J-10
09-19-2005, 06:46 AM
Capitalist-roaders flourish in China
Published: September 19 2005 03:00 | Last updated: September 19 2005 03:00
Exactly how much of China's booming output is generated by the private sector has been a matter of some heated debate, the more so because the country's Communist rulers have not been keen to shed light on it. Now, however, we have an estimate from the Organisation for Economic Co-operation and Development which, in its first country survey of China, claims "over half of national income now originates from the private sector". The OECD would have no claim to special expertise about China (which is not a member of the organisation), and certainly not in its first study of the country, but for its emphasis that this "original" finding about the private sector results from "close collaboration" with the Chinese national statistical agency.
Depending on definitions, the private sector has been reckoned to generate anywhere between one fifth and three-quarters of national income. For its part, the OECD, with its Chinese statistical helpers, defines it as excluding all companies controlled by the state or collectives. On this basis, it suggests the private sector accounted for up to 57 per cent of non-farm national income in 2003, and more in the two years since.
This seems very plausible, in view of the ever looser rein Beijing has allowed market forces. Last year it gave private property more constitutional protection from arbitrary seizure, and this year it has removed restrictions on privately owned companies getting involved in infrastructure, public utilities and financial services. At the same time, the OECD is impressed with the way Beijing has restructured the state sector, with the OECD's chief economist commenting how few of his own capitalist member governments would have dared close down so many state enterprises, or end life-time job practices.
The OECD says the Chinese authorities still need to improve the legal business framework. They have yet to pass the much-discussed bankruptcy law and remove certain barriers to forming companies. This would involve reducing the capital requirement for incorporation and relaxing restrictions on the number of shareholders. And, on the macroeconomic level, the OECD lends its weight to the many calls for China to run a more flexible exchange rate policy; among other benefits, this would reduce the volatility of China's inflation that is a headache for Chinese business.
Yet the OECD report may itself be a step forward if some of the figures included in it show the Chinese authorities are coming cleaner about property ownership. The messy economic transÂÂ*ition from communism that occurred in Russia, and for that matter in the former Yugoslavia, showed what muddle and corruption can result when it is not clear who owns what. There is no reason to believe China will follow their fate but it is undoubtedly a communist country in transition and could benefit from greater clarity.
http://news.ft.com/cms/s/7806ddd2-28a9-11da-97c7-00000e2511c8.html
Published: September 19 2005 03:00 | Last updated: September 19 2005 03:00
Exactly how much of China's booming output is generated by the private sector has been a matter of some heated debate, the more so because the country's Communist rulers have not been keen to shed light on it. Now, however, we have an estimate from the Organisation for Economic Co-operation and Development which, in its first country survey of China, claims "over half of national income now originates from the private sector". The OECD would have no claim to special expertise about China (which is not a member of the organisation), and certainly not in its first study of the country, but for its emphasis that this "original" finding about the private sector results from "close collaboration" with the Chinese national statistical agency.
Depending on definitions, the private sector has been reckoned to generate anywhere between one fifth and three-quarters of national income. For its part, the OECD, with its Chinese statistical helpers, defines it as excluding all companies controlled by the state or collectives. On this basis, it suggests the private sector accounted for up to 57 per cent of non-farm national income in 2003, and more in the two years since.
This seems very plausible, in view of the ever looser rein Beijing has allowed market forces. Last year it gave private property more constitutional protection from arbitrary seizure, and this year it has removed restrictions on privately owned companies getting involved in infrastructure, public utilities and financial services. At the same time, the OECD is impressed with the way Beijing has restructured the state sector, with the OECD's chief economist commenting how few of his own capitalist member governments would have dared close down so many state enterprises, or end life-time job practices.
The OECD says the Chinese authorities still need to improve the legal business framework. They have yet to pass the much-discussed bankruptcy law and remove certain barriers to forming companies. This would involve reducing the capital requirement for incorporation and relaxing restrictions on the number of shareholders. And, on the macroeconomic level, the OECD lends its weight to the many calls for China to run a more flexible exchange rate policy; among other benefits, this would reduce the volatility of China's inflation that is a headache for Chinese business.
Yet the OECD report may itself be a step forward if some of the figures included in it show the Chinese authorities are coming cleaner about property ownership. The messy economic transÂÂ*ition from communism that occurred in Russia, and for that matter in the former Yugoslavia, showed what muddle and corruption can result when it is not clear who owns what. There is no reason to believe China will follow their fate but it is undoubtedly a communist country in transition and could benefit from greater clarity.
http://news.ft.com/cms/s/7806ddd2-28a9-11da-97c7-00000e2511c8.html