The regulation now in force was issued in 1988. It has played an active role in both promoting the development of private economy and regulating the administration and supervision of government, according to the vice-chairman. But as the political and economic conditions of both China and the world have changed so much, and in addition, many fresh issues have appeared with the development of private businesses, the regulation is thwarting the further development of the private sector, Bao said.

The Federation pointed out in its proposal that some provisions of the regulation -- a product of the planned economy -- have proved to deviate from the current economic conditions as well as the spirit of developing a market economy.

For example, Article 1 of chapter I stipulates that the regulation was promulgated to boost a socialist planned commodity economy, which is not in line with the policy of establishing a socialist market economy. In Article 3, private sector is described as “a supplement to socialist public ownership,” which deviates from the principle established in later years that emphasizes the role of the non-state economic sector as an integral part of the socialist market economy. The state encourages some people and some areas to get rich first through a means of combining distribution according to work and distribution according to essentials of production so as to promote common prosperity step by step. But Article 36 in Chapter VI of the regulation sets this limit: The private enterprise heads’ salary shall be within the 10 times of their employees’ salary. Such a restriction suffocates the enthusiasm of those private businessmen in developing their businesses.

In addition, many provisions of the regulation transgress other related laws now in force.

According to Company Law, a limited liability company shall be invested by shareholders numbering from 2 to 50. But this regulation says the number of shareholders in a said company should range from 2 to 30, and an approval from the authority in charge of industry and commerce shall be sought if the number is over 30.

Furthermore, the provision in Article 2, which stipulates that the difference between an individual industrial commercial business and a private enterprise lies in the number of its employees being above eight or not, has no scientific foundation and breaks the related parts of the Company Law. It goes against the principle of equal competition. It is therefore necessary to remove such discriminatory names as “private enterprises” and “individual industrial or commercial businesses” and to regulate how various companies are designated according to the relevant laws made by the NPC and its Standing Committee.

Bao further explained that although private enterprises could in principle deal in any sectors which foreign companies could, some departments still administer private enterprises following the original provisions in the regulation, which are somewhat discriminatory and narrow the development of private businesses.

By the end of last year, according to Bao, the number of private enterprises had reached 1.76 million and this number will top 2 million this year. Shanghai alone is home to more than 180,000 private businesses. Private investment in capital construction has accounted for over 60 percent of the total. Private businesses have played their part in developing the national economy and creating job opportunities.

It is also mentioned in the proposal that in order to establish and improve the socialist market economic system and an open, equal competition system, the NPC and its Standing Committee have no longer been enacting laws according to company ownership but rather according to company operations. Successful examples include Company Law, Partnership Enterprise Law and Private Sole Proprietorship Law, all of which were issued in the past three years.

After WTO entry, it has become increasingly important for China to establish laws and regulations complying with WTO rules and to abolish unsuitable ones. Bao Yujun said that the government should take some measures to protect the tender private enterprises as foreign companies rush into China. Nowadays private enterprises cannot enjoy the same equal treatment as foreign enterprises. Under this circumstance, the development of private business and even whole national economy could be disturbed. So it’s better to abolish the old regulations and constitute new laws and regulations as soon as possible so that private sector could develop robustly.

(By Zhang Yan, translated for china.org.cn by Zhang Hui, March 14, 2002）