Private firms outperform state enterprises, says official

PUBLISHED : Saturday, 18 December, 2004, 12:00am
UPDATED : Saturday, 18 December, 2004, 12:00am

Highlighting sector's success may ease fears about impact of cooling-off measures

Privately run businesses on the mainland have fared much better than their government-controlled counterparts, according to a top industry official.

The comments were made by All-China Federation of Industry and Commerce president Huang Mengfu amid complaints that the private sector has been hit hardest by the central government's macroeconomic controls.

The federation is a central government umbrella group that helps regulate the private sector.

Mr Huang said non-state-run businesses had achieved results that were better than the national average in terms of business performance.

The official made his comments at a seminar on Thursday in Chongqing .

He said the mainland's leading 500 private companies reported average profit margins of 4.7 per cent last year - 1.2 percentage points higher than the average for the leading 500 firms from all sectors.

The income-to-net-assets ratio of private business stood at 14.6 per cent compared with 10 per cent for state-run concerns, said Mr Huang, who is also a vice-chairman of the Chinese People's Political Consultative Conference.

The national economy was increasingly reliant on private companies to be the engine for growth and new employment openings, with statistics showing they had set the pace for other sectors in the past decade.

'The [private] sector has created more than 60 per cent of the country's gross national product, more than 70 per cent of urban employment, more than 60 per cent of total industrial output by value, more than 60 per cent of exports, and 40 per cent of capital investment in the economy,' Mr Huang said.

He attributed the impressive achievements to the communist party's programme of reform and liberalisation, as well as the nation's increasingly clear-cut property rights legislation, better incentive mechanisms and flexible policies for human resources within the private sector.

In theory, the federation represents the interests of private businesses, but also acts on the government's behalf.

Since late last year, the government has been taking administrative and fiscal measures to cool down the breakneck growth of some overheating sectors.

Concern has grown among private investors that the mainland's credit squeeze, which has drastically slowed the growth of fixed-asset investments, might hurt them more than other businesses.

Although central leaders publicly support the private economy and have ordered it be treated equally, many state-run banks still struggle to break the habit of giving priority in lending to state-owned enterprises and government agencies.

The private economy has grown at an average annual rate of 20 per cent since the early 1980s, much faster than the national economy's 9-per-cent growth rate.