Download Chinese Non-government Economic Development and Institutional Innovation ——Take Xinjiang as an Example

Chinese Non-government Economic Development and Institutional
Innovation
——Take Xinjiang as an Example
CHAI Fucheng
Economic and Trade School of Shihezi University, Xinjiang, P.R.China, 832000
[email protected]
Abstract: Since the reform and opening up, China's non-government economy has developed rapidly
and become an important force for economic and social development. However, there still exist defects
in terms of protection of intellectual property rights, financial policy support, the market environment
and service system. Confront of the current international financial crisis and insufficient domestic
demand, it becomes more necessary to innovate institutions so as to enhance comprehensive
competitiveness of non-government economy. Taking Xinjiang’s non-government economy as an
example, this article analyzes the factors which restrict the development of Xinjiang’s non-government
economy on the basis of analysis on current situation of Xinjiang’s non-government economy. And
come up with countermeasures of institutional innovation to promote the non-government economy
development.
Keywords: Xinjiang non-government economy development institutional innovation
1. Introduction
After 30 years of the reform and opening up, China's non-government economy start from scratch, from
nothing; the laws, policies and market situation continues to improve to provide a good external
environment for the non-government economy to develop steadily and rapidly, which correspondingly
make active contribution to China's economic and social development. According to preliminary
statistics, by 2007, the number of China's registered non-government enterprises is nearly 6,000,000, the
total registered capital is over 9,000,000,000,000 yuan, the number of job holder is up to 71,000,000. In
the GDP contribution, the non-government economy in China in 2007 accounted for 60% share of GDP,
by 2010 this proportion is expected to reach 75%. In the tax contribution, in 2000, China's
non-government economy has remained revenue growth of 40%. According to statistics released by the
Xinhua News Agency, in 2006 the taxation of non-government economy accounted for 37.23 percent
share of the country’s total amount; According to the National Development and Reform Commission
Secretary for small and medium enterprises, in 2007 this proportion has reached 53%; data from the
provinces and autonomous regions nationwide shows that non-public economy averagely accounts for
50% share of local tax revenue, in some areas even reach 75%. According to other statistics, China's
non-government economy has provided 70% of technological innovation, 65% of invention patents and
more than 80% of new products, and has become an important source of independent innovation[1], all
of which shows the non-government economy has become an more important role in the national
economy. Using only one-third of the proportion of social resources, the non-government economy has
created two-thirds of GDP growth. That is, the non-government economy has made greater contributions
to national economy with fewer resources. In terms of the promotion of economic and social
development, the reform of state-owned enterprises and the development of the market system, the
non-government economy plays an irreplaceable role. Therefore, solving the bottlenecks problems
which constrains the development of the non-government economy will be of great significance
。
2. The current situation of non-government economy development in Xinjiang
2.1 The features of Xinjiang’s non-government economic development
2.1.1the scale of Xinjiang’s non-government economy is larger and the competitiveness is gradually
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enhanced. Since the 1990s, with series of central government and autonomous regions’ policies of
supporting the non-government economic development released, they inject great vitality to the
non-government economy. By the end of 2007, individual industrial and commercial households in
Xinjiang has reached 489,100, employing 856,900 people with a registered capital of 10.23billion yuan,
which increased by 54%, 14% and 36.8% individually that of 2001; Non-government enterprises in
Xinjiang reach 86,900 GDP employing 701,800 people with a registered capital of 84.54billion yuan.,
which increased by 30%, 29% and 52.2% individually than that of 2001. In 2007 the individual and
non-government enterprises in Xinjiang created 68.69 billion yuan accounting for 26% of GDP,
absorbed a further 186,700 people to employment accounting for 49.1 % of the region’s; turned in
1.83billion yuan to local taxation accounting for 21% of the region’s.
2.1.2Xinjiang's non-government economy develops regionally unbalantly, mainly in traditional
industries. Non-government Enterprises expand from 8 in 1998 to the current 44, among which are 34
state-level large-scale enterprises, mostly are traditional labor-intensive industries and sectors, mainly
wholesale and retail trade and are distributed in the three sectors of restaurants, industry and service.
Including 12 industrial enterprises, accounting for 27.3 percent; 5 enterprises in the construction
industry, accounting for 11.3 percent; 8 wholesale and retail trade, accounting for 18.2 percent; 14 real
estate, accounting for 31.8 percent; 5 other industries, accounting for 11.3 %. From the geographical
distribution, non-government enterprises in Xinjiang concentrated in the more developed northern
regions, while the overwhelming majority of the southern border area development has lagged. 90% of
he 44 non-government enterprise groups are located in the northern slope of Tianshan Mountains 2
2.1.3Xinjiang's non-government economy is facing enormous challenges. First of all, from the external
environment, Xinjiang , is located in the remote, backward area, whether it’s legal, institution, human
resources, financial support, or management, technology, equipment and so on are relatively backward
compared to the well-developed provinces and cities of the inland. Apart from that, the advantages of
natural resources in Xinjiang is bound to attract more enterprises across the country to develop and
evocate. This surely gives the local non-government enterprises tremendous competitive pressure.
2. the developing level of Xinjiang’s non-government economy is relatively low compared to the eastern
and western regions
First of all, from the state-owned enterprises and the added value of state holding industrial in
large-scale state-owned and non-state-owned industrial enterprises in eastern and western provinces and
cities in to see the added value of the share (see Table 3)
【】
Table 3
State-owned enterprises and state-controlled industrial added value accounting for around a ratio
of output value (2006):%
Guang
National
Beijing Shanghai
Jiangsu Zhejiang
dong
36.75
55.67
39.78
16.85
14.95
16.80
Chongqing
Yunnan
Shanxi
Gansu
Xin
jiang
/
50.02
75.95
71.37
72.43
87.31
/
Source: "China Statistical Yearbook (2007)"
Note: The "around the output value" means the state-owned and large non-state-owned enterprises, industrial added
value.
From Table 3 we can see a clear gap between east and west. In 2006, Xinjiang's highest proportion of
components of state-owned, state-owned enterprises and state holding industrial added value accounting
for nearly 90% of the value of the region, while among the more developed provinces and cities, only
Beijing is more than 50%, Jiangsu, however, is only 14.95 %.
This was followed by east-west state-owned economy in total fixed asset investment proportion (see
Table 4)
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Table 4 State-owned economy in investment of fixed assets in proportion (2006):%
Guang
Zhe
National
Beijing Shanghai
Jiangsu
dong
jiang
34.52
30.05
33.26
28.05
24.13
Chongqing
Yunnan
Shanxi
Gansu
Xinjiang
38.57
45.87
52.65
58.08
41.67
25.46
Source: "China Statistical Yearbook (2007)"
From Table 4, we can see that in 2006 the state-owned economy in Xinjiang has a share of over 40% in
the Xinjiang total fixed asset investment, while in the developed provinces and municipalities four
provinces and cities are below 30%.
Again from the working population of the eastern and western towns to see the proportion of
state-owned units (see Table 5)
Table 5 The proportion of working population of state-owned units in east-west cities and towns (2006):%
Guang
Zhe
National
Beijing Shanghai
Jiangsu
dong
jiang
76.86
73.65
77.18
77.42
77.15
80.82
Chongqing
Yunnan
Shanxi
Gansu
Xinjiang
/
64.91
56.84
43.62
38.78
47.96
/
Source: "China Statistical Yearbook (2007)"
From table 5, it can be noted that urban employed population in Xinjiang focused on state-owned
sectors of the economy because of the less development of non-government economy. While the
proportion of urban working population in non-state-owned units in well-developed eastern towns is
over 70%, which of Zhejiang breakthroughs 80%.
We can conclude from the above results: In the course of China's reform and opening-up, the
non-government economy is playing an increasingly prominent role in the national economic and social
development. The more developed the economy is, the more obvious role the non-government economy
plays. In the well developed eastern regions, the non-government economy has become the main force
in driving the national economy growth, increasing urban employment and pulling investment. While
compared with the national economic growth and social development especially that of well developed
eastern regions, the reform and opening-up has not changed Xinjiang state-owned structure of
ownership, employment and investment and it’s growth pattern. In Xinjiang, economic growth and
social development mainly depends on state-owned economy, the potential function of the
non-government economy has not yet been brought out.
3. The institutional factors leading to Xinjiang's laggard development of
non-government economic
Review the existing literature on the analysis of Xinjiang's laggard non-government economy, more
attention is focused on the poor regional basic conditions and geographic conditions, low industrial
levels, backward technology, lack of funds and qualified personnel, etc. These factors will undoubtedly
result in laggardness of Xinjiang economy. While the theory of institutional economics tells us that the
institution is the key factor affecting economic development. As a result, the laggard economic system
reform and innovation is the fundamental reason of restricting the development of Xinjiang's
non-government economy.
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3.1 Market access constraints
Under the traditional planned economy system, different levels of governments are the main social
investment agent, controlling the investment activities of all walks of life. After the reform and
opening-up, with the rise of the non-government economy, the monopoly situation of Government's
investment is gradually broken, but the government still controls a considerable part of the investment
and forms a strict pattern of market access restrictions. The degree of monopoly management in
Xinjiang Construction of the marketization is high, not only in the performance of the traditional
monopoly sectors such as the railways, postal services, telecommunications and financial services where
the reform is backward, but in the internal correlation of resource development and economic monopoly.
Market access constraints will inevitably lead to the low efficiency of resources distribution, thus cause
the state of resources distribution to deviate the Pareto optimal state.
3.2 Financing channels is not swimmingly
As far as I survey, 80% of Xinjiang's non-governmental enterprise has not enough capital, 90% has the
problem of making loans. At present, non-governmental enterprises in Xinjiang are mostly medium and
small and generally have smaller scale. A large number of non-governmental enterprises haven’t yet
established credit files and not recorded in the national credit database bank. In addition, the lack of
sufficient cash to make mortgage assets makes the credit resources very limited. Bank loans aim at large
and medium-sized state-owned enterprises. The non-government economy has difficulty in getting great
financial support.
3.3 Legal environment is unhealthy
At present, the non-government economy in Xinjiang is not healthy enough which mainly manifests in
the following issues: First, the rule of law is not perfect; Second, the quality of administrative law
enforcement officials remains improved furtherly Third, the non-government entrepreneurs do not
receive the respect they deserve and they’re regarded as "second-class citizens". According to a survey
of the Autonomous Region CPPCC and the Federation of Industry and Commerce, now what the
individuals and non-government business owners reflect strongly is listed as followings: first, the quality
and technology supervision departments check too frequently and the fees charged is high. Second, the
policies of land management sectors are rigid. Third, it’s difficult to appeal lawsuit, and arbitrary
charges, weak law enforcement and other issues still exist. Fourth, government personnel are lack of
awareness of the law, the executive branches invade the legitimate rights and interests of the
non-government economy occur from time to time.
3.4 Social services is relatively lagging behind
The transformation of government functions is laggard, a considerable number of government
departments are used to managing the non-government economy with the thinking of planned economy
model, which lacks of innovation in the ways and means of market supervision and management and
lack of service awareness. This, to some extent, affected the development of the non-government
economy. First, a sound market service system has not yet established, that is the information, human
resources, capital, land, etc. are quite scare. Second, service awareness is poor. Some law enforcement
departments haven’t formed the idea "management is just service”. They only emphasize on
management instead of services, and simply replace the management with taxes and fees, their service
awareness and levels are poor.
3.5 Property rights protection system is flawed
The social prejudices of the non-government economy has not changed thoroughly, arbitrary violation of
lawful property rights still occur from time to time, many non-government business owners think that
local governments seldom abide by the lease contract, they withdraw the land use rights at every turn.
They remove the small and medium non-government
enterprises with brutality, ignore the
compensation for loss of them, infringing the legitimate rights and interests of these non-government
enterprises.
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4 To promote the development of non-government economy through institutional
innovation
Modern economics theory insists on fitting institution factors into the framework of economic growth, it
thinks that institutional change is a major factor of economic growth, institutional innovation is a source
of economic growth. Central government determines the strategy for developing the western region is a
great opportunity for Xinjiang. This article holds that during the development of the western region,
Xinjiang should make full use of the central government's investment policy and financial support to
enable the
construction of the infrastructure and ecological environment in Xinjiang region to
experience a huge change, meanwhile make good use of the platform of improved basic conditions and
to speed up the process and promote institutional innovation so as to create an environment of equal
market access, competitiveness, institution and policy for the development of different forms of
ownership economy especially that of the non-government economy. And then to promote the formation
of multiple market body thereby lay a good foundation for the Xinjiang region's rapid economic growth.
4.1 To implement fair trade access principles, relax the terms of investment fields and access.
All the fields and industries that the national law has not forbidden officially should be open to
non-government enterprises. All the non-government capital should be encouraged to invest into
Xinjiang pillar industries, high-tech industry and modern service industries. To encourage and support
strong enterprises to invest in energy, transportation, water conservancy, environmental protection, the
supply of water, heating and gas, electricity, other infrastructures and Construction and operation of
public utilities. The government should encourage and support all kinds of social forces to legally set
up service industries of culture, education, medicine, health, sports, tourism, information, intermediary
services and other new types of service industries in various forms.
The government should actively promote non-government enterprises to participate in the reorganization
and transformation of state-owned enterprises. Now in Xinjiang, state-owned economy is still the major
form and there’s still great amount of state-owned assets. The government should encourage
non-government business owners to lease, purchase, merger small state-owned businesses, and to give
full play to non-government business owners in the state-owned economic reform, reconstruction and
restructure. Therefore, make non-government economy and the state-run economy get common
development. The practice of reform shows that in the region where the more developed the
non-government economy regions is, the more smoothly the reform of state-owned economy proceeds.
Only the two wheels of both state-owned economy and non-government economy run faster and better,
can the goal of revitalizing Xinjiang’s economy be achieved.
4.2 Further implementation of the preferential financial and taxation policies for non-government
economy.
In terms of tax policy, the government should feasibly implement relevant preferential taxation policies
for the western region development. Any preferential taxation policy for the state-owned economy
should be equally applied to the non-government economy. The technological transformation funds,
high-tech industrialization funds and small and medium enterprises to open up international markets
funds, all of which are given to the state-owned enterprise development by governments at all levels
should also be offered to the non-government economy equally. The key projects that non-government
enterprises declare should share the same preferential policies such as technical transformation capital,
scientific research capital and financial discount, etc. that the state-owned enterprises enjoy. Financial
sectors at all levels in autonomous region should take effective measures to actively support the
potential and strong driving small and medium enterprises which has industry advantage to carry out
technical innovation, new product development and help construct the guarantee system and service
system for small and medium enterprises. In the terms of credit policy, local governments, enterprises
and financial sectors should work together to raise funds through multiple channels. All financial
institutions should improve loans decision-making process, credit appraisal and reward and punishment
management, relax the loan approving authority of circulating funds, shorten the time of loan
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assessment and approval, and establish credit appraisal system and guarantee system of small and
medium non-government enterprises, so as to improve financing environment. We should actively
issue credit loans to well managed small and medium non-government enterprises which have products
market and the ability of paying loans. At the same time, we should seriously implement the the national
and autonomous regions’ supporting policy of small and medium non-government enterprises absorbing
laid-off workers’ small loans.
4.3 To establish social service system of supporting the development of non-government economy.
4.3.1 The Governments must emancipate their minds, adopt new ideas, remain open and practical, get
rid of the traditional planned economy thinking, and remove the institutional barriers and policy
obstacles for the development of the non-government economy. They should also change their
government working style, enhance government services awareness and improve working efficiency, so
as to provide a stable policy expectation for the development of the non-government economy.
4.3.2 Vigorously develop social intermediary organizations to continuously improve the social services.
Governments at all levels must vigorously develop and standardize business counseling, technical
support, recognized certification, information services, management consulting, personnel training, and
other types of intermediary service organizations. Federation of Industry and Commerce at all levels
should strengthen their connection and guidance of the industry associations, commerce associations
and craft union, assist the government to regulate and develop various self-regulatory bodies. The
industries in charge at all levels and industrial and commercial departments of industry and commerce
administration departments should seriously rectify the intermediary service market order and
standardize intermediary services behavior to create a good service environment for the non-government
economy.
4.3.3 Develop various elements market. Standardize and develop the technology market, the property
rights trading market, the talent market, etc. So that non-government enterprises can get any necessary
elements that they need directly from the market.
4.4 Strengthen the protection of property rights of the non-government economy.
There’re two ways to strengthen the property rights protection of the non-government economy: First,
through the constitution. The new "Constitution" amendment clarified the basic policy of the non-public
economic development “to protect the legitimate rights and interests of the non-public economy, the
government encourage, support and guide non-public economic development, and supervise and
manage it according to law.” The "People's Republic of China Property Law" will go into effect on
October 1, 2007, it is detailed the legal rules on the property ownership and use. It aims to definite
property ownership and to bring into full play of the utility of the property. Through the strict
implementation of the provision related to non-government property protection, to prohibit illegal
occupation of any organization or individual. This essentially protects the property rights of the
non-government economy. Second, to raise social status of the non-government entrepreneurs. In recent
years, the government have taken many measures to improve the social status of non-government
entrepreneurs, For example, increase the proportion of non-government entrepreneurs in the CPPCC
National Committee, and that in the National Association of Industry and Commerce, actively attract
qualified non-government entrepreneurs to join the CCP, etc. In order to abolish the concerns of
non-government entrepreneurs and promote the healthy development of non-government economy, the
government should further promote their social status and enhance their confidence. Only in this way,
the impact of the violation of the non-government property which happened in the past can be
eliminated.
5 Conclusion
After 30 years’ implementation of china’s reform and opening-up policy, non-government economy has
become the main force in national economic development, social progress and employment to absorb.
The difference in regional development, however, is obvious. It seems that different regions take on its
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own features. Analyzed from a macro point of view, the main factors restricting non-government
economy development in different regions are all similar. while their impact is different which mainly
reflected in the following respects: property rights protection system of non-government economy is still
not perfect, Social service system lags behind, poor financing channels lead to financing difficulties,
market access for industry is limited, and non-government enterprise culture, ideas, concepts,
management, technical equipment, and the quality of human resources is relatively backward. All the
factors above turn out to be the bottleneck of non-government economy sustainable development.
Therefore, to promote the rapid development of non-government economy, the national and regional
government, on the one hand, should start from the institutional innovation, constructing the legal,
institutional, and cultural environment which adapt to the rapid development of non-government
economy, giving policy support to non-government economy in financing, taxation, market access, etc.
Especially in the current environment of worldwide financial crisis, the different levels of governments
should take the opportunity to innovate institutions and increase efforts to Policy guidance and support.
On the other hand, the non-government enterprise should emancipate the mind and clearly understand
the situation, analyze the difficulties caused by the financial crisis at the same time , they should also
see the opportunity, strengthen enterprise culture, innovate enterprise system, improve the level of
human resources management, construct a learning organization, improve core competitiveness which
adapt to their own sustainable development.
About the author:
Chai fucheng, born in 1965, male. Vice- professor, supervisors of postgraduate student
Main research area: enterprise strategy management, enterprise human resource development and
management, regional economic management.
Tel: 0993_2058973, 13909937636
E_mail [email protected].
Notes:
1. Li Guoliang, the two topics: an objective look at the non-government economy in the
socio-economic development on March 4, 2008, China reported that the quality of food.
2. The northern slope of Tianshan economic zone at the northern foot of Tianshan refers to the
Eurasian Continental Bridge railway, from the Urumqi East, west along the Dushanzi, Xinjiang is a
modern industry, agriculture, transport, education, science and technology at the heart of the most
developed regions, GDP The region accounts for more than 50% of the regional party committee
and government are classified as priority development areas.
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