Though the macro-economic controlpolicies, now under way, have adversely affected the cash flow of some enterprises, most of China's private firms, however, take these policies for bitter but good pills, prompting them to rethink of their investments and readjust their development strategies.

"When the policies were firstly adopted, we did feel the strainand thought it would hit us heavily," said Wang Licheng, chairman of the board at the Zhejiang Huali Group. "But now, I realize these policies are essential and do us good. We could have a larger space for development at the end of this bitter period."

China's private economy developed mainly out of the 1980s' "sellers market." High investment and high pollution combined with low efficiency have been long considered the features of the country's private economy.

East China's Zhejiang Province, for example, now has more than 300,000 privately-owned firms, which generate half of its GDP (gross domestic product). In 2003, its GDP grew by 14.4 percent, but the electric power consumed rose 22 percent and total loans increased by 59 percent.

Aiming to curb overheated investment and to attain sustainable economic growth, China's central government issued widespread macro-economic control policies at the end of 2003. Those private-owned firms with high investment and low efficiency were obliged to change their profligate ways, economists noted.

"Drawn by high profits, some firms want to do things with millions that they know might cost billions. When the government raised the threshold for these businesses and tightened loan policy, they felt the pinch," said Lu Guanqiu, chairman of the Board of the Zhejiang Wanxiang Group.

In April of 2004, the government's crackdown on Jiangsu Tieben Iron Co, ltd. led to worries of some private firms that the government was to "operate" on and squeeze the private economy. Jiangsu Tieben had illegally invested in an iron project, occupying some 440 hectares and beginning construction without approval of the local environmental protection department. The project had received a large amount of loans from banks by forgingdocuments.

To remove the worries of private company owners, Premier Wen Jiabao went to Zhejiang province to explain the issue, saying his government will "go on encouraging, supporting and guiding the healthy growth of private economy."

Wen got an enthusiastic response from private firms at a private economic summit that closed here recently.

"The fairly tight policy will compel us to upgrade technology and to make high-value-added products," acknowledged Liang Jianfeng, director of board of Hubei Tonglian Textile Company. "Inthe long run, it will do our company good."

Guangyu Group, a Zhejiang-based private firm listed on the HongKong stock market, has the same view as Tonglian. The company aborted a plan to build its manufacturing lines this year, diverting its focus onto researching new technology and producing 0.75-mm super-thin glass. If it succeeds, the new glass will bringit 10 times the profit of normal glass.

Besides, while curbing over investment in sectors such as iron and steel, electrolyte aluminum, and cement, policies for macro-economic control spur the development of high-tech sectors such astelecommunications, bio-medicine and new materials. Banks take a more positive attitude toward providing loans to companies engagedin these sectors.

In July this year, the Zhejiang branch of the Construction Bankof China signed cooperative agreements with 200 small and medium-size privately owned firms, providing them loans with credit linesof 13.4 billion yuan (about 1.6 billion US dollars).

"China's macro-economic control policies have eased major problems in current economic operation and established a better economic environment for the growth of non-state sectors," said MaKai, minister in charge of the State Development and Reform Commission.

Since the policies were put into effect, the growth of investment in fixed assets has dropped obviously, but that of private investment has maintained rapid growth.

Statistics from the National Bureau of Statistics show that in the January-September period, investment by privately owned firms rose 59.4 percent over the same period last year. Meanwhile, the proportion of investment by the private economy of the total increased to 9.7 percent from 7.9 percent.

In Zhejiang alone, investment by non-state-owned firms stood at247.5 billion yuan (29.8 billion US dollars) during the January-September period, up 24.9 percent over the same period last year. The figure is 9.8 percentage points higher than that of state-owned companies.

Source: Xinhua