Private enterprise, Guangdong style

Asia Pulse, XIC, [24 January 2003]

GUANGZHOU—In the southern economic hub of Guangdong province, few can say with certainty when state-run shops, restaurants and hairdressers—once an indispensable part of day-to-day life—will start to be phased out. One thing is certain: citizens today have wider choices and better, more personalized services at the myriad private businesses that seem to have spontaneously risen to dominate the local economy.

Statistics suggest that as of November, the province had reported 1.77 million private enterprises with a total registered capital of 306 billion yuan (US$37 billion). Many farmers, whose forefathers had spent their lives toiling on a small piece of land, have changed their fortunes and now thrive as businessmen.

The booming garment business in Humen, a small town near Dongguan, reports annual sales of $2 billion and has provided many residents with lives admired even by urbanites in larger cities. Last year, the 700,000 residents in Humen reported total bank savings of 17 billion yuan, about $2,850 per person. Private capital is a most vigorous force to drive the local economy, said a local official in Humen.

The private sector is changing the outlook of the entire province, particularly its rural areas. Many boomtowns have emerged and quickly gained national popularity for their brand names. Zhongshan, a historic city in southern Guangdong, has become a major production base for lamps, and its products have taken over 50 percent of the domestic market share. Of China's top 10 undergarment brands, seven are brand names from Yanbu, a small town in Nanhai city whose annual undergarment production tops 2 billion yuan.

Science and technology have played a leading role in upgrading the small, unprofessional workshops that burgeon in the early 1980s to larger, technology-intensive enterprises and have given birth to renowned enterprise groups such as the Zhongli Group, based in the provincial capital Guangzhou, and the Haiwang Group in Shenzhen. By the end of 2001, the province had reported more than 4,700 privately run technology firms, including 574 high-tech firms that took up nearly a half of the province's total, said Ou Weidong, a senior official.

In their expansion in a globalized environment, many private businesses have started to tap the international market. By last November, private firms in Guangdong had reported total exports of $3.66 billion, more than 30 percent of the total export volume of their counterparts nationwide. To address the bottleneck in financing, many business owners have resorted to a modern corporate system and the capital market. To date, 10 private businesses in Guangdong have undergone drastic restructuring to become joint-stock companies, and more than 20 are ready to carry out similar reforms soon. Some 18 businesses have been listed at stock exchanges in Shanghai or Shenzhen. Early last year, Qiaoxing Group based in Huizhou city, hit newspaper headlines as the first private high-tech enterprise in China's interior regions ever to be listed on the US Nasdaq exchange.

We should take the opportunity to further boost the private sector, which will lead the long-term growth of the national economy, said Ou Guangyuan, a senior official with the Chinese Communist Party Guangdong Provincial Committee. To that end, sources here say the provincial government is devising a growing number of preferential policies and will honor the top 100 entrepreneurs of the province at a meeting on the private sector scheduled for next month.