation to solve problems of socioeconomic development, raise the efficiency of national economic development, and improve a country's position in the world. Private entrepreneurs carry the principal responsibility for running their enterprises, bringing together the enterprise's duties, powers, and interests, and they are the fullest expression of the entrepreneurial spirit. Promoting the healthy development of private entrepreneurs and cultivating the entrepreneurial spirit is a full affirmation of their social standing.
Only when private entrepreneurs are treated as "insiders" and "owners" of the project of Chinese-style modernization will they commit themselves wholeheartedly to the building of the national economy and throw themselves, with an owner's mindset, into rural revitalization, philanthropy, and the building of a society of common prosperity.
Four — internationalization
The document mentions "guiding and supporting private enterprises in going out," and providing supporting services. The passages are brief but make it clear that attention is being paid to private enterprises' global expansion.
China has historically been a land-power country — its government restricted civilian sea trade more than it encouraged it. The closed-door policy of past eras cost China its chance at maritime-civilization development and ultimately left it a semi-feudal, semi-colonial country, beaten by others. Private enterprises going abroad is not only an expression of the international competitiveness of our province's economy — it can also powerfully advance our province's economic transformation, upgrading, and high-quality development.
Our province's support for private enterprises going out embodies Guangdong's sense of agency, responsibility, and exploratory courage as a reform-and-opening-up province. It is reform and opening up at a deeper, higher level.
Social development is a complex ecosystem. Building a social system requires both consistency, which gives society stability and order, and diversity, which gives society vitality and innovation. In the building of Chinese-style modernization, the public-ownership economy can provide more of the consistency, and the private economy can provide diversity and flexibility.
Of course, the public economy can also find mechanism innovations that unlock efficiency, and the private economy can also contribute fairness by solving employment and by taking part in third-tier distribution. Between them there is no opposition — there is a deeper complementarity and an exchange of social functions. The existence of the private economy is not simply a social issue. It carries important social functions. It is a vital cell of the social organism.
The provincial Party committee and provincial government's encouragement of high-quality development of the private economy should be read with this deeper intention in mind.
Originally published: 36Kr · The Walker’s View · 2024-01-31 · Read original →
Originally published in the "36Kr · The Walker’s View" column. The author is Executive President of the Guangdong SME Development Promotion Association. For reprints or citations, please contact the author or the Association Secretariat.