Efforts are being stepped up to remove legal hurdles hindering the development of China's 3.4 million private enterprises.

Officials with the Law Department of the All-China Federation of Industry and Commerce (ACFIC) said yesterday that some of the country's laws and regulations conflict with central government efforts to allow private enterprises achieve their potential.

The State Council freed-up operations of private companies, responsible for employing at least 47 million people, in a number of industries in February.

Directives allowed private companies to enter previously State-monopolized sectors like the railways, civil aviation and even national defence and also gave them easier access to bank loans.

"However, some laws and regulations, in effect, contradict the spirit of the cabinet's decision, and examples can be found everywhere," said an ACFIC official.

One example of the contradictions is that Interim Rules on Private Enterprises, released by the State Council in 1988, clearly bar private companies from the military industry and finance sectors. Under the new policy, private companies are allowed to bid for some military projects.

Corporate Law also says that only State-owned enterprises are allowed to manufacture "special products," such as weapons.

The Supreme People's Court's judicial interpretation in 1999, banning private companies from seeking investment from individuals, is also a case in point.

The ACFIC official, who preferred to be unnamed, said the federation is dispatching teams to seven provinces to find out how serious the problem is and what the best solution would be.

The federation is expected to submit proposals on amending relevant laws and regulations to both the central government and the law-making National People's Congress (NPC) after the survey is completed in June.

China enshrined individual property rights in the constitution last March, and declared them "inviolable."

Xu Jian, an official with the NPC's Financial and Economic Committee, said yesterday that a systematic law revamp is unlikely in the near future because legislation usually lags behind policy making.

He suggested, instead, that government departments revise their regulations and rules to remove restrictions on the development of private enterprises.

When conditions are ripe, the NPC could revamp or draft relevant laws, he added.

Level playing field

The Corporate Law is expected to be revised at the year-end to reflect the reality of the situation and current policies, said Xu.

The law will ensure a level playing field for all companies in China so they can compete effectively in the market, he noted.

Xu Kun, who owns several private companies in Shanghai, and Guizhou and Zhejiang provinces, said government departments should speed up revision of outdated regulations.

"I would like the central government to incorporate the changes in its 11th Five-Year Plan (2006-10)," said the businessman.

If the changes are included in the five-year plan, the central government can prod government departments to make revisions earlier, he said.

(China Daily June 7, 2005)