On October 10, the Ministry of Justice and the National Development and Reform Commission (NDRC) released the "People's Republic of China Private Economy Promotion Law (Draft for Solicitation of Comments)" (hereinafter referred to as the "Draft") on the portal to solicit opinions from the public.
Judging from the draft, there are two more outstanding improvements in this law.
First, the draft summarizes and summarizes the provisions of different policies and regulations in the past few years that involve protecting the fair rights and interests of the private economy and promoting the healthy development of the private economy, so that they have a systematic character. Some policy provisions have also taken on stronger legal force.
Second, for the first time, the draft defines what the private economy is. Article 76 mentions: "Private economic organizations" as used in this Law refers to for-profit legal persons, unincorporated organizations and individual industrial and commercial households lawfully established within the territory of the People's Republic of China and controlled by Chinese citizens, as well as for-profit legal persons and unincorporated organizations controlled or actually controlled by the aforementioned organizations.
I worked in the Legislative Affairs Bureau of the State Council (Legislative Affairs Office of the State Council) for 5 years, and participated in the formulation of regulations related to ownership such as the Regulations of the People's Republic of China on Urban Collectively Owned Enterprises. It should be said that at that time, there was no conclusion as to what the private economy was. Broadly speaking, it can be divided into two categories according to the size of the connotation: the big concept is that all market entities except state-owned enterprises and state-controlled enterprises, foreign-funded enterprises and foreign-controlled enterprises are private economies, and the small concept is the collective cooperative economy, that is, all private and privately controlled economies are excluded from the big concept.
Judging from the wording of the draft, it is closer to the third definition. Of course, there is room for improvement in the definition of the draft, and the private economy has made great breakthroughs in the composition of equity in recent years. For example, there is still room for discussion whether an employee-owned company like Huawei meets the definition of the above draft.
But defining it is also a crucial step.
The very tight time from the formulation of the draft to its promulgation shows that the central authorities are attaching great importance to the private economy. The draft mentions that "the private economy is an important part of the socialist market economy, a new force for promoting Chinese-style modernization, an important foundation for high-quality development, and an important force for building the mainland into a modern socialist country in an all-round way and realizing the great rejuvenation of the Chinese nation." Promoting the sustained, healthy and high-quality development of the private economy is a major policy that the country has adhered to for a long time. ”
Reform and opening up has changed the fate of the private economy, and then liberated the unlimited potential hidden in millions of entrepreneurs, and stimulated the infinite vitality hidden in the hearts of hundreds of millions of people. The private economy has grown from scratch, from small to large, from weak to strong, and has become the largest main body promoting the rapid development of China's economy. Over the past 40 years and more, the private economy has served the people and enriched the people, rejuvenated and enriched the country, and fundamentally changed China's economic and social structure and appearance. Roughly speaking, the development of the private economy has brought about fundamental changes in 15 aspects of the mainland's economy and profound changes in four aspects of the mainland's society.
The private economy has brought about 15 fundamental changes in China's economy
1. It has fundamentally changed the structure of China's main market: privately held enterprise legal persons account for more than 85% of the country's enterprise legal persons, and all private enterprise legal persons account for more than 95% of the country's total.
The micro foundation of the national economy is the enterprise, and the main body of the market economy is the enterprise. Reform and opening up has given birth to thousands of private enterprises. Private economy entrepreneurship and construction enterprises, from self-employed to small enterprises, from small enterprises to medium enterprises and large enterprises, to China's top 500 enterprises, and then to the world's top 500 enterprises. Its capital and capital are constantly growing. In 1978, there were only 150,000 individual industrial and commercial households in China, and there was not a single private enterprise, and by 2020, there were more than 130 million individual industrial and commercial households. In 1989, there were more than 90,000 private enterprises in China, and by 2020, there were 23.9 million privately held legal person enterprises in China, accounting for 95.4% of the country's total. All private enterprises account for 97.9% of the country's total. At present, the number of private enterprise investors exceeds 50 million, plus more than 100 million individual industrial and commercial households, and nearly 200 million people have become entrepreneurs and entrepreneurs, who are the largest group in China's economic micro foundation.
2. It has fundamentally changed the pattern of urban employment in China: private enterprises account for 80% of the urban employment stock and more than 100% of the increase.
Employment is the fundamental guarantee of people's livelihood, promoting employment is the basic function of the government, and full employment is an important foundation for national and social stability. The private economy provides employment, from small scale to large-scale, from small proportion to large proportion, and has now become the largest body of employment in China. In 1978, among the 95.14 million urban workers in China, 74.51 million were employed by state-owned units, accounting for 78.3 percent. 20.48 million people were employed in collective units, accounting for 21.5 percent. In 2019, there were 452.49 million urban employees and 54.73 million state-owned units, accounting for 12.1%; 23.6 million foreign-funded units, accounting for 5.2%; 145.67 million were in private enterprises and 116.92 million were individuals, accounting for 58%; The private sector accounts for 82 percent of the country's urban employment. In the past 10 years, more than 10 million new jobs have been created in cities and towns across the country every year, and the number of jobs in China's state-owned units and foreign-funded units has basically been decreasing year by year, and the total annual increase in individual and private employment has significantly exceeded the total number of urban employment increases in the whole country, that is to say, the private economy has provided more than 100 percent of the new urban jobs. This does not include the creation of new jobs among the more than 100 million people employed by private enterprises and self-employed people in rural areas.
3. Fundamentally changed the pattern of investment growth in China: private investment accounts for nearly 60% of the country's investment.
Investment growth is the main engine of economic growth. Over the past 40 years, especially in the past 20 years, China has made important contributions to the rapid growth of investment in various types of economies, but the largest contribution is private investment and private enterprise investment. For a long time, the growth rate of private enterprise investment has been significantly higher than the national average in most years and has doubled higher than that of state-owned enterprises. In 1980, state-owned units accounted for more than 80 percent of the country's investment in fixed assets, while individual and private investment (including rural individual investment) accounted for just over 13 percent. In 2012, private investment accounted for 54.6% of national investment, and by 2021 and 2023, it will account for 56.5% and 50.5%, respectively. Among the more than 20 major industries, most industries account for more than 50% of private investment, of which agriculture, forestry, animal husbandry and fishery, manufacturing and manufacturing account for more than 70%. Private investment and private investment have become the largest subject and driving force for China's investment.
4. It has fundamentally changed the pattern of China's industrial development: private enterprises account for 3/4 of manufacturing investment and 2/3 of industrial operating income.
Manufacturing is the main economic foundation of a country, and the revitalization of manufacturing is the top priority of revitalizing China's economy. China is already the world's largest manufacturing country and exporter of manufactured goods. For more than 40 years, the private manufacturing industry started from scratch and has now become the largest main force of China's manufacturing. In 2016, 7.7% of the country's manufacturing investment was state-owned, 4.3% foreign-owned, 77.2% private, and more than 85% private-owned. There are 31 manufacturing industries, and most of the industries account for more than 50% to 80% of private investment. In 2023, private industrial assets accounted for 47% of the country's total industrial assets above designated size, with total operating income accounting for 52% and total profit accounting for 47%. If we add more than 3 million industrial enterprises below designated size (of which private enterprises account for the vast majority), the proportion of various indicators of private industry is even higher. As far as the manufacturing industry is concerned, the proportion of indicators in various industries of private manufacturing is about 50%-80%. Coupled with the private manufacturing industry below the designated size, the proportion is higher. Private enterprises have basically had an absolute advantage in the export of ordinary manufacturing and finished products such as light textiles, food, electronics, and ordinary machinery; In terms of high-end manufacturing of major equipment and high technology, as well as the export of finished products, it is basically one of the three parts of the world, and some even half of the country.
5. Fundamentally changed the supply pattern of China's consumer goods: private enterprises provide about 90% of the country's daily consumer goods and about 70% of the country's medium and high-end consumer goods.
Over the past 40 years of reform and opening up, especially since the beginning of the 21st century, China has fundamentally solved the problem of commodity shortage and has become a country with an overall surplus of commodities. This is mainly due to the extensive and rapidly developing private economy. The investment of private industrial enterprises in various industries of China's textile and light industry accounts for more than 80%, and the sales revenue accounts for more than 70%. Private enterprises produce and sell about 90 percent of the country's daily consumer goods, about 70 percent of the country's medium and high-end consumer goods, and more than 70 percent of the export consumer goods, making great contributions to meeting the people's growing consumer demand.
6. Fundamentally changed the pattern of China's commercial services: private enterprises provide more than 3/4 of the living consumption services.
The development of the service industry is an important indicator of the prosperity of the country and its people. At present, China's service industry accounts for about 55% of the total economy. More than half of the private enterprises in the service sector have the number, employment and total sales. In particular, the private economy accounts for more than three-quarters of the consumer service industry. In particular, most of the value-added services of communication and Internet services, which fundamentally change people's lifestyles and improve the quality of life, are provided by private enterprises, especially the innovation of smart products and the innovation of daily consumption patterns, which basically originate from private enterprises.
7. Fundamentally changed the structure of China's real estate supply: private enterprises have built three-quarters of the buildings and houses in cities and towns.
Home ownership is a long-term dream of human beings. But hundreds of millions of Chinese have long struggled to achieve this in the past. After the reform and opening up into the 21st century, China's housing construction has developed rapidly, and the human dream of home ownership has been basically realized in China. The per capita housing area in China's urban areas was more than 3 square meters in 1978, 15 square meters in 2000, and more than 40 square meters in 2020. Currently, more than 90 per cent of households in urban areas own a home. The general solution of housing for urban residents in China is not only due to the reform of the housing system, but also to the construction of houses by real estate enterprises and the increasing expansion of housing supply. Private enterprises account for the vast majority of China's construction enterprises and real estate enterprises. In 2023, the output value of private construction enterprises will account for nearly 60% of the country, the number of private real estate enterprises will account for more than 90% of the country, and the number of employees will account for more than 70% of the country. Private enterprises are the largest providers of urban housing construction in China, and have made great contributions to the overall realization of the dream of home ownership for Chinese.
8. It has fundamentally changed the pattern of China's foreign trade and economic cooperation: private enterprises account for more than 60% of the country's exports and 1/3 of China's overseas investment stock.
Foreign trade and economic cooperation is one of the "troikas" driving China's rapid economic growth. At present, China is already the world's largest importer and exporter, and the world's second largest foreign investment. After China's accession to the WTO (World Trade Organization), private enterprises have gradually obtained the right to direct import and export and the right to invest abroad, and the foreign trade and foreign investment of private enterprises have developed rapidly, and they have now become the largest main force.
In the past, except for the export of township enterprises, there were almost no other private enterprises exporting. In 2023, China's total exports will be US$2,145.5 billion, of which 8% will be owned by Chinese enterprises, 28.6% by foreign capital, and 63.5% by private enterprises. The total import value was 2,556.8 billion US dollars, of which 26.6% were owned by Chinese enterprises, 32.4% by foreign capital and 41% by private enterprises. Private enterprises have accounted for more than 100% of China's foreign trade surplus, and have become the largest contributors to the country's foreign exchange reserves. In terms of overseas investment, since 2016, the non-public economy has accounted for more than 50% of China's overseas non-financial direct investment flows, and private enterprises have accounted for the vast majority of China's overseas non-financial direct investment. At present, China's various cheap and high-quality goods are all over the world, and all kinds of Chinese investors and businessmen have gone to the world, and China has become the largest contributor to the global economic development, among which private enterprises are playing an increasingly important role.
9. Fundamentally changed the pattern of China's scientific and technological innovation and development: private enterprises provide 60% of China's invention patents and 60% of new products.
At present, private enterprises have accounted for more than 80% of China's patent applications, more than 60% of invention patents, and more than 60% of new product offerings, making great contributions to rejuvenating the country through science and technology. In 2022, the R&D expenditure of industrial enterprises above designated size in China will be 1,936.1 billion yuan, of which 737.6 billion yuan will be spent on private enterprises (excluding private holding companies in limited and joint-stock companies, the same below), and all private enterprises will exceed 1 trillion yuan, accounting for more than 60% of the country's total. 1.98 million valid invention patents, including 795,000 private enterprises and more than 1.2 million private enterprises, accounting for more than 60%; The sales revenue of new products was 32.8 trillion yuan, of which 12.54 trillion yuan was for private enterprises and more than 18 trillion yuan for all private enterprises.
10. Fundamentally changed the pattern of China's tax sources: private enterprises provide more than 50% of the country's tax revenue and more than 65% of the tax increment.
Taxation is the source of the country's financial strength, the foundation of the national strength, and the basic guarantee for the operation of the state apparatus. And the main creators of taxes are businesses. After more than 40 years of development, private enterprises have become the most important contributors to China's tax revenue. In 2021, China's total tax revenue was 18.87 trillion yuan, of which 4.66 trillion yuan, or 24.7 percent, was held by Chinese enterprises, 2.97 trillion yuan, or 15.7 percent, and 11.2 trillion yuan, or 59.6 percent, was held by the private economy. In 2021, the national tax revenue increase was 2.27 trillion yuan, of which the private economy tax revenue increased by 1.34 trillion yuan, accounting for 58.9% of the national tax increment. In other words, China's private economy has generated nearly 60% of the country's total tax revenue and tax increment, and has become the largest contributor to the country's financial growth.
11. Fundamentally changed the source of income for Chinese workers: private enterprises paid wages and increased income for more than 300 million people in urban areas.
With employment, there is wage income, there is a guarantee of livelihood, some people live a life of food and clothing, most people live a well-off life, and some people live a rich life. At present, there are more than 400 million urban employees in China, of which about 350 million workers are employed in private enterprises, receive wages in private enterprises, and receive social security in private enterprises. In 1978, the average annual wage of urban workers was 615 yuan; In 2022, the average annual wage of employees in urban non-private units nationwide was 114029 yuan, the nominal wage increased by 185 times, and the real wage increased by more than 7% per year. The average wage of employees in China's private sector used to be only about half of that of those employed in urban non-private units, but now it has reached nearly 60 percent. In 2023, the annual wage level of private enterprises above designated size will reach 75,858 yuan, which is 77% of the average salary of 98,096 yuan for enterprises above designated size in China. On the whole, most of the ordinary employees of China's private enterprises have already lived a well-off life; Most of the skilled workers and middle managers have entered the middle class; The top management of enterprises above designated size has generally entered the affluent class.
12. Fundamentally changed the pattern of property rights of Chinese enterprises: private enterprises have allowed more than 100 million people to own enterprise property rights or company equity.
Those who have constant birth have perseverance. In the more than 40 years since the reform and opening up, the growth rate and scale of Chinese people's property are unique in the world. Bank deposits, insurance assets, self-owned housing assets, and equity stock funds are the three main assets of residents. While Chinese families have savings and most families own real estate, a considerable number of residents also own stocks, equity, funds and other properties. More than 100 million individual industrial and commercial households have small-scale operating assets, more than 50 million investors in private enterprises own enterprise equity property, tens of millions of middle and senior managers and technical backbones of private enterprises own enterprise equity incentive assets, and more than 100 million shareholders own the stock property of listed companies, while 60% of listed companies are private companies, and the shareholding ratio of their social shareholders is much higher than the average level of listed companies. Private enterprises are the most important promoters of the diversification, decentralization, publicization and socialization of property rights, and they provide conditions for the broad masses of the people to obtain property rights sharing. China's largest sharing economy is the property rights sharing economy, and private enterprises are the main promoters and largest providers of the property rights sharing economy.
13. Fundamentally changed the structure of China's wealth accumulation: private enterprises have produced China's billionaires faster and on a larger scale than at any time in China and abroad.
Everyone has the desire to pursue wealth accumulation and growth, but only a very small number of people realize the desire to accumulate and grow huge amounts of wealth. In the more than 20 years since the beginning of reform and opening up to the end of the last century, the personal and family wealth of some private entrepreneurs has changed from 10,000 yuan to 10 million yuan and 10 million yuan, and very few people have reached hundreds of millions of yuan. In the nearly 20 years since the beginning of the new century, the wealth of some private entrepreneurs has become hundreds of millions, billions, or even tens of billions or hundreds of billions of yuan. The speed of wealth accumulation, the amount of accumulation, and the number of wealthy individuals in China are unique in the history of China and the world, and have exceeded everyone's expectations.
From the perspective of industrial enterprises above designated size, in 2023, there will be 357,600 private industrial enterprises above designated size in China, with per capita assets of 133 million yuan, per capita net assets of nearly 53 million yuan, per capita main business income of 136 million yuan, and per capita profit of 6.54 million yuan. From the perspective of the top 500 private enterprises, the entry threshold for China's top 500 private enterprises in 2022 is 27.6 billion yuan in operating income, nearly 80 billion yuan per household, nearly 92.6 billion yuan in average assets, and 32.8 billion yuan in net profit per household.
Judging from the list of China's richest people, there will be 1,241 people entering the "Hurun China Rich List" in 2023, and the per capita wealth of entrepreneurs will be 18.9 billion yuan, including 895 people with a wealth of more than 1 billion US dollars, 628 people with a wealth of more than 10 billion yuan, and 30 people with a wealth of more than 100 billion yuan. This is only the publicly available wealth in the private economy, and the number of billionaires who are not publicly available, difficult to find, or from other fields is greater than the number of billionaires who are publicly listed.
14. Fundamentally changing the domestic and international competition structure of China's large enterprises: China's large private companies have become the new cutting-edge that China and the world can compete with.
The number of private enterprises entering the top 500 enterprises in China has not been a single one in the past, and now accounts for nearly 50%. In 2023, among the top 500 Chinese enterprises, 244 are private enterprises, accounting for 49%; The total assets per household are 264.5 billion yuan, the operating income is 137.2 billion yuan, the net profit is 5.1 billion yuan, and the employees are 38,000. In the 2023 Fortune Global 500, Chinese companies (including Hong Kong and Taiwan enterprises) have 142 companies on the list (including 132 in the mainland), which has surpassed the number of United States. Of these, 45 are private enterprises.
15. Fundamentally changed the pattern of China's philanthropy: Private enterprises and entrepreneurs have become the largest contributors to the development of philanthropy in China.
Private enterprises have become the largest contributors to China's philanthropy. The vast majority of private enterprises and entrepreneurs have participated in local public welfare and charity activities to varying degrees, from glorious undertakings to hope projects, from poverty alleviation to earthquake relief, from supporting community construction to engaging in targeted poverty alleviation, etc., private enterprises and private entrepreneurs are the main supporters and participants. In parallel with the China Rich List, the Charity List has become a vane for private enterprises to participate in public welfare and philanthropy. In 2022, the entry threshold for the Hurun China Charity List is to donate more than 100 million yuan, and 49 entrepreneurs will enter the charity list, with an average donation of 1.48 billion yuan and a maximum donation of 14.9 billion yuan.
The private economy has brought profound changes to Chinese society
1. Profound changes in China's social class structure: Nearly 200 million people composed of private business owners and executives, Chinese executives of foreign-funded enterprises, individual industrial and commercial households, and freelancers have become a new social class.
Since the beginning of reform and opening up, the development of the non-public sector of the economy, with the private economy as the mainstay, has promoted the formation of a new social strata of people. According to the Regulations of the Communist Party of China on the Work of the United Front issued in 2015, the new social strata mainly include four major groups: managers and technical personnel of private enterprises and foreign-funded enterprises (referring to those employed by private enterprises and foreign enterprises who have mastered the core technology and professional knowledge of enterprise operation and management), employees of social organizations (including lawyers, accountants, appraisers, tax agents, patent agents and other social professionals who provide knowledge-based products and services, as well as social organizations, foundations, Employees of private non-enterprise units), freelancers (refers to those who do not work for any economic organization, public institution or government department, and provide certain services to the society and obtain remuneration by virtue of their knowledge, skills and expertise within the scope permitted by national laws, regulations and policies), new media practitioners (refers to those who use new media as a platform or object to engage in investment and financing, technology research and development, content production and publishing, and business management activities on behalf of specific institutions). These people are concentrated in new economic organizations such as private enterprises and foreign-funded enterprises, as well as new social organizations such as non-governmental organizations. As builders of socialism with Chinese characteristics, they play an important role in promoting common prosperity, building a harmonious socialist society, and building a moderately prosperous society in all respects.
According to the early estimates of the United Front Work Department, the number of new social classes at the beginning of the 21st century was about 50 million, but the total number of employees in related industries was about 150 million, who controlled or managed about 10 trillion yuan of capital, used more than half of the country's technology patents, and directly or indirectly contributed nearly one-third of the country's tax revenue, absorbing more than half of the new employment every year. After nearly two decades of development, the above indicators have roughly doubled. At present, there are more than 100 million individual industrial and commercial households, 31.5 million private legal person enterprises, more than 250,000 legal person enterprises in Hong Kong, Macao, Taiwan and foreign-funded legal persons, 500,000-600,000 private and civil society organizations of various kinds, and tens of millions of freelancers, and the total number of people in several categories may have reached 200 million.
2. Profound changes in China's social organizational structure: Private and private civil society organizations have become the largest body of all types of social organizations in China.
All kinds of social organizations in China are mainly private and private. According to the statistics of the Ministry of Civil Affairs, in 2023, there will be 882,000 social organizations in the country, including 373,000 social groups, 9,617 foundations, and 499,000 private non-enterprise units. The vast majority of these social organizations are privately run by the private sector.
In 2022, there will be 37.17 million legal entities of various types in the country, in addition to enterprise legal persons and government legal persons, there are 744,000 public institutions, 350,000 social organizations, and 3.02 million other legal person organizations.
3. Profound changes in the composition of China's major political and social organizations: A large number of private entrepreneurs and heads of civil society organizations have entered various important political and social organizations at all levels in China, and some have even held important positions.
There are different numbers of representatives of private entrepreneurs in the party, government, trade unions, youth leagues, and other organizations at all levels across the country. Some private entrepreneurs and managers, as representatives of the non-public economy, have entered party congresses at all levels, people's congresses at all levels as people's congress deputies, and CPPCC members at all levels, as well as many private entrepreneurs into the Communist Youth League and women's federation organizations at all levels, and some private entrepreneurs have entered the organizations of the eight major democratic parties at all levels. In particular, the federations of industry and commerce at all levels and the various chambers of commerce to which they belong are social organizations dominated by private entrepreneurs.
4. Profound changes in the pattern of social and cultural undertakings: Most of the institutions and organizations of China's social and cultural undertakings are private institutions.
Private enterprises and institutions have become the main providers of various cultural products and services such as film, television, drama, arts and crafts, leisure and entertainment in China. In 2023, there will be 73,000 enterprises in cultural and related industries above designated size in China, with assets of 19.6 trillion yuan, operating income of 12.95 trillion yuan, and total profits of 1.15 trillion yuan. Among them, private cultural and related industry enterprises and institutions account for the majority, operating income accounts for nearly half, and employees account for the vast majority.
(The author is vice president of Dacheng Enterprise Research Institute)
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