The Factor Analysis and Countermeasures Study That Affects the Sustainable Development of China's Private Economy

By Feng, Yingru | International Management Review, January 1, 2007 | Go to article overview

The Factor Analysis and Countermeasures Study That Affects the Sustainable Development of China's Private Economy


Feng, Yingru, International Management Review


[Abstract]

With over 20 years' development after the beginning of economic reform, China's private economy has grown from nothing. From small-scale to large-scale, from weak to strong, the economic form has become one of the strongest powers that support China's economic growth and has shown its great vitality. However, China's private economy has never escaped from the vicious circle of "short life" which strongly indicates that sustainable development has inevitably become a new outlet for China's private economic future growth. The paper begins with the definition of sustainable development of China's private economy, describes the importance of private economy to China's overall economic development, analyzes key factors that affect sustainable development of China's private economy and raises relevant measurements based on above listed respects, for better growth of China's private economy.

[Keywords] China's private economy; sustainable development; restrictive factors; measurements

Introduction

In accordance with "Private Economy Blue Book 2006", till the end of 2005, China's domestic capital private economy accounted for 50% of GDP, there also exists a number of family enterprises earning annual revenue of over 10 billion RMB such as "Suning" and "CHINT". Private economy is exhibiting its vitality as a vital part of the socialist market economy. However, it encounters a problem that private enterprises are usually difficult to grow and short in life. According to statistical data, 60% of China's private enterprises fail within 5 years, 85% within 10 years and the average life is 2.9 years, which perfectly agrees with Kuznets Curve. The failure of once popular brands such as "Juren", "Idall" and "Sanzhu" serves as good examples. Therefore, how to realize long-term, stable and healthy sustainable development has become an urgent issue for China's private enterprises.

Definition of Private Economy and Sustainable Development of Private Economy

Private economy contains three levels: private economy of broader sense, domestic capital and narrower sense. Private economy of broader sense refers to general designation of all economic forms in China except state-owned or state-controlled enterprises; private economy of domestic capital refers to that of broader sense minus Hong Kong, Macau, Taiwan and foreign invested enterprises; private economy of narrower sense refers to private individual economy. This paper focuses on analysis of private economy of narrower sense; i.e., private individual economic form.

This paper defines the sustainable development of private economy as: sustainable developments of private economic behavior; organic combination and coordinative development of short-term and long-term, partial and overall, individual and common interest of private economy development; sustainable development of healthy operation, overall coordination, sustainable growth, capability strengthened, etc., of private economy; in order to gain a common prosperity for society.

Importance of Private Economy to China's Economic Development

The sustainable development of private economy is vital to China's sustainable development. It generally reflects as respects below: Private economy has grown to be an important power that pulls up China's economic development and is playing one of the most important roles of China's economy. In 2005, domestic capital private economy accounted for 49.7% in GDP, Hong Kong, Macau and Taiwan invested economy accounted for around 15%-16%, sum up over 65% of total GDP. Private economy has become one of the main channels of employment rate increase and basic factors to achieve social stability. The share of private economy in the 2nd and 3rd industry employment rate has grown from 77.5% in 2000 to 84.1% in 2005; the share of private economy of overall employment rate in rural area has grown from 65% in 2000 to over 75% in 2005. As we can see, private economy has released the pressure of employment rate and made important contributions toward the stability of society. …

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