In February, the Chinese government published a document, described as "The 36 Terms Document" (36 Terms) that sets out way forward for the development of private sector.

Since then, the private sector considerable development has taken place.

Breaking down state monopolies

China has witnessed a gradual breaking down of state monopolies across a range of industries. The following are just some examples:

Oil is traditionally an industry firmly in the hands of the government. However, the Great-Wall United Petroleum Company (GUPC), an amalgamation of 10 private oil enterprises, announced in June that it had completed its capital integration, and would begin operations in oil exploitation, petroleum refining, and oil transportation.

When China East Star Group Co. won a bid to become the holding company of Shenzhen Airlines, it also obtained its permit to operate the country's first private airline backed by 100 percent private capital. Buoyed by this development, another 15 private enterprises have followed suit and have applied for permits to operate private airlines.

The Commission of Science, Technology and Industry for National Defense has published a regulation on weapons research and development and production that allows private enterprises to play a role in a sensitive field typically reserved for the national defense sci-tech industry.

To date, 300 private enterprises have applied for the relevant licenses.

Simplified loan arrangements

In Xiaoshan, Zhejiang Province, a group of small to medium-sized enterprises (SMEs) has banded together to work with the local government to establish a joint venture credit guarantee company that provides loan guarantees to shareholder enterprises that require bank loans.

In Henan Province, too, credit guarantee institutions have been set up to cater to the SME market at all levels; province, city, and county. Results have been promising. In Q1 2005 alone, Henan's 59 SMEs obtained 185 million yuan (US$22.35 million) financing with the help of guarantee institutions.

Without a credit guarantee company, it is very difficult for SMEs to obtain bank loans. This is because SMEs are usually unable to furnish loan guarantees, which are a pre-requisite for a loan.

The guarantee company facilitates the process, and it's a win-win situation for all; the SME gets its loan, the bank gets its loan guarantee, and the guarantee company stays in business.

The China Banking Regulatory Commission also intends to implement a series of its own measures to facilitate the loans process to SMEs.

The Long-term view

The 36 Terms is a central government document that constitutes long-term national policy.

According to statistics released during a recent China Private Enterprises Forum, held in Beijing on June 6 and 7, 50.17 million people work in private enterprises, 16.7 percent more than last year; and the number of private enterprises with more than 1 million yuan (US$120,824) registered capital was 1.09 million.

Further, private enterprises are encouraged to participate in strategic economy adjustments as more and more state monopoly industries open up to privatization, industries such as sci-tech, services, agriculture, and infrastructure.

(China.org.cn by Wang Sining, June 29, 2005)