Dynamic Private Enterprises in Shandong

By+GAO+XIN

ON August 8， 2014 the All- China Federation of Industry& Commerce published the list of Chinas Top 500 Private Enterprises. Fifty-four private companies from Shandong Province ranked among the top 500， putting Shandong in third place behind Zhejiang and Jiangsu. Fifteen Shandong companies ranked in the top 100. This achievement is attributed to the provinces economic reforms and an improving business environment.

Private Enterprises on a Fast Track

Over the three decades since Chinas reforms began， Shandongs private sector has grown into a major engine for local developments in society and culture. In 2013， Shandong had 3，974，000 registered private enterprises， accounting for 96.3 percent of the local market. The added value generated by the private sector reached RMB 2.45 trillion， accounting for 44.8 percent of the provinces GDP. Private businesses are playing an irreplaceable role in Shandongs development.

However， these fi gures are dwarfed by the accomplishments of more economically advanced areas in China.

According to official figures， Shandong has 77.4 private companies and 320.8 individual businesses per 10，000 people， both below the national average. In 2013 ， the share of added value generated by private enterprises in local GDP and the total amount of private companies registered capital lagged far behind Guangdong and Jiangsu.

According to Shandong governor Guo Shuqing， the key to developing the private economy lies in clarifying the border between the government and the market to create a favorable business climate. The local government introduced a series of policies and measures to mobilize the vitality of private economy and improve the business environment. The provincial governments 2014 work report vowed to stimulate the private economy and remove barriers to private investment. In July and August， Shandong promulgated guidelines for boosting the private economy， which include strengthening the legal system， improving the market environment and reinforcing governmental oversight.

Local officials said that the guidelines aim to remove institutional obstacles and relax restrictions on the private economy. With the implementation of more favorable policies， private enterprises are expected to develop on a fast track.

Streamlining Administration and Delegating More Power to Lower Levels

The transformation of government functions is breathing new life into Shandongs economy and society.

At a 2013 meeting， Guo Shuqing， then Shandongs acting governor， enjoined the new provincial government to delegate power to lower levels and give full play to civil society and the free market.

A joint survey by Shandong Administration for Industry & Commerce and Shandong Academy of Macroeconomic Research found that current regulations require official pre-approval for 292 items in the application for a business license. In recent years， Shandong has made efforts to streamline the approval process by decentralizing and simplifying approval procedures. Barriers to private investment have been reduced to encourage market activity.

However， private companies continue to complain that their burdens remain heavy. New projects now need a score of assessment reports from government-designated agencies in the course from planning to implementation， which offset benefits of reforms. The government has acknowledged the need for greater change and has pledged to further simplify ratification proce-dures. It has also changed the policy on assessment reports by allowing companies to choose facilitating agencies in different areas to issue the most necessary assessments.

At the same time， the local government attaches great importance to increasing ratification efficiency. Government service centers at every level are urged to accept applications for business licenses and other certificates for new businesses at “one counter.” Better coordination and cooperation among government departments would obviate applicants from shuffling between different offices. “The time cost saved by the reform on ratification procedures is considerable，” said Gao Fuyi， head of the Shandong Academy of Macroeconomic Research.

Breaking the “Glass Door”for Private Investors

“What we long for is fairness，” said Tang Yilin， president of Jinan Shengquan Group Co.， Ltd. At present， many of the difficulties facing private businesses are rooted in unfair treatments.

There are three major policy obstacles impeding private investment， known colloquially as the “glass door，”“swinging door” and “revolving door.”Although government policies may not explicitly bar private companies in certain fields， in practice they are often blocked from getting a foot into those areas. Prejudice against private enterprises remains， and double standards are applied to private and state-owned enterprises in market access， security deposits， and other issues.

For this reason， one of the important principles in the new guidelines is guaranteeing equal rights， opportunities and rules for all businesses and removing hidden barriers to private investment. The measures also permit private capital to take part in state-owned enterprise reforms and reorganizations. No limit on the shares held by private investors will be defined in competitive sectors. And rival capital is encouraged to hold controlling interest in multiownership firms. All competitive industries and investment fields will open to private capital. Moreover， Shandong will also experiment with opening mo-nopolies and franchised industries to private investment.

The new guidelines also stipulate that no additional conditions should be imposed on private enterprises when they are involved with governmental funds， government procurement or loans from international financial organizations and foreign governments. Furthermore， private companies will receive the same treatment as state or collectively owned enterprises in land leases， supply and other aspects. Equal opportunity will be given to the heads of private companies in attending highlevel conferences， career trainings and economic and trade cooperation. All these measures aim at providing private investment with a level playing field and a better market environment.