Work continues to improve environment for private businesses

China will take concerted steps to foster a more enabling business environment for private businesses, emphasizing targeted support, regulatory frameworks and oversight practices.

These policy initiatives, while not necessarily involving large-scale financial input, can have a transformative impact on the private sector, empowering enterprises to unleash their growth potential and better underpin an economic recovery, experts said.

Helping enterprises navigate the current challenges and providing them with tangible support are key priorities for the government, said Zheng Shanjie, head of the National Development and Reform Commission, at a recent news conference.

The country's top economic regulator will work to ensure that administrative law enforcement agencies refrain from engaging in illegal cross-jurisdiction enforcement, profit-driven enforcement and arbitrary fines, inspections or seizures, Zheng said.

The government is also focused on accelerating the legislative process for the private economy promotion law, which is expected to create a more favorable environment for the development of the nonpublic sector, he added.

The private economy has been identified as the wellspring of market dynamism in China, contributing more than 50 percent of the country's tax revenue, over 60 percent of its GDP, more than 70 percent of its technological innovation achievements, over 80 percent of urban employment, and more than 90 percent of its total number of enterprises.

Ren Zeping, an online influencer and former chief economist at property giant Evergrande, said the ability of the private sector to regain vigor, confidence and investment momentum is essential for the economy to bounce back from the current challenges.

However, the disproportionate growth in non-tax revenue, particularly in the form of fines and forfeitures, is a concerning trend that can have a detrimental impact on the overall business environment and erode the confidence of private enterprises, Ren said

Data from the State Taxation Administration showed that in the first eight months of the year, while national tax revenue declined by 5.3 percent year-on-year to 12.1 trillion yuan ($1.7 trillion), non-tax revenue surged by 11.7 percent to 2.67 trillion yuan over the same period.

Going forward, departments concerned, as stated by the commission, will closely monitor any abnormal increases in revenue from fines and forfeitures, and provide timely reminders to local authorities, with the option of conducting further inspections where necessary.

The emphasis on more inclusive and prudent regulation, coupled with the efforts to rein in the excessive reliance on fines and forfeitures, restore a sense of security and fairness among private businesses, which is crucial for improving the overall business environment, Ren said.

Delayed payments from local authorities have created significant cash flow issues for many smaller businesses, forcing them to resort to cost-cutting measures such as layoffs and salary reductions in order to stay afloat, experts said.

This situation further undermined market confidence and caused a decline in private investment, said Dong Yu, executive vice-president of the China Institute for Development Planning at Tsinghua University.

"As we work to safeguard the dynamism of the private sector, we must also recognize the pressing fiscal difficulties confronting local governments and comprehensively address these challenges," Dong said.

Resolving the local debt issue and stabilizing the real estate market, which is a crucial revenue source for local governments, are key priorities that will help alleviate the fiscal constraints and enable local authorities to better support the private economy, he added.

As the year-end approaches, the government is set to review and determine the extension of various supportive policies for enterprises, including tax and fee reductions and skill upgrade subsidies.

While some policies can directly mobilize vast sums of capital, there are also initiatives that, despite not involving direct investment, can be worth their weight in gold, particularly when it comes to improving the development environment for the private economy, Dong said.