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

China Plus Published: 2018-10-18 23:08:36
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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]

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.

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.