Support China's private sector

Byzjx

Updated Wed, 01 Sep 2004 00:00:00 GMT

Chinese Premier Wen Jiabao has called for support for private firms,amid concerns economic cooling steps have taken too big a toll on the dynamic and job-creating private sector.

China's tightening measures have lifted hopes that the economy is heading towards a soft landing, but policies have created unintended side effects, with many private firms complaining about credit squeezes.

Some 25 years after China launched market reforms, the private sector has become a pillar of the economy, accounting for about half of gross domestic product by some estimates and creating jobs for millions of workers laid off by state firms.

'To encourage, support and guide the development of non-state businesses is important for building a well-off society and to speed up modernisation,' the China Daily quoted Mr Wen as telling entrepreneurs during a visit to the eastern province of Zhejiang.

Zhejiang's economy, one of the fastest-growing in the country, is riding on private firms.

'The rights and interests of non-state enterprises should be protected according to the law, while such enterprises should do business legally,' Mr Wen was quoted as saying.

The government would take steps to create a 'fair environment' for private firms to compete in the market and make it easier for them to raise money, he said.

Mr Wen reiterated that the government's tightening measures since last year had yielded fruit.

Currently, the macro economic controls have achieved results, but they are still at a crucial stage.

Banks have been told to keep more money in reserve, making less available for lending.

Banks have also been asked to restrict lending specifically to sectors that have seemed especially hot - such as property, steel and cement.

But analysts say private firms, long subject to political suspicion, have borne the brunt as state firms have the political connections to keep getting the finance they need.

Entrepreneurs have been lobbying for state support following a high-profile shutdown of a US$13 billion (S$22.4 billion) steel project by Tieben Iron and Steel in Jiangsu province earlier this year.

A Cabinet meeting in April singled out Tieben, which aimed to build the steel complex in the eastern city of Changzhou with annual capacity of 8.4 million tonnes, as a prime violator of repeated calls for restricting investment in the steel sector. -- Reuters