Increased private sector in China

Description

The emergence and growth of the private sector in China has been one of the most profound socioeconomic changes in China since the onset of post-Mao reform.

From the early 1990s, the number of private enterprises increased by 35 per cent annually and there are now over five million. The private sector is the main source of economic growth in China: as of 2007 it contributed 66 per cent of GDP and 71 per cent of tax revenues. It is also the main source of new jobs: between 2002 and 2006, the private sector created almost 44 million urban jobs, whereas employment in state-owned and collective enterprises shrank by nearly 11 million.[1]

Enablers

• China government policy
  • China's private sector is playing an increasingly important role in helping the nation become innovative, one of the government's key targets highlighted at the 17th National Congress of the Communist Party of China held last October in Beijing.
• Relationship between modernization and democracy
  • Modernization theory has had enduring appeal, in part because of its clear and intuitive explanation of how economic development leads to political change.
• The role of new social classes
  • The formation and influence of new social classes are considered to foster political change towards democracy.

Inhibitors

• Increasing labor cost
  • Labor shortage results in labor cost rising. Considering about saving cost, private setors of China might transfer their factories to other lower-cost country, like Vietnam.
• Government policy of other country
  • Government of other country implement preferential tariff agreements to attract China private sector to invest capital to develop international trade. Therefore, the industrial focus might be transfered to other country.

Paradigms

• As the private enterprises have gained increased prominence in the national economy, private entrepreneurs have begun to play an increasingly important role in China’s political life.
• Because of their growing economic and political clout, it has been commonly anticipated that private entrepreneurs will begin to promote political change and eventually a democratic system.

Web Resources

1. "Private companies playing a bigger role", China Daily
2. "Allies of the State: Democratic Support and Regime Support among China’s Private Entrepreneurs", China Quarterly
3. "Premier urges support for private sector amid crisis", China Daily
4. "Globalization's Victors Hunt for the Next Low-Wage Country", SPIEGELnet Online

Revision History

September

2009

Created by Chia Wei Lee