Private economy's role in China: Driving stability and enhancing prosperity

Editor's note: As the annual Two Sessions commences, CGTN’s Visionary Voices launches the "Global Think Tanks Unpack China Agenda 2025" series. Authored by experts from think tanks worldwide, these articles offer cutting-edge analysis of China's advancements in fields spanning economy, technology, rural revitalization and cultural innovation. Each piece demystifies China's growth trajectory while illuminating its global significance. The second article explores how to inject new impetus into society and safeguard people's well-being through the private economy. Paul Frimpong, a special commentator on current affairs for CGTN, is founder and executive director of the Africa-China Centre for Policy & Advisory (ACCPA). The article reflects the author's opinions and not necessarily the views of CGTN.

China's private economy has emerged as a cornerstone of the nation's remarkable economic ascent over the past four decades, following the economic reforms and opening up that began in the 1970s. It has been the citadel driving innovation and spearheading economic growth.

China's private sector is already accounting for over 60 percent of GDP, 70 percent of technological innovation, and more potently, employing over 80 percent of the workforce across the country's urban landscape.

Focusing on continuing improvement in the business environment, promoting emerging consumption trends, and fostering an upward adjustment in employment opportunities, this insight explores how these strategies could propel China to strengthen its private economy.

Strategic role of the private economy in China

The strategic importance of the private economy goes well beyond its economic contributions and permeates areas such as technological innovations, becoming a pivotal part of China's social stability. It is a correlated fact that China's recent economic success and global standings owe their positions to the pivotal role played by the private economy.

In addition to the large percent of the country's GDP and employment, private enterprises contribute substantially to taxation revenue, contributing over 50 percent of it and bolstering the national fiscal base, which is critical for sustaining public goods and services.

China's private economy has also been at the forefront of the industrialization and modernization drive that has transcended multiple sectors such as manufacturing, artificial intelligence, and renewable energy, representing over 70 percent of technological innovations in the country.

The Chinese government has been smart by enacting and promoting policies that ensure fair competition and a level playing field for private businesses. The level of commitment in ensuring transparency and ease of doing business has been a major game changer for the private economy to thrive.

For example, China unveiled new rules for fair competition reviews last June, which have ensured equitable market access for private businesses, removing favoritism. This certainly allows private businesses to compete with state-owned enterprises on a level playing field.

The level of transparency has been very impressive in recent years as China seeks to avoid bureaucratic hurdles. For instance, the Special Administrative Measures (Negative List) for Foreign Investment Access, is a guide that outlines which sectors of the economy foreign and private investment are restricted from. In doing so, it sets a clear expectation and avoids uncertainties that are common in other jurisdictions.

Expanding market opportunities through new consumption

There is a huge potential for China to create and expand market opportunities through new consumption approaches, especially in areas such as e-commerce and live-streaming sales, which are gaining popularity among the youth, as well as in digital services. The rapid expansion in China's digital economy presents an opportunity to drive new consumption growth, engineer innovations, and drive connectivity between the rural and urban markets.

The government's investment in critical IT infrastructures such as 5G networks and financial and technical innovations has facilitated the rapid development of the e-commerce ecosystem both in China and globally, thereby opening up opportunities for cross-border trade.

With the continuous rise of China's middle class, domestic consumption has also surged, presenting limitless opportunities for private-sector businesses. Premium services, quality products, and world-class experiences have been key determinants of what private businesses can and cannot do in China.

China's rural revitalization strategy has been remarkably successful in modernizing and developing rural industries, leveraging technological innovation, and expanding services such as e-commerce into rural markets. The private sector has played a monumental role in achieving this success.

Strengthening employment and protecting livelihoods

Through the innovations of private sectors as key job creators and enhancement of workforce skills and entrepreneurship, China can create sustainable employment opportunities and protect livelihoods. A successful example of this can be drawn from the role firms such as Alibaba and Huawei have played and continue to play in generating millions of direct and indirect jobs.

Under workforce skills enhancement, China's launch of programs such as the National Vocational Education Reform Plan and the Digital China Strategy has ensured that Chinese workers, whether in rural or urban areas, remain competitive through technical and digital literacies. In 2023 alone, China offered subsidized training for 18 million people in areas such as advanced manufacturing and digital competencies.

While it's essential to ensure that there's availability of jobs and career opportunities, it is equally imperative for China to ascertain the sustainability of the same. This is why for all intents and purposes, the government prioritized introducing social security measures covering private sector employees. This is a novel achievement that has a role to play in ensuring stability and protecting livelihoods.

Making it sustainable

The Chinese government's effective partnership with the private sector has been central to the country's economic success through enhancing prosperity, employment, and overall livelihoods.

By driving GDP growth, creating jobs, and fostering innovation, private enterprises underpin the nation's economic resilience. By fostering a dynamic and inclusive private economy, China can sustain high-quality growth, improve living standards, and enhance global competitiveness.

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com. Follow @thouse_opinions on X, formerly Twitter, to discover the latest commentaries in the CGTN Opinion Section.)