Party open to private affairs

As manoeuvring continues in the run-up to the long-anticipated 16th Communist Party Congress in Beijing, there is widespread speculation on the changes to the political and economic landscape that will be likely to flow from the November gathering.

Certainly, the stakes are high. Not only is the Congress likely to determine the vital issue of leadership succession, it will also illuminate the thorny question of the direction of party ideology.

In particular, President Jiang Zemin's plan to use the Congress as a forum to insert his homespun political philosophy, known as the 'Three Representations', into the Com-munist Party constitution, has created controversy.

In part, Mr Jiang is motivated by a desire to secure his political legacy. The adoption of the Three Representations will elevate him alongside Deng Xiaoping, who had his Theory, and Mao, who had his Thoughts.

But the issue has real-world implications too. Although the contents of Mr Jiang's theory remain vague, one basic premise is that the Communist Party must move with the times, representing the nation's most advanced productive forces, its most advanced culture, and the broad interests of the people.

In more concrete terms, this means the party should officially move to embrace private businesses, allowing entrepreneurs equal status as Party members. Although last year Mr Jiang invited private businessmen to join - and indeed some have been Party members for years - they have never been formally acknowledged.


Most likely, therefore, Mr Jiang will seek to use the Congress to officially induct private businessmen into the Party. Even more radically, he is also pushing to recruit a small number of prominent entrepreneurs into the Party's Central Committee, its inner sanctum.

Success for Mr Jiang's plan is far from guaranteed. Because the Three Representations amounts to an ideological shift away from classic communist doctrine towards a more pragmatic (some would say capitalistic) viewpoint, it has met with considerable resistance from leftist elements within the Party.

Nonetheless, the signs are that Mr Jiang's changes will be endorsed. According to Peter Moody, a China expert at the University of Notre Dame, 'my feeling is he will probably get it through - the leftists may extract a concession, such as adopting it without naming him as author, but there has been so much propaganda that if it doesn't that would be a big surprise'.

Assuming Mr Jiang is successful, not only will private business be formally legitimised, but it will also finally have real representation within China's central power base. The question then becomes: what impact will this have on the development of the private sector?


According to official statistics, private business at present accounts for about 13 per cent of gross domestic product.. In reality, however, the percentage is far higher. A study released by the Asian Development Bank in April calculated that the private sector actually represents more than 60 per cent of China's economy.

In addition, according to the ADB, more than half of China's 200 million urban workers are either self-employed or employed by private companies. Moreover, private businesses dominate China's fastest growing industries, such as high-technology and services.


It comes as something of a surprise, therefore, that private firms should continue to face discrimination from the state.

Access to finance, for example, is a particularly severe problem. Although the public sector has enjoyed a glut of investment capital in recent years, as authorities continue to prime the economy, private firms remain starved of funding.

This is partly because bank lending has been curtailed by the government in an attempt to combat state bank bad loans, and partly because bank lending procedures have traditionally shunned the private sector, and especially small and medium-sized enterprises.


Recently, the government has taken some steps to try to redress the balance. In 1999, the National People's Congress amended the constitution to recognise private businesses. Since then, the government has also passed laws to regulate sole proprietorships, to end various bureaucratic restrictions on private businesses, and to grant them access to foreign trading privileges, among other things.

Finally, the China Securities Regulatory Commission (CSRC) now allows all qualified firms, including private companies and joint ventures, to list their shares on the A- and B-share markets.

Despite these moves, however, discrimination against the private sector remains both real and institutionalised.


Apart from investment capital, private industry is denied proper access to everything from land-use rights to commercial dispute resolution. Even when official policy dictates equal treatment, private businesses invariably get the short end of the stick. For example, despite CSRC rules, only a few dozen private companies have actually succeeded in listing shares on China's domestic markets.

The long-term impact of the upcoming change, therefore, may be in altering the entrenched thinking that has made private business a pariah to Chinese bureaucrats even as it pulls the country's economy out of the dark ages.

The government will surely need all the help it can get. Over the next several years, China must create at least 10 million new jobs per year in order to soak up millions more workers laid off from the ailing state sector.

Only private companies will be able to provide those jobs. Which means that if the government has any hope at all of meeting its target, it can ill afford to continue a policy of persecution. That would only be biting the hand that feeds it.