Speech at a Symposium on Private Enterprises

Xi Jinping

November 1, 2018

Translated by Vero Publishing from the Chinese text released by Xinhua. No official English full text has been published; the line "private enterprises and private entrepreneurs are our own people" follows the wording used in official English reporting. See the translator's notes at the end.

Hello, everyone! We are holding this symposium today mainly to hear your views and suggestions on the economic situation and on the development of the private economy. First of all, I would like to extend my sincere greetings to the private entrepreneurs present here and to private entrepreneurs throughout the country.

Just now, several representatives of private enterprises spoke and offered many valuable views and suggestions, which the relevant departments should study carefully and take on board. Drawing on what you have said and the issues you are concerned about, I would now like to make a few points.

China's non-public sector developed after the launch of reform and opening up, under the guidance of the Party's principles and policies. The basic economic system, with public ownership playing the dominant role and diverse forms of ownership developing side by side, is an important component of the system of socialism with Chinese characteristics, and an inevitable requirement for improving the socialist market economy. After the Third Plenary Session of the Eleventh Central Committee, our Party broke free of traditional ideas about ownership and opened the door to the development of the non-public sector. In 1980, Zhang Huamei of Wenzhou received the first business license issued to a self-employed individual.[1] By 1987, the number of people working in urban self-employed businesses and related trades nationwide had reached 5.69 million, and a large number of private enterprises were springing up. After Comrade Deng Xiaoping's remarks during his 1992 tour of the south were published, a new wave of starting businesses and developing the private economy swept the country, and many well-known large private enterprises got their start in this period.

The Fifteenth National Congress of the Party established "public ownership playing the dominant role and diverse forms of ownership developing side by side" as China's basic economic system, and stated explicitly that "the non-public sector is an important component of China's socialist market economy." The Sixteenth National Congress called for "unswervingly consolidating and developing the public sector" and "unswervingly encouraging, supporting and guiding the development of the non-public sector." The Eighteenth National Congress went further, calling for "unswervingly encouraging, supporting and guiding the development of the non-public sector, and ensuring that economic entities under all forms of ownership have equal access to factors of production in accordance with the law, compete on a level playing field, and are equally protected by law."

Since the Eighteenth National Congress, I have repeatedly reaffirmed that we must uphold the basic economic system and the "two unswervinglys."[2] The Third Plenary Session of the Eighteenth Central Committee stated that the public and non-public sectors are both important components of the socialist market economy and important foundations of China's economic and social development. The property rights of the public sector are inviolable, and so are those of the non-public sector. The state protects the property rights and lawful interests of economic entities under all forms of ownership, upholds equality of rights, of opportunity and of rules, abolishes all forms of unreasonable regulations against the non-public sector, removes hidden barriers of every kind, and unleashes the vitality and creativity of the non-public sector. The Fourth Plenary Session of the Eighteenth Central Committee called for "improving a property rights protection system with fairness as its core principle, strengthening protection of the property rights of economic organizations under all forms of ownership and of natural persons, and clearing away legal and regulatory provisions that violate fairness." The Fifth Plenary Session of the Eighteenth Central Committee stressed the need to "encourage private enterprises to enter more sectors in accordance with the law, bring non-state capital into the reform of state-owned enterprises, and better unleash the vitality and creativity of the non-public sector." The Nineteenth National Congress wrote the "two unswervinglys" into the basic policy for upholding and developing socialism with Chinese characteristics in the new era, further confirming them as a major principle and policy of the Party and the state.

On March 4, 2016, when I joined a panel discussion with members of the China National Democratic Construction Association and the All-China Federation of Industry and Commerce at the Fourth Session of the Twelfth National Committee of the CPPCC, I gave a speech devoted to upholding China's basic economic system and set out the principles and policies of the Party and the state toward the private economy. The purpose of today's meeting is to pool ideas, strengthen confidence and work together to maintain and strengthen the good momentum of the private economy.

On October 20 this year, I wrote back to private entrepreneurs who had been commended in the "Ten Thousand Enterprises Helping Ten Thousand Villages" campaign,[3] specifically on the development of the private economy. I stressed that over the forty years of reform and opening up, private enterprises have flourished and the private economy has grown from small to large and from weak to strong. It has played an important role in stabilizing growth, promoting innovation, increasing employment and improving people's lives, and has become an important force driving economic and social development. Supporting the development of private enterprises is a consistent policy of the Party Central Committee, and this will not waver in the slightest.

I. Fully Affirming the Important Status and Role of China's Private Economy

This year marks the fortieth anniversary of reform and opening up. Over these forty years, China's private economy has grown from small to large and from weak to strong, expanding steadily. By the end of 2017, China had more than 27 million private enterprises and more than 65 million self-employed businesses, with registered capital exceeding 165 trillion yuan. In a nutshell, the private economy can be summed up by the figures "five, six, seven, eight, nine": it contributes more than 50 percent of tax revenue, more than 60 percent of GDP, more than 70 percent of technological innovations, more than 80 percent of urban jobs, and more than 90 percent of all enterprises. Among the Fortune Global 500, the number of Chinese private enterprises rose from one in 2010 to twenty-eight in 2018. The private economy has become an indispensable force driving China's development. It is the main arena for starting businesses and creating jobs, a major agent of technological innovation and an important source of state revenue, and it has played an important role in developing the socialist market economy, transforming government functions, absorbing surplus rural labor and opening up international markets. For many years, private entrepreneurs, with the innovative spirit to blaze new trails and the perseverance to keep striving, have organized and led tens of millions of workers in working hard, building businesses from scratch and innovating constantly. The private economy has made an indispensable contribution to the "Chinese miracle" of economic development!

Our Party's position on upholding the basic economic system is clear and consistent, and it has never wavered. China's public sector took shape over the long course of the nation's development and has accumulated a great deal of wealth. This is the common wealth of all the people, and it must be well kept, well used and well developed so that it keeps and increases its value. Large amounts of state assets must never be left idle, allowed to drain away or squandered. That is the purpose of our efforts to advance the reform and development of state-owned enterprises, tighten supervision of state assets and punish corruption involving them. At the same time, we stress that consolidating and developing the public sector is not opposed to encouraging, supporting and guiding the non-public sector; the two form an organic whole. The public and non-public sectors should complement and reinforce each other, not exclude or cancel each other out.

For some time now, certain people in society have made remarks that deny or cast doubt on the private economy. Some, for example, have put forward a so-called "private economy exit theory," claiming that the private economy has completed its mission and should leave the historical stage. Others have put forward a so-called "new public-private joint ownership theory," misrepresenting the current mixed-ownership reform as a new round of "public-private joint ownership."[4] Still others say that strengthening Party building and trade union work in enterprises is meant to bring private enterprises under control. These views are completely wrong and run counter to the Party's major principles and policies.

Here I want to stress once again: the status and role of the non-public sector in China's economic and social development have not changed! Our principles and policies of unswervingly encouraging, supporting and guiding the development of the non-public sector have not changed! Our principles and policies of creating a sound environment and more opportunities for the non-public sector have not changed! China's basic economic system is written into the Constitution and the Party Constitution; this will not change, and it cannot change. Any words or deeds that deny, doubt or shake China's basic economic system run counter to the principles and policies of the Party and the state. Do not listen to them, and do not believe them! All private enterprises and private entrepreneurs can be fully reassured and concentrate on developing their businesses with peace of mind![5]

In short, the basic economic system is one we must uphold over the long term. The private economy is an intrinsic element of our economic system, and private enterprises and private entrepreneurs are our own people. The private economy is an important achievement of the development of the socialist market economy and an important force driving it forward. It is a major player in advancing supply-side structural reform, promoting high-quality development and building a modernized economy. It is also an important force for our Party's long-term governance and for uniting and leading the people of all our ethnic groups in achieving the Two Centenary Goals and the Chinese Dream of the great rejuvenation of the Chinese nation. On the new journey of completing the building of a moderately prosperous society in all respects and then building a modern socialist country in all respects, China's private economy can only grow stronger, not weaker. Far from "exiting the stage," it must step onto a still broader one.

II. Correctly Understanding the Difficulties and Problems Facing the Private Economy Today

Recently, some private enterprises have run into many difficulties and problems in their operations. Some private entrepreneurs describe them as "three great mountains": the iceberg of the market, the high mountain of financing, and the volcano of transformation.[6] These difficulties and problems have many causes. They result from a convergence of multiple contradictions: external and internal factors, objective and subjective causes.

First, they result from changes in the international economic environment. For some time, risks have been building up in the course of global economic recovery, and protectionism and unilateralism are clearly on the rise, which has affected China's economy and market expectations in many adverse ways. Private enterprises account for 45 percent of China's total exports. Some private exporters are bound to be affected, and private enterprises that supply exporters or sit along their industrial chains will also be dragged down.

Second, they result from China's economy shifting from a stage of high-speed growth to a stage of high-quality development. We are now at a critical stage of transforming our growth model, improving our economic structure and changing the drivers of growth. Economic expansion will slow, but consumption is being upgraded across the board and the structure of demand is changing rapidly, raising the bar for the quality and standard of supply. This inevitably puts pressure on enterprises to transform and upgrade. In the course of structural adjustment, industrial concentration generally rises and strong enterprises win out; this is the normal outcome of market competition, in which the superior survive and the inferior are eliminated. With the market fluctuating, the economy going through ups and downs, the structure being adjusted and institutions being reformed, it is unavoidable that some private enterprises will run into difficulties and problems against such a complex backdrop. This is long-term adjustment pressure arising from changes in the objective environment. Private enterprises, like state-owned enterprises, need to adapt step by step to the requirements of high-quality development.

Third, they result from policies not being properly implemented. In recent years we have introduced many policies and measures to support the private economy, but many have been poorly implemented and have had little effect. Some departments and localities have not fully grasped the Party and state's major principles of encouraging, supporting and guiding private enterprises, and there have been policy deviations in their work that should not have occurred. There are still large gaps in equal protection of property rights, equal participation in market competition and equal access to factors of production. Some policies were drawn up without sufficient preliminary research or adequate consultation with enterprises; their actual impact was not carefully considered, and enterprises were not given the time they needed to adjust. Some policies are poorly coordinated, so that their effects pile up in the same direction, or they are carried out in a crude way, causing well-intentioned policies to backfire. For example, in preventing and defusing financial risks, some financial institutions have been reluctant or afraid to lend to private enterprises, or have even called in or cut off loans outright, leaving enterprises short of liquidity or even forcing them to close. In replacing business tax with value-added tax,[7] insufficient account was taken of the higher tax burden that stricter collection would bring to some small and micro businesses seeking deductions. In improving the collection of social insurance contributions, insufficient account was taken of how well enterprises could adapt to the change in the collection mechanism, or of the contractionary effect it would have on expectations. These problems must be resolved in light of actual conditions, so as to create a sound environment for private enterprises.

The difficulties now facing China's private economy also have causes within the enterprises themselves. During the period of high-speed growth, some private enterprises were run in a fairly extensive way. They were keen on expanding their operations and scale and took on too much debt, and their practices in environmental protection, social insurance, quality, safety and credit were nonstandard, unsound or even out of compliance with the law. As regulation and law enforcement are tightened, they will inevitably face great pressure.

It must be acknowledged that the difficulties some private enterprises face today are real, and in some cases quite severe, and must be taken very seriously. At the same time, we should recognize that these are difficulties arising in the course of development, problems arising as we advance, growing pains, and that they can certainly be resolved through development. I am confident that as long as we uphold the basic economic system and implement the principles and policies of the Party and the state, the private economy will certainly achieve greater development.