On September 25, top Chinese authorities — the Central Committee of the Chinese Communist Party (CCP) and the State Council — released a guideline on creating a favorable environment for entrepreneurs and boosting entrepreneurial spirit. The guideline is the first of its kind focused on Chinese entrepreneurs.
In order to boost entrepreneurs’ confience, the Chinese government vows to “create a legal environment that protect the rights and interests of entrepreneurs, a market that values fair competition and integrity, and a society that respect and encourage entrepreneurship,” according to the guideline.
To achieve the goals mentioned above, the guideline puts forward a series of measures aimed at protecting entrepreneurs’ property rights, ensuring fair competition and smoothing business-government relations.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
The guideline promised that China would “protect the entrepreneurs ‘ property rights by law. [The government will] establish mechanism to make up for the entrepreneurs ‘ losses caused by policy change or the government’s planning adjustment.”
China once treated public property and non-public property quite differently. Public or state property was better protected by law than private property. It was not until 2007 that China issued the Property Law, which grants equal protection to both public and private properties. However, in reality, the Property Law fails to completely protect private property, especially when a dispute involves public property. Mentioning “property rights” in the new guideline obviously touches on a big issue for many Chinese businessmen.
Chinese businessmen have long complained about unfair market barriers for private enterprises. The new guideline says that China will “ensure fair competition and counter monopoly, unfair regulations and local protectionism. [The government will] launch a negative list management program nationwide to allow various enterprises to get access to industries and businesses that are not on the list.”
The Chinese government forbids private enterprises from entering a number of the most profitable industries, such as electricity, telecommunications, transportation, military and petroleum, on the grounds that these industries involve national security interests. Despite the promising remarks with regard to fair competition in the new guideline, there is unlikely to be an opening of closed industries.
The guideline also stated that China would “build a clean and reliable government to serve the entrepreneurs. The government should not interfere in business management. Instead, the government should minimize the burden on enterprises by reducing various fees and charges, and solve the enterprises’ difficulties by better service.”
One of President Xi Jinping’s signature policies has been a crackdown on corrupt officials. Ostensibly, over the past five years this crackdown has been good for business by relieving pressure to pay bribes to government officials. But government taxes and fees remain.
Zong Qinghou, Founder and Chairman of the Hangzhou Wahaha Group, a leading beverage company in China, once complained in a TV program that his company had to pay about 500 different kinds of fees, amounting to a total of 40 million yuan (around $6 million), to the government from January to November in 2016. Government officials soon corrected him, saying that it was actually 317 different kinds of fees rather than 500.
Recently, China is struggling with rapid capital flight triggered by a slower economic growth. Meanwhile, a large number of Chinese entrepreneurs are trying to move or have already emigrated to foreign countries with their property. According to a 2017 survey from Hurun Report, half of Chinese millionaires with a net worth of more than $1.5 million are considering moving overseas.