In a landmark statement on Monday, the country's cabinet encouraged deeper reforms and further development of the non-State investment system, allowing private investors to invest in any sector not forbidden by laws.

The statement was made public Monday, after a forum of the State Council focused on improving the country's non-public economy.

Private investors can put their money into any sector not forbidden by laws, the State Council said Monday.

Improving the country's non-public economy was the focus of Monday's meeting.

In a written statement, Premier Wen Jiabao said the non-public economy is a very important component of China's socialist market economy.

Wen said different levels of government should draft policies to "encourage, support and guide" the non-public economy.

Vice-Premier Zeng Peiyan said private entrepreneurs can invest in infrastructure, public undertakings and other sectors on equal footing with other types of enterprises.

Zeng said prospects for the non-public sector are promising as the country is not only offering support but also institutional changes.

With the improved political status of private entrepreneurs and a constitutional amendment in the offing to provide stronger protection on private ownership, Zeng said the country is transforming its favorable policies towards the non-public sector into concrete institutional guarantees.

He said China's non-public sector has made rapid progress, but some problems remain.

Statistics from the All-China Federation of Industry and Commerce show that every day there are about 1,500 new privately-owned enterprises with registered capital of 3 billion yuan (US$361 million).

In 2003, approximately 570,000 new privately-owned enterprises were set up, with a total registered capital worth 1 trillion yuan (US$120 billion).

The development of the non-public economy has become a policy firmly pursued by the Chinese Government, Zeng said, noting that both the State-owned economy and privately-owned sectors are the basis of the national economy.

Experts said the private sector is emerging and gaining clout in Chinese society but more efforts are needed to make them develop healthily.

"This round of opening-up policies toward private sectors is quite good, but reinforcement of them is a demanding job," said Lin Yueqin, researcher with Chinese Academy of Social Sciences, who added that private entrepreneurs have long been worried about their political rights and the protection of private ownership.

He said China has enhanced legislation to protect private property and created greater incentives for people to establish their own businesses.

But he insisted that enterprises will come across three hurdles despite the new encouragement from the government.

First, local governments, likely to lose many opportunities for administrative intervention, are likely to continue in a track of blind profiteering.

Second, the non-public sector, mainly medium and small businesses, will face financial difficulties because banks are unwilling lend them money. Meanwhile, State-owned large enterprises in the same sectors will continue to strengthen their monopoly.

"Finally, some private companies are still challenged by themselves," said Lin. He said most private companies in China are small-sized and short of research and development capacity.

(China Daily July 27, 2004)