Development of the Market Economy

    Guangdong took lead in implementing market-oriented reforms in China since 1978. During the past 20 years, the government of Guangdong has been constantly improving the market economic system and reducing administrative approving procedures and microeconomic interventions to a great extent. As a result, various production factors are freely circulated, state-owned enterprises are transformed into the system of incorporated companies, and non-state economy becomes a mainstay of the economy.

Government has changed the way of economic administration

• Introducing the policy “separation of enterprise from administration”
• Guangdong has cancelled most authorities used to administer each specific industry sectors, and handed over state-owned enterprises to assets management companies or big enterprise groups designated by the government. The government no longer interferes in the operating activities of state-owned enterprises.
• According to Tentative Measures for Transfer of State Property in Enterprises, state property in enterprises can be transferred or sold to employees of the enterprise as well as other state-owned enterprises, private enterprises or individuals. The transferor should be compensated through agreements, tendering or auctions; such property can also be transferred or sold to foreign-invested enterprises or individuals (foreign investors). On March 16, 2004, the property “Guangzhou Zhongshan Mansion”, originally belonging to Zhongshan city, Guangdong, was sold to a private boss from Macao by auction at the price of RMB 34.20 million, which was the first successful transaction of state property by auction in China.
• Narrowing the scope of projects subject to examining and approving procedures
      As for non-government invested projects, the government will only examine projects involving state security and development of major resources, projects crucial to industrial disposition, projects under industrial restrictions, as well as foreign-invested projects; other projects are only required to be reported to the government for record.
• Repealing plans intervening resource allocations
• All mandatory plans for agricultural production have been abolished; mandatory plans for industrial production are only maintained for lumber, gold, cigarettes, edible salt and natural gas, among them, mandatory plans are only maintained in certain aspects or for certain products as to lumber, natural gas and gold.
• Labor contract system has been widely established in various enterprises in accordance with the Labor Law; employers determine the salary level through consultations with employees; and the government has set up guiding salary level and minimum salary standards; enterprises and employees may choose each other through over 1,700 job centers and over 2,000 talent fairs every year in the province; each year Guangdong offers more than 1 million jobs to people from other provinces.
• Government must transfer the land-use right for commercial purposes (such as business, tourism, entertainment, office building, hotels and commercialized residential houses) publicly through auction, tendering and on-line bidding, etc. In the case of land for industrial facilities, the competent land authority can transfer land-use right on price negotiated with the transferee in the agreement reached between the authority and the transferee. However, if there are two or more bidders for the same lot, the transfer must be conducted through tendering procedures or auction. Moreover, transfer of land-use right of state-owned enterprises must be conducted publicly.
• All enterprises, including private and foreign capital enterprises, may finance themselves by commercial loans or issue of shares. Domestic companies also issue shares in Hong Kong, New York and Singapore to raise fund.
• Shenzhen Stock Exchange, located in Guangdong, is one of the two major stock exchanges in China. Up to now, there are 142 publicly listed companies in Guangdong. These companies have totally raised RMB 97.4 billion and 11.4 billion HK dollar in domestic and foreign capital markets.
• State-owned specialized banks have been transformed into state-owned commercial banks. Current banking system is composed of state-owned commercial banks, joint-stock commercial banks and municipal commercial banks; and foreign capital banks have already entered the market. Highly-monopolized market structure has been converted into competitive market structure in the banking system. According to laws and regulations such as Commercial Bank Law and General Principles for Loans, commercial banks may review the qualification of borrowers and disburse loans independently.
• Repealing government pricing for commodities and services
      Prices of over 95% commodities are depended on market conditions, while only less than 5% are subject to government pricing or guiding prices, which mainly include a few commodities significant to national planning and people’s life, as well as important public facilities and services involving public interests.

Enterprises operate in light of market rules at their own discretions

• Establishing and operating enterprises pursuant to law
• Domestic enterprises are established in accordance with the Company Law, Partnership Law and Law for Sole Proprietors, state-owned enterprises have changed into companies with limited liabilities and corporations in light of the Company Law. Domestic capital enterprises are no longer required to report production and operation plans to the government.
• Foreign-invested enterprises are established in accordance with Law for Chinese-Foreign Equity Joint Ventures, Law for Chinese-Foreign Contractual Joint Ventures and Law for Enterprises Wholly-Owned by Foreign Investors. And the parts of the preceding laws that are inconsistent with WTO rules have been repealed. Foreign-invested enterprises operate in light of joint venture contract and/or articles of association, and are free from any interventions with their business.
• Implementing accounting system compatible with international practices
      All enterprises conduct accounting practices and formulate financial statements in light of Accounting Law, Accounting Principles for Enterprises, accounting system for sectors and Accounting System for Enterprises. Above-mentioned laws and regulations have been amended to harmonize with international standards.
• Enterprises assume their losses or enjoy their profits on their own.
      According to the Law on the Bankruptcy of Enterprises, Civil Procedure Law and Company Law, in the event a company or an enterprise is incapable of repaying due debts, it should go into liquidation; and the government will not compensate such companies with their losses.

Non-state owned economy has became a mainstay of the economy of Guangdong

• Number of private enterprises exceeds that of state-owned enterprises in Guangdong.
      By the end of 2003, Guangdong has 323,000 private enterprises with total registered capital
  of RMB452,280,000,000, ranking the first in all provinces of China. Among enterprises registered in 2003 in Guangdong, private enterprises represent 78% and foreign capital enterprises represent 6%; every day, over 200 private enterprises and 1,000 individual businesses emerge in Guangdong.
• Guangdong became the province with biggest scale of non-state investment.
      By the end of 2003, the whole province realized fixed assets investment RMB 498,890,000,000, including RMB 151,284,000,000 by state-owned enterprises and RMB 347, 606,000,000 by non-state owned enterprises; non-state investment accounted for 69.7% of the total investment.
• Guangdong is the province receiving most foreign investments in China.
      Foreign-invested enterprises constantly increase their capital and expand their assets. In 2003, 2,240 foreign-invested enterprises in Guangdong increased their capital, with the total increment of 4.1 billion USD (3.37billion by foreign side), equivalent to 39.4% of the total capital of newly-registered foreign-invested enterprises in the year.
• Non-state owned industries represent 80% of total economic increase of Guangdong Industries
      By the end of 2003, industrial output value of foreign-invested enterprises represented 55% of that of all enterprises in the province, accounting for 64.8% of the total industrial increase of the province; and the industrial output value of private industries represented 23% of total industrial increase of the province.

Liberalization of trading environment has been gradually improved.

• Highly liberalized trading sectors and diversified operating entities
      Private enterprises represent over 50% of all domestic trading enterprises. Foreign capital companies are speeding up in entering domestic distribution business. For example, Walmart and Carrefour have already established in Guangdong. As for foreign trade, foreign enterprises act as a main force, their import and export accounted for 61.6% of total import and export in Guangdong in 2003; private enterprises is the most active force, their import and export volume increased by 161.6% in 2003.
• Gradually standardized market order
      Under the uniform arrangement of the central government, Guangdong has made great efforts in rectifying market order, (such as special rectifying campaigns including investigating and disposing fake and shoddy foods and medicines etc.), reinforcing IPR law enforcement, combating monopoly and stopping arbitrary charges, to establish a uniform, standardized, competitive and orderly market economic system as quickly as practicable.
• Relatively developed professional services
      Increment in Guangdong service sectors ranked the first among all provinces around the country in 2003, representing 40.8% of GDP. In recent years, legal, accounting, exhibition, trading, logistics, financial and insurance service level has been enhanced due to constant inflows of foreign capital.
• Rapid growth of intermediate agencies.
      There are 792 trade associations in Guangdong province, covering over 100 sectors. Each association owns an average of 218 members, including over 50% private enterprises. Trade associations are self-discipline organizations, which are not a part of the government and represent the interests of member enterprises.

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