China 'becoming more capitalist' By James Kynge in Shanghai
China's dynamic private sector contributes almost as much to gross domestic product as the lumbering state enterprises that have been the bulwark of the ruling Communist party's economic power since the revolution 50 years ago.
A landmark new report by the International Finance Corp (IFC), the private sector arm of the World Bank, says that private businesses generated 33 per cent of China's GDP in 1998 compared with 37 per cent from the state sector.
The balance came from agricultural companies and businesses with a mix of owners dominated by state interests. The report, which has yet to be made public, provides a rare, authoritative illustration of how the last two decades of reform and opening to foreign investment have transformed the economy.
Its findings may help to reshape classification of China's economy, which is officially called a "socialist market economy" but which is, in many ways, scarcely less capitalist than those in the west. Official statistics on the development of the private sector are notoriously confusing and unreliable.
Before 1979, when Deng Xiaoping, China's late leader, launched a programme of free market reforms, private enterprise of any sort was banned. People who furtively sold watches on street corners in those days were sentenced to years of hard labour. Now, some of those very same people rank among China's richest entrepreneurs.
The emergence of the private sector accelerated in the early 1990s after Mr Deng took his famous "southern tour" to urge people in China's booming southern provinces to be bolder in economic reform.
But perhaps the greatest growth spurt by private business has come since Zhu Rongji, the current premier, took power in early 1998 and pledged a faster pace of state economic reform. Last year, the constitution was amended to elevate private enterprise to a place alongside the state sector in China's economic ideology. However, discrimination against private businesses is still commonplace.
The IFC figures split Chinese corporations into six categories. They included state, agricultural and collective in the state or semi-state sector. Shareholdings, foreign and domestic private companies were included in the pure private sector. The most statistically elusive of these categories is "collective", a classification that denotes a mix of private and state stakeholders. The IFC decided that nearly half of the companies that call themselves collective should in fact be called private.