Zhejiang Province has been a leader in the development of the private sector in China since its reform and opening began a quarter-century ago. Assets of private enterprises in the province as of the end of last year were 310.0 billion yuan (US$37.4 billion), while the year’s sales and earnings totaled 375.7 billion yuan (US$45.3 billion) and 18.9 billion yuan (US$2.3 billion), respectively. Private enterprises exported US$7.94 billion worth of products, about 22.6 percent of total exports.

 

The Chinese government has affirmed the importance of the private sector in recent years. Private enterprises now are allowed to do business in infrastructure, public service and other previously off-limits areas. The government has also promised to grant private enterprise equal treatment with state-owned and foreign-funded enterprises.

 

These measures boost the development of the private sector nationwide, which means that Zhejiang’s comparative advantage is shrinking as many provinces, autonomous regions and municipalities catch up and more transnational companies enter the Chinese market.

 

The seven NPC deputy/entrepreneurs agreed that Zhejiang must improve its core competitive ability rather than attempt to wage a price war against other areas.

 

Most Zhejiang entrepreneurs launch their businesses by imitating others’ products, they said. This is patent infringement, a problem that has gained greater attention since China joined the WTO in 2001.

 

“Private enterprises should learn WTO rules, abide by them and make full use of them,” said Nan Cunhui, chairman of the board of Zhejiang Zhengtai Group. He said that private enterprises should hold their own patents. His company, for example, has opened a research and development institute overseas, hiring foreign experts to develop new products.

 

Nan was echoed by Lu Guanqiu, chairman of Wanxiang Group, a leading auto parts company. “In the first phase, they can introduce foreign advanced technology, then conduct independent R&D when they have adequate capital,” he suggested.

 

Chinese products are usually labor-intensive, and labor is relatively cheap. Low prices have won Chinese enterprises a huge chunk of the world market, but they have also led to a number of anti-dumping investigations and technical barriers.

 

To reduce such problems, Zhejiang’s stronger private enterprises have begun to turn to high-end products. Lu Guanqiu said that Wanxiang Group, for example, is considering producing pollution-free electric cars.

 

“Our next goal is to be integrated with international practice,” he added.

 

Private enterprises need to be innovative in systems and management as well as in technology, said Zong Qinghou, chairman of Wahaha Group.

 

The group also agreed that many private enterprises should accelerate plans to obtain financing in capital markets. Nowadays, many private enterprises have been listed on the stock market, where they have raised enough money for further development.

 

To expand their international markets, private enterprises must also consider adopting brand strategy.

 

“There is still a long way to catch up, but we have already begun international expansion,” said Li Rucheng, president of Youngor Group, a leading garment enterprise.

 

He said that skilled professionals are crucial for development. Currently, many private enterprises are still managed by family members, and his company plans to form a team of trained management personnel.

 

(China.org.cn by staff reporter Tang Fuchun, March 9, 2004)