Birthplace of private enterprise in China to take the lead with new growth

Note: The following is an edited translation of a commentary from the Chinese-language "Commentaries on International Affairs."

Wenzhou City in Zhejiang Province recently saw the establishment of a type of special economic zone that will pioneer new efforts to foster healthy growth in China's private economy. Known as a birthplace of modern private business in China, it is fitting that Wenzhou is once again becoming a leader in China's mission to reform and open up. In these efforts, it will be guided by an approach that has been called the "Two Healthys".

Wenzhou Oujiang River Estuary Industrial Zone [File photo: VCG]

The "Two Healthys" concept was presented at the 19th National Congress of the Communist Party last year. It means building a new relationship between government and business in order to promote healthy development in the private sector, and for people in the private sector to be supported to achieve healthy economic growth.

China's private enterprises are constantly striving to develop better products, improve their corporate management, and prevent and control financial risks. And they are doing this at an increasingly complex time, as the world economy experiences accelerating restructuring amid growing global trade frictions. This is why China's private sector needs government support now more than ever and the "Two Healthys" is of major economic and political importance.

Over the past 40 years, private enterprises in China have taken in nearly 40 percent of the country's economic resources and turned them into more than 60 percent of its gross domestic product. They contribute more than 50 percent of the country's tax revenue, create 70 percent of its technological innovations and new products, produce nearly 45 percent of its exports, and provide around four out of five jobs. Over the course of China's reform and opening up, Wenzhou has provided important successes thanks to its role as a place for experimentation for China's private economy. The "Wenzhou spirit" is captured by the local saying "Dare to be first, and be able to start a business". One out of ten people in Wenzhou are currently running a business, and 99.5 percent of enterprises in Wenzhou are privately owned.

Making Wenzhou the first region in which to promote the "Two Healthys" approach will further invigorate the "Wenzhou spirit" among local entrepreneurs and officials. And the experience will provide new knowledge, processes, and measures that can be replicated elsewhere as part of the ongoing effort to foster high quality development in China's private economy. To this end, Wenzhou has proposed a broad plan of action that will help the city to develop a first-class international business environment, and for private entrepreneurs and medium, small, and micro enterprises to have access to the support they need to thrive. The plan includes three key measures which will be critical to success in these endeavors.

First, a new type of relationship shall be formed between government and business. Government must work closely with private enterprises to help solve difficult problems they encounter. This will mean streamlining administration, and improving regulation and service delivery. In doing so, officials must guard against their engagement with businesses leading to corrupt behavior and the abuse of their professional power for personal gain. Likewise, private entrepreneurs must be law-abiding and aboveboard. Authorities in Wenzhou will introduce a list of behaviors that define this new type of friendly and ethical relationship between government and business.

Second, the business environment needs to be further optimized. According to the principle of "competitive neutrality" put forward by China's central bank governor Yi Gang, enterprises of all kinds can enter the marketplace, but they must do so in accordance with the law and without taking unfair advantage. One of the ways Wenzhou will do this is by fully implementing a market entry negative list system, while striving to ensure a level playing field outside of the listed sectors. The negative list will clearly and transparently lay out which sectors are closed to market competition, just as the national negative list details sectors closed to foreign investment. For sectors that are not on the list, authorities will ensure that market access is available on an equal footing for private and non-private enterprises.

Third, government will vigorously promote entrepreneurship. President Xi Jinping emphasized the important role that entrepreneurs have in generating new economic activity. Entrepreneurship is the source of growth for enterprises and a fundamental element of competitiveness. It is also a scarce and fragile resource, which is why the "Two Healthys" approach focuses on providing entrepreneurs with support like long-term mechanisms to protect ownership rights in accordance with the law, and efforts to vigorously promote the "artisan spirit" that is required to start a new enterprise.

Taken together, these measures will help to ensure that Wenzhou continues to spearhead development of the private sector and service-oriented governance. Their success will help to light the way for entrepreneurs across the country to push the Chinese economy towards continued high quality and sustainable growth.