Private enterprises face five challenges: renowned economist
( 2002-10-16 11:24 ) (7 )

“Chinese private enterprises have developed very rapidly yet they still have five challenges to face,” Wu Jinglian said. Wu is recognized as a highly respected Chinese economist and was speaking at a recent Chinese Economic Forum in Beijing.

He is of the view that the Chinese business sector and especially private enterprises within the sector are now facing increased competitive pressure following China’s WTO entry.

An Influx of Foreign Enterprises

Foreign enterprises are increasingly moving their factories into China and now enjoy much the same cost advantages as their Chinese counterparts. Compared with Chinese enterprises, foreign firms have more opportunities to reduce their trading costs.

Natural Barriers to Rural Growth

Chinese farm production is at a competitive disadvantage to foreign farm production. Opportunities to reduce production costs are restricted due to the limited land resources available to support such a huge population. Consequently farmers are one of the most vulnerable groups in China. As their income is held back, there is a knock-on effect nationwide with limited purchasing power in rural markets generally. This in turn can only hinder the development of Chinese private enterprises.

Funding Difficulties

Chinese enterprises face challenges arising from a difficult financial environment. These make it difficult for them to raise new funds either directly or indirectly.

Malpractices

The commercial environment is also not good enough. It has its problems of scandals, defaults, unfair competition and lack of tight control. This is just one more factor, which hinders the development of Chinese private enterprises.

Still Developing

Finally, although Chinese enterprises have already come a long way in terms of development, they are not yet on a level playing field with the world’s major companies due to their relative lack of experience and technology.

Statistics show that recent years have seen major improvements in Chinese private sector. They are now able to play a more important role in the development of the Chinese economy. During 2001 the overall output of Chinese private enterprises increased 10 percent, their turnover in retail sales of household products was up 14.6 percent, and registered capital rose 30 percent. They also provided 21.4 million laid-off workers with jobs.

Since the beginning of this year, Chinese private enterprises have further stepped up their development. Wu Jinglian said he was optimistic that Chinese private enterprises will have a bright future once they overcome the five challenges.