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UPDATED: April 1, 2013 NO. 14 APRIL 4, 2013
Making Room for the Private Sector
Private economy needs more support from the government
By Wang Wenjie
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Chen Fang, Chairman of Sichuan Federation of Industry and Commerce, suggested strengthening legal protections for the private economy.

"Priority should be given to improving the legal environment, and making sure that POEs can compete on an equal basis," he said.

Investing overseas

Liu Yahuang, Vice Chairman of Chongqing Federation of Industry and Commerce, believes that in the post financial crisis era, many countries were in urgent need of foreign investment, and a new investment boom will take place in many regions.

"Compared to state-owned enterprises (SOEs), investment by POEs is more favored by other countries," said Chen Jingwei, Vice Chairman of All-China Federation of Industry and Commerce and Chairman of Hong Kong China Chamber of Commerce.

"Actually, foreign countries are cautious toward investment from Chinese companies, primarily SOEs, for they are deemed to challenge the interests of other countries by acting on behalf of their own country."

How can POEs go global? They are always prudent when it comes to foreign investment, said Chen, because they have to undertake all the risks. One failure and they could lose their shirts. On the other hand, they were restrained by financing difficulties. In stark contrast, SOEs have more opportunities because they are backed by the government.

"In recent years, POEs have done much on this front. By January 2013, non-financial overseas investment had reached $439.5 billion, of which, POEs accounted for 40 percent," said Wang Chao, Vice Minister Commerce.

To better support POEs to go overseas, Wang believed efforts should be made in the following aspects. First, the government should reduce investment barriers and improve the administration of overseas investment. Second, the coverage of special fiscal funds should be expanded and preferential policies diversified. Third, financing insurance should be improved and renminbi settlement of foreign direct investment should be facilitated. Fourth, collaboration platforms need to be set up to provide project match-making and information services for POEs and SOEs.

Seeking innovation

In addition to high production costs, weak innovation, a shortage of talented professionals and the drawbacks of family-run management, POEs are also confronted with an array of inherent problems. To realize brand upgrading and industrial transformation, POEs should self-reflect, emancipate their minds and intensify innovation.

"Many products and industries have matured, innovation is the most efficient way to win market share," said Liu. POEs should undergo restructuring, technological innovation and industrial upgrading.

"Putting aside government support, POEs should foster the ability to innovate. Only by elevating its credibility, can a POE gain greater access to finance," said Li Shufu, President of the Zhejiang-based carmaker Geely Group, which completed a takeover of Swedish car brand Volvo in 2010.

"In this year's government work report, transformation of the country's economic development model, and the development of the private sector and strategic emerging industries were all mentioned. If it is hard to restructure the existing system, we should try to combine the development of POEs with strategic emerging industries, in order to complete changes in economic development model," said Wang Yusuo, Board Chairman of ENN Group, a Hebei-based clean energy solution provider.

"POEs always take a lead in strategic emerging industries, such as e-commerce, new energy and culture. I believe the way out is to combine the development of POEs with strategic emerging industries."

Email us at: yushujun@bjreview.com

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