China's booming private sector has won strong policy support from the central government.

The State Council last week issued a circular supporting non-state investment into infrastructure, monopolized industries, and public utilities. The circular also called for more effort to create a sound environment of law, policy and market for non-state economy.

"This is the first time that the Chinese government has made a clear statement giving the green light for non-state capital to enter industries monopolized by the state economy," said Chinese Academy of Social Sciences researcher Heng Lin.

Although the government has displayed support for the development of non-state economy in recent years, there are still barriers to the development of the private sector especially in the power and oil industries. Even in Shanghai where the private economy booms, the non-state business often faces many limits from various industries. "Its existence is under great pressure,"Heng said.

"The newly issued circular means the government encourages non-state investment into industries monopolized by state economy, including telecommunications, power, civil aviation, railway, film shooting, and financial service industries," said Xia Xiaolin with the State Development and Reform Commission.

He said China had not tried to break the monopoly until recent years, and more still needed to be done to simplify the procedure of ratification for the development of private businesses.

"This document would push forward the local governments to make concerned index on industries that allow private investment," said Xia.

Wang Degang, deputy general secretary with China Chamber of Commerce for Petroleum Industry, was quite happy when he heard the news. "The policy adjustment is quite encouraging and would definitely inject new vigor into monopolized industries."

Wang's chamber, launched last December, aims to remove the barrier for private enterprises to enter the refined oil market and strive for equal treatment with state business in the sector.

China's private economy has grown much stronger since the reform and opening-up in the late 1970s. Government statistics show in 2003 the state economy contributed less than 40 percent of the Gross Domestic Products (GDP) while the non-state sector accounted for nearly two thirds of the GDP. Some private capital has broken the barriers and entered industries of steel and finance which were previously monopolized by state economy.

In fact, many so-called monopolized industries such as civil aviation and oil do not actually belong to a natural monopoly but formed through administrative order.

"Those measures can hardly prevent the entry of private business and it is a wise way to regulate the entry through laws and regulations," CASS researcher Heng Lin said.

In October 2003, China made it clear it wanted to develop non-state economy. "The newly issued circular is a further and more specific follow-up," Liao Yingmin, from the Development Research Center with the State Council, said. "It means the private business would enjoy equal and legal status as the state economy," Liao said.

In China, state economy still dominates. Experts believe the loosened control of private business would not affect the status of state-owned capital in strategic industries concerning the safety of national economy and the peoples' livelihoods, but would enhance the efficiency of the market economy.

Meanwhile, the participation of non-state business would also be an impetus for state enterprises. "As the competition grows more heated, state businesses could not lie in the warm bed as in the past," Liao said.