Private sector development to keep Chinese economy afloat in 2024

Editor's note: Kulsum Begum, a special commentator on current affairs for CGTN, is a security and strategic affairs researcher and freelance columnist. The article reflects the author's opinions and not necessarily the views of CGTN.

High-quality manufacturing, investment, job creation, revamping industrialization, innovative technology and exports by the private sector help China's economy expand alongside the state sector. The private sector is essential to China's economic growth. China's private sector accounts for 60 percent of GDP and 80 percent of urban employment.  

Thus, the Chinese government always encourages private sector participation in China's economy to fully implement new development philosophy and promote entrepreneurship for national rejuvenation and strong country-building. The imports and exports by Chinese private enterprises grew by over 6.1 percent year on year in the first 11 months of 2023. At the same time, private investment rose 9.1 percent year on year, excluding real estate.

After strong trade and investment growth in 2023, China has recently outlined six steps to boost private sector development. Accelerating legislative procedures, enhancing communication, strengthening analysis, attracting private finance, encouraging excellent practices, and improving work systems are examples. The policies seek to further boost the growth of the private sector. 

The People's Bank of China (PBOC) will steadily enhance lending for private companies. Lu Lei, deputy governor of the PBOC, highlighted private sector progress, including capital support and services for small businesses, expanding financing channels, facilitating private enterprises' bond access, and improving cross-border financing convenience to attract foreign capital. The Chinese government’s consistent support for the private sector is vital to China's economic progress. Its commitment to enhancing its business climate, policy, funding, legal guarantee for development, and fair competition shows the country's ongoing support for private firms and will enhance entrepreneurs' confidence and promote good growth. Banks and other financial institutions should finance private companies with marketable goods.

During a conference in Jinjiang, east China's Fujian Province, Zheng Shanjie, head of the National Development and Reform Commission, encouraged private investors to participate in national projects like railways, nuclear power plants, water conservancy, and ecological and environmental protection and help them with financing and project recommendations.

The nation would encourage private enterprises to expedite digital transformation and spend more on research and development to promote high-quality growth in the private sector. The Chinese government is doing its best to attract local and international investments, develop infrastructure, ensure continuous power supply and utilities, and create a business-friendly climate to boost private sector development. Despite the public sector's role in good governance, private sector investments are still vital to socio-economic progress, production, employment, and getting essential goods to the masses.

Industrialization and innovation in private companies are key to creating jobs. Rapid industrialization creates large-scale jobs, which helps socioeconomic growth and reduces poverty. Private company investments create management, technical, supervisory, skilled, and semiskilled jobs.

The abovementioned six measures, PBOC's loans to promote private firms, and decreasing negative listings are government attempts to boost private enterprise development. By encouraging investments in private enterprise, the authorities have helped private sector industrial development. The strategy encourages investments in creative and high-tech corporations, manufacturing, agro-based and manufacturing industries, services, trade and commerce, tourism, housing, real estate, entertainment, and power industries.

Public-private partnership (PPP) links public and private investments. The Chinese government has created a new PPP mechanism to improve cooperation between government funding and social capital and deepen private sector involvement in infrastructure investments, with increased support for private enterprises, private investor interests, and a business-friendly environment. Financial incentives are also offered for private infrastructure development. PPP project formulation, management, and supervision are being improved by implementing agencies.

According to a World Bank report, since 2013, China has seen a significant rise in registered firms, businesses, and farmers' cooperatives, from 61 million in 2013 to 154 million in 2021. This growth is attributed to a significant reform initiative aimed at reducing startup costs. The vast majority of these businesses are modest but have the tremendous potential of the entrepreneurial spirit to drive economic growth.

Large-scale jobs created by small- and medium-sized enterprises (SMEs) have great potential to solve the unemployment crisis. The central bank's funding program for growing SMEs for commercial banks and financial institutions remained between 2022 and 2023.

Authorities promote lending stability by improving small business services. Nearly 140 companies issued bonds, and outstanding loans reached 41.2 trillion yuan ($5.8 trillion) and inclusive loans 28.9 trillion yuan ($4.07 trillion). Guangzhou and Yiwu, China's largest wholesale market for small manufactured goods, are leveraging finance and technology to drive high-quality growth of the private economy.

China has been building hi-tech/software technology sectors around the nation to provide jobs, particularly for information and communications technology-savvy young people. Recent private sector investments in education, healthcare, and tourism have also shown growth. There is no alternative to the country's prosperous private sector. We expect private sector development will keep the Chinese economy afloat in 2024.

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