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UPDATED: May 21, 2012 NO. 21 MAY 24, 2012
Not Opponents
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The government has also reduced the tax burden on private companies by initiating a pilot reform of the corporate income tax system in 2007, which has led to a large drop in private enterprises' contribution of sales revenue tax. The pilot reform, which was expanded this year, is expected to further reduce the tax burden on private companies.

Roles

Since China's reform and opening up, private companies have entered a golden period of development, and a structure of coexistence, cooperation and competition between SOEs and private companies has been formed, just like a man walking on two legs, which is steadier, faster and more coordinated than hopping with only one leg.

Under the socialist market economy, SOEs and private companies play different roles. The core task of resource-, capital- and technology-intensive SOEs is to become industrial leaders. Meanwhile, private companies, with most of them being labor-intensive enterprises, focus on local markets to create more job opportunities and can effectively facilitate local economic development. Due to their flexibility and creativity, some private companies have already gained reputation nationwide.

The competition and cooperation between SOEs and private companies has spurred their joint development. And that's why Chinese companies can compete among the world's top 500.

What should be discussed is how Chinese enterprises compete with international companies. Chinese enterprises are currently facing the situation in which "the United States retreats and China advances." By 2011, the number of U.S. companies among the world top 500 had dropped from 241 in 1975 to 133, and 61 Chinese mainland-based companies had entered the ranks, up from only two in 1995. This should be attributed to the advance of both SOEs and private companies.

In only seven industries, the number of state-owned and state-holding enterprises has surpassed 50 percent of the country's total, including cigarette production (99 percent), oil and natural gas exploitation (94 percent), gas production and supply (92 percent), petroleum processing, coking and nuclear fuel processing (71 percent), water production and supply (69 percent) and coal mining and washing (56 percent). These industries are resource industries or those related to public services and infrastructure, requiring SOEs to play a leading role in ensuring product quality, stabilizing product prices and maintaining market order. However, these industries, with clear and strict market access, do allow the entrance of private companies, on condition they observe government rules. In most other industries, state-owned and state-holding enterprises are not holding a leading position.

Strength training

China should develop SOEs and private enterprises in order to strengthen and advance both, instead of letting one advance and the other retreat. The statement that "the state-owned sector advances and the private sector retreats" is completely unfounded.

Among the world top 500, now we see a rise in the number of both our state-owned and private enterprises and a decline in the number of U.S. companies. We believe Chinese enterprises (both state-owned and private ones) will keep advancing amid cooperation and competition, and in the future, the number of Chinese companies among the world top 500 will catch up with that of U.S. companies.

China has already become the world's biggest exporter and second largest economy, thanks to the contribution of Chinese companies, both state-owned and private ones. SOEs and private enterprises are like the "two legs" of this oriental giant, making it advance faster, steadier and with coordination.

Email us at: yushujun@bjreview.com

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