Chinese Vice-Premier vows unwavering support for private sector

BEIJING - Vice-Premier Liu He Friday reiterated China's unwavering support for the private sector in an interview with Chinese reporters.

"I want to emphasize in particular that we must uphold the basic economic system," Liu said. "There must be no irresolution about working to consolidate and develop the public sector; and there must be no irresolution about working to encourage, support and guide the development of the non-public sector."

The remarks came amid concerns of private enterprises about the implementation of the basic economic system.

Liu acknowledged that misunderstanding and deviation existed in implementation, citing a viewpoint of some lenders that it was safe to provide loans to state-owned enterprises, but politically risky to loan to private businesses.

"This kind of understanding and practice is completely wrong," Liu said.

The private sector plays an important role in the economic system, contributing more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of technological innovation, 80 percent of urban employment and 90 percent of new jobs and new firms.

"Without private enterprises, the entire economy cannot achieve stable development," Liu said.

Liu said the practices of not supporting private businesses for "private safety" are politically problematic and must be rectified.

"We must uphold the basic economic system and give full play to micro, small and medium-sized enterprises and the private sector in economic and social development," Liu said.

"We must pay high attention to the difficulties faced by micro, small and medium-sized enterprises and roll out precise and effective measures to help them.

"Efforts should be made to intensify research on working out policies aiming for boosting growth of private businesses in aspects including reducing burdens from taxes and administrative fees, solving financing problems, improving environmental governance, as well as enhancing technological innovation ability," Liu said.

"Efforts should also be made to help private businesses improve their own capability and adapt to market changes, and achieve high-quality development."

The Vice-Premier added that the State Council and the All-China Federation of Industry and Commerce will send special groups to inspect the implementation of the basic economic system and the development of micro, small and medium-sized companies.

Chinese SOEs and private enterprises interdependent

Liu said that state-owned enterprises (SOEs) are in an interdependent relationship with private enterprises, where there is mutual support and cooperation.

The discussions about the so-called "Guo Jin Min Tui," the Chinese phrase describing a situation where state firms force a retreat of the private sector, are "one-sided" and "wrong," he said in an interview with Chinese reporters.

Recently, state-owned banks or enterprises are helping and even restructuring private firms which are in liquidity crunch after expanding too fast at the costs of excessive debts and deviating from their main business. "I believe this is a good thing, not 'Guo Jin Min Tui'," he said.

State-owned enterprises, most of which are in the upstream of the industry chain, play roles in basic industries and heavy manufacturing, while private enterprises are more involved in providing manufacturing products, especially final consumption goods, said Liu.

"The two are highly complementary to each other with mutual cooperation and support. In the future, the Chinese economy will continuously upgrade in this direction to high-quality development," said Liu.

If private enterprises are in a good business condition, state-owned capital can withdraw, and SOEs can increase efficiency by enlisting the participation of private enterprises when facing difficulties, said the vice premier.

"We also encourage qualified private enterprises to conduct merger and acquisitions of small and medium-sized enterprises in the same industry with competitive potential but confronted with difficulties," said Liu.

Liu stressed that the Chinese government will create an equal environment, intensify the rule of law, strengthen property rights and intellectual property protection, stick to the basic economic system and deepen reform and opening-up.

"We have no reason not to have full confidence in the broad prospect of China's economic development," said Liu.