Promote the Healthy Development of Diverse Forms of Ownership*

March 4, 2016

Good afternoon. It is a great pleasure for Yu Zhengsheng¹ and me to be here with members of the Chinese People's Political Consultative Conference (CPPCC), the National Committee from the China National Democratic Construction Association (CNDCA), and the All-China Federation of Industry and Commerce (ACFIC) and to join your discussion today. First of all, on behalf of the CPC Central Committee, I wish to convey sincere regards to the CPPCC members present and absent, and through you to other CNDCA and ACFIC members, to people working in the private sector of the economy.

Several speakers have offered inspiring insights on issues such as sustaining healthy economic development, promoting supply-side structural reform, and promoting the sound growth of the private sector. They have also voiced valuable and insightful opinions and suggestions. Departments concerned should study and draw ideas from them.

Last year, in the face of a complex international landscape and the formidable tasks of reform, development and maintaining stability at home, we committed ourselves to the coordinated implementation of the Four-pronged Strategy in accordance with the underlying principle of making progress while keeping performance stable. We took the initiative in economic and social development by proactively adapting to the new normal and taking a sound approach to dealing with significant risks and challenges. Economic growth continued to rank among the highest worldwide, while reform gained momentum across the board and drove to deeper levels, leading to new breakthroughs in economic, political, cultural, social and ecological fields. The year's major targets were accomplished, and the 12th Five-year Plan was completed.

Indeed, these achievements were hard-won. They were a result of the strong leadership of the CPC Central Committee and the concerted efforts of all the people of China. The hard work and wisdom of other political parties, the ACFIC and the CPPCC members present also factored in. Last year, the CNDCA Central Committee and the ACFIC tapped into their own strengths to carry out in-depth studies and research. They focused on topics such as boosting the Yangtze River Economic Belt, carrying out targeted poverty alleviation, accelerating the commercialization of scientific and technological advances, creating a favorable environment for innovation, involving private companies in the Belt and Road Initiative, and supporting small and micro businesses. They put forward a number of constructive proposals, which gave a boost to our work. I would like to express heartfelt gratitude to you all.

Now let me share some of my thoughts in response to your remarks and concerns.

1. Upholding and Improving the Basic Socialist Economic System

The basic economic system in which public ownership is dominant and diverse forms of ownership develop side by side is a fundamental policy inaugurated by the CPC. The policy is a pivotal part of the socialist system with Chinese characteristics as well as an essential requirement for improving the socialist market economy.

China's private sector has flourished since the adoption of reform and opening up in 1978 in keeping with the CPC's guidelines and policies, a trail blazed under the Party's leadership. The country's basic economic system was defined at the 15th CPC National Congress in 1997. It was pointed out emphatically at the congress that the private sector is an important component of China's market economy. The 16th CPC National Congress in 2002 decided to "consolidate and develop the public sector of the economy" and "encourage, support and guide the development of the private sector of the economy". While reaffirming the latter statement, it was further noted at the 18th CPC National Congress in 2012 that China would "ensure that economic entities under all forms of ownership have equal access to factors of production in accordance with the law, compete on a level playing field and are protected by the law as equals." It was pointed out at the Third Plenary Session of the 18th CPC Central Committee in 2013 that both the public and private sectors are key components of the socialist market economy and are important foundations for the economic and social development of China. Also, the property rights of the public sector are inviolable, as are those of the private sector. The state protects the property rights and legitimate interests of all economic sectors. In addition, China will promote equality of rights, opportunities and rules; abolish all the unreasonable regulations for the private sector; remove all hidden barriers; and stimulate its dynamism and creativity. The Fourth Plenary Session in the following year called for "improving the system for protecting property rights with fairness as the core principle, better protecting the property rights of natural persons and economic organizations of all types of ownership, and abolishing clauses in laws and regulations that go against the principle of fairness." The Fifth Plenary Session in 2015 underlined the need to "encourage private enterprises, in accordance with the law, to enter more sectors and involve non-state capital in SOE reform to better stimulate the dynamism and creativity of the private sector." 

The reason why I touch upon these crucial policies and principles is to illustrate that the CPC's stand on the basic economic system is clear-cut, consistent and unwavering, and it continues to move to deeper levels. It is enshrined in the Party Constitution. It will not and cannot be changed.

I would like to reaffirm that the status and role of the private sector in China's economic and social development have not changed, nor have our guidelines and policies of encouraging, supporting and guiding the growth of the sector and of devoting ourselves to creating a favorable environment and providing more opportunities for its development.

China is a socialist country led by the CPC. The public sector has maintained a firm hold over the years as the country develops. It has made a monumental contribution to China's development, national defense and security, and improvement in the people's standard of living. It is an invaluable asset belonging to all Chinese. There is no doubt that we should ensure its sound growth so that it will continue to contribute to reform, opening up, and modernization. Our emphasis on the need to consolidate and develop the public sector and our policy of encouraging, supporting and guiding the development of the private sector are not contradictory but inherently coherent. China is a huge country with a large population. It is still and will long remain in the primary stage of socialism. In a bid to step up economic and social progress, it is imperative that all sectors work in unison. The flame leaps high when everybody adds wood to a fire. The public and private sectors of the economy should be mutually reinforcing and beneficial; there is no need for conflict or strife.

China's private sector has grown larger and stronger under the guidelines and policies of the CPC and the state. For a long time, its rapid expansion has played a crucial role in helping stabilize growth, power innovation, increase employment, and raise living standards. This sector is a cornerstone for economic stability, a major source of the country's tax revenue, an essential player in technological innovation, a pillar for financial progress, and a driving force for sustained and healthy economic development.

Of course, the public and private sectors alike encounter problems, dilemmas and challenges as they grow. We need to work together in pursuit of solutions. However, we should not reach a point where we adopt a one-sided perspective. Claims that seek to negate the role of the public sector or the private sector run counter to the fundamental interests of the overwhelming majority of the people and the requirements of China's reform and development and are therefore incorrect.

2. Implementing Policies and Measures on Promoting the Healthy Development of the Private Sector

Since the reform and opening-up program began, the Party and the government have come up with a series of policies and measures on the development of the private sector. Since the 18th CPC National Congress in particular, these have been improved as we forge ahead with all-round in-depth reform.

A host of reform measures aimed at granting greater market access to private sector enterprises and ensuring that they develop on an equal footing with SOEs were launched at the third, fourth and fifth plenary sessions of the 18th CPC Central Committee. These included:
– encouraging private sector enterprises to take part in SOE reform;
– fostering mixed enterprises with non-public capital as the controlling shareholder;
– ensuring that all kinds of market players can enter areas not on the negative list on an equal basis in accordance with the law;
– allowing more SOEs and enterprises of other types of ownership to develop into mixed enterprises;
– allowing private capital to hold shares in projects invested in by state-owned capital;
– allowing qualified private capital to set up financial institutions such as small and medium-sized banks in accordance with the law;
– allowing private capital to participate in urban infrastructure investment and operation by government license and other means;
– encouraging private capital to invest in rural construction; and
– allowing enterprises and social organizations to initiate various programs in rural areas.

In order to implement the principles proposed at the 18th CPC National Congress and the third, fourth and fifth plenary sessions of the 18th CPC Central Committee, we have launched a large number of relevant policies and measures. It is safe to say that a policy framework that encourages, supports and guides the development of the private sector has taken shape. The private sector enjoys a better policy and social environment than ever before.

For some reasons, supportive measures for these policies are not substantive enough. Consequently, the policies have yet to achieve the desired results on the ground. Several problems stand out. For instance, there remain many restrictions on market access. During policy implementation, the so-called "glass ceiling" exists, coupled with numerous restrictive policies and unspoken rules. Certain government departments still fail to provide efficient services to private companies. The financing channels of private companies are insufficient, especially for small and medium-sized enterprises and small and micro businesses, resulting in a strained cash flow. Mired in the current predicament, some entrepreneurs have identified three stumbling blocks – an under-heated market, financing hurdles, and business model transformation woes.

Although these problems mostly occur during policy implementation and stem from ineffective execution, they have taken a toll on the viability of our policies. We must make resolute efforts to solve them. On the one hand, we should improve policies by giving greater substance to them and making them more practicable. On the other hand, we should intensify implementation efforts to ensure that all policies are carried out to the letter. The total or partial failure to implement policies and defective implementation are mainly last-kilometer problems. I want to reiterate that now that we have a plan, it is most important to implement it. All regions and government agencies should add detail to our policies and measures with quantitative indexes based on their actual conditions. They should also take supportive steps to ensure that the policies can take root, become more specific, and produce substantive results, so that private companies can reap more tangible benefits.

At present, we must concentrate on the following areas: First, we need to tackle inancing difficulties for small and medium-sized enterprises. The financial system should be improved so that it can offer reliable, efficient, and convenient services to meet their financing needs. Second, we need to relax restrictions on market access. Private capital should be encouraged to enter all industries and sectors to which entry is not explicitly prohibited by laws or regulations. All sectors that the Chinese government has opened or promised to open to overseas investment should be open to Chinese private capital. Third, we need to accelerate the establishment of a public service system. The creation of a generic technology service platform for private companies should be supported. The technology market should be vigorously developed to provide technological support and professional services for innovative private companies. Fourth, we need to guide private sector enterprises in reorganizing private capital through the equity market and carrying out mergers and acquisitions across regions and industries, thus fostering a number of competitive conglomerates with distinct features. Fifth, we need to further re-engineer and streamline administrative approval procedures concerning private investment management and fees charged to enterprises. Intermediate processes and the conduct of intermediaries should be regulated to reduce the burden on enterprises and lower their costs.

The new normal is a hallmark of China's economic development during the 13th Five-year Plan period (2016-2020). It presents both challenges and opportunities. The key lies in how to understand and grasp it. A proper understanding, a good grasp, and effective actions can help turn challenges into opportunities. Private companies should be self-motivated and innovation-driven to gain a correct understanding of the new normal, proactively adapt to it, and strive for new achievements, upgrades and developments. For instance, the Belt and Road Initiative, the Coordinated Development of Beijing, Tianjin and Hebei, and the Yangtze River Economic Belt offer unprecedented opportunities. Private companies have every right to be fully involved in the three strategies. As they push for joint reorganization regarding equipment, technology, standards and services, they can optimize and upgrade their industries. Also, the proposed 13th Five-year Plan puts forward 50 major initiatives and more than 300 specific measures, all of which provide tremendous opportunities for the private sector.

The advantages of China's economy – solid resilience, great potential and significant scope for adjustments – are readily apparent. China remains the country with the best investment opportunities throughout the world. There is more space; there are more opportunities and better prospects for the private sector to develop and for those working in the sector to make the most of their abilities. This sector is expected to play a bigger role. Confidence counts. There may be short-term fluctuations in China's development, but in the long run, positive trends prevail. People in the private sector should have an accurate idea of the global view of China's economic development, bolster confidence, and enhance overall competence. They should improve the corporate management system, rekindle entrepreneurship, bring their talent into full play, boost the inherent dynamism and creativity of their enterprises and enable them to scale new heights.

3. Encouraging People in the Private Sector to Be Actively Involved in Building Socialism with Chinese Characteristics

I emphasized at the Central Conference on the United Front last year that the healthy development of the private sector depends on those working in the sector. While bearing this idea in mind, these people should dedicate themselves to self-development, self-study, and self-improvement. Do not let this requirement make you feel uncomfortable. In the CPC, officials are required to do likewise, and the bar is even higher. A traditional Chinese saying goes, "There is no pure gold, nor are there perfect people." We should constantly improve ourselves and strive for excellence.

Many entrepreneurs are successful and have become public figures. To put it colloquially, you are all "big shots". What you do and say can have a remarkable social impact, and you should therefore cherish and maintain a positive social image. The campaign in which entrepreneurs are educated in ideals and convictions and called upon to put them into practice, with a focus on the observance of the law, honesty and firm confidence, should be more extensive. You should always love the motherland, the people and the Party; practice the core values of socialism; and set a good example of dedication to work, abiding by the law in doing business, entrepreneurship and innovation, and giving back to society. As you work to make the Chinese Dream of national rejuvenation a reality, you will write a glorious chapter in your own lives and careers.

We need to set great store by educating the younger generations of private sector leaders. They should be encouraged to inherit and carry forward the older generations' entrepreneurial spirit and the great tradition of answering the call of and following the Party. Private companies should participate in the Guangcai Program and other charitable initiatives. They should not forget how they have prospered; they should attach equal importance to the public and individual interests and be ready to undertake social responsibilities. The ACFIC's targeted poverty alleviation program of 10,000 Enterprises Helping 10,000 Villages is a good initiative. It should be implemented effectively.

We have demanded that officials stay true to our principles and conduct themselves appropriately in their relations with entrepreneurs. They should not be indifferent to entrepreneurs, turn a deaf ear to their legitimate requests, or refuse to protect their lawful rights and interests. In an effort to propel economic and social progress, they often work with those in the private sector. This is inevitable and is actually a necessity. They should build a gentlemen's relationship. Officials should develop an affinity with entrepreneurs, create a stable business climate for them, and help them prosper. Their relations, however, should not be like those between feudal bureaucrats and entrepreneurs holding official posts or between financial consortiums and politicians in Western countries, far less between casual friends who get together only for wining and dining.

I often think about how people in the government and business can establish a new type of relationship. In my opinion, it can be summed up in two words – affinity and integrity.

For officials, affinity means that they should be open-minded and sincere in developing relations with private companies. In particular, when these companies encounter difficulties and problems, they should take the initiative in lending a helping hand. They should pay more attention to people working in the private sector, often hold heart-to-heart talks with them and provide them with guidance, help them address practical problems, and support the development of the private sector wholeheartedly. Integrity means that their relations with entrepreneurs should be clean, without selfish motives. They should not abuse power for personal gain or profiteer from their public office.

On the part of entrepreneurs, affinity means that they should be eager to communicate with Party committees, governments and government agencies at all levels, speak the truth, put forward constructive proposals, and support local development with enthusiasm. Integrity means that they should behave honorably and righteously, run enterprises in accordance with discipline and laws, and do business in an open and aboveboard way. When their companies experience difficulties and problems, they can make themselves heard and seek solutions through regular channels. If government workers fail to give them a hearing or are negligent, they can report them to relevant authorities. They can protect their lawful rights and interests through legal means. No company can succeed through improper and unscrupulous practices. These practices not only undermine social ethics, but also undermine the good conscience of those involved.

Abiding by the law is an overriding principle that all enterprises should uphold. People in the public sector and the private sector alike should take the fact of being law-abiding and honest as their lifeline. They should do business, govern their companies and safeguard their rights in accordance with the law. Never should they break the law by doing things such as tax evasion, smuggling, producing and selling counterfeit products. They should refrain from dishonest practices such as performing sub-quality work, defrauding with short weights, and selling shoddy products at high prices.

Since the 18th National Congress, the CPC has intensified its anti-corruption campaign. We have continued to catch "tigers" and also "flies". Showing zero tolerance for corruption, the campaign covers all those holding public office without exception. We have investigated and dealt with a large number of discipline and law violations. The campaign is conducive to cleansing both the political and economic ecosystems, restoring market order and operations, and rectifying distortions. Is it not inevitable that the economy should suffer if people in positions of authority ask for bribes, seek personal gain by deliberately erecting obstacles, or engage in embezzlement of public funds and under-the-counter dealings? I believe upright entrepreneurs can identify with this. At the same time, I must point out that some of the cases that have been dealt with involve private enterprises. In some cases, officials demanded bribes, while in others, business managers offered bribes. The former shows that we have not yet put officials under sufficient scrutiny, and we therefore need to enforce more stringent discipline. Entrepreneurs should learn a lesson from the latter cases. In no circumstances should they let this happen.

Several political parties and the ACFIC will elect new leaderships this year or next year, as will local people's congresses and CPPCC committees. It is important to make proper political arrangements for private sector figures who have made outstanding contributions. We should uphold high standards, adopt strict procedures, and conduct careful reviews. Based on valid overall assessments, we should see to it that private sector representatives who have strong moral and political integrity, who are in a good position to represent their industries, who are capable of participating in the discussion and management of state affairs, and who enjoy a favorable social reputation are recommended to leadership positions. We will support the efforts of other political parties including the CNDCA to promote ideological, organizational and institutional progress, and especially to make their leadership more competent. In this way, they can become more capable of grasping the political landscape, taking part in the discussion and management of state affairs, exercising leadership, cooperating with others, and addressing their own problems. These political parties have raised concerns over certain problems including those that they have experienced while performing duties. We should create the conditions for helping to analyze and resolve them. The ACFIC should continue improving itself to enhance the organization's cohesion, influence, and capacity to execute plans. It should promote the reform of its affiliated chambers of commerce and live up to its role in providing direction, guidance and services.

* Speech at a joint panel discussion of CPPCC National Committee members from the CNDCA and the ACFIC during the Fourth Session of the 12th CPPCC National Committee.

Notes 

¹  Yu Zhengsheng (1945- ), member of the Politburo Standing Committee of the 18th CPC Central Committee and chairman of the 12th National Committee of the CPPCC.

(Not to be republished for any commercial or other purposes.)