By Liu Jie and Tong Hao (China Daily)
Updated: 2008-01-29 10:17

The nation's private sector is evolving fast and playing an increasingly bigger role in the economy.

There were 4.98 million private companies in China by the end of 2006 - up 15.8 percent, or by 680,000, on 2005, and double the 2002 figure. That's according to this year's Blue Book, put out by the Chinese Academy of Social Sciences (CASS).

Meanwhile, the private sector accounts for a growing portion of the nation's GDP. Private business - beyond State-owned and State-controlled companies, but including overseas firms - contributed 65 percent of the nation's GDP in 2006. But the domestic private sector alone contributed 40 percent. Moreover, up to 70 to 80 percent of the nation's economic growth came from private business.

"I have made a rough estimate that the strength of the non-State-owned business sector, including foreign-backed companies, was about 3 trillion yuan in 2006," said Chen Guangjin, deputy director of the Institute of Sociology at the CASS.

The State-owned Assets Supervision and Administration Commission said the State-owned sector was worth about 2.9 trillion yuan in 2006, and 3 trillion yuan, if collective businesses are included. That would paint a balanced picture for the private and public sectors in terms of asset scale.

But Chen believes there is an imbalance, with 70 percent of China's fixed-asset investment coming from the private sector last year.

There were 12.72 million private entrepreneurs in China at the end of 2006, and 13 million by June 2007, CASS statistics show.

"Therefore, this group accounts for nearly 1.7 percent of the Chinese workforce and 1 percent of its population, respectively. This is a really significant change," said Chen.

Compared with State-owned companies, the bulk of private businesses are small- to medium-sized, which could make their operations more flexible.

Many private companies are started by a single owner, devoted to the business and passionate about its development, said Chen.

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.

Of the 310,554 patents applied for by companies in China in 2006, 41 percent came from private firms, with State-owned enterprises contributing only 23 percent and foreign-backed companies accounting for 12 percent, a State Intellectual Property Office survey said.

The private sector has generated 66 percent of the country's patents and 82 percent of new products over the past 20 years, the Ministry of Science and Technology said.

Although more profit was inevitably the primary goal for entrepreneurs surveyed by the CASS, Zhang Houyi, a researcher at the academy's Institute of Sociology, said many business owners wanted to play a role in politics and society.

Some 25.5 percent said they had tried to get elected to the People's Congress or Political Consultative Conference, while 22.4 percent wanted to establish ties with government officials. Meanwhile, 17.6 percent were trying to promote themselves via media, 11.1 percent wanted to join the Communist Party of China and 2.9 percent wanted to lead a social organization.

According to the survey, many private business owners wanted to strengthen government connections and make their voices heard.

"Although private business owners seemed enthusiastic about politics, this was not their original intention (in setting up a business)," said Chen, adding that many entrepreneurs were keen for their interests to be taken into consideration in policy-making.