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To: Vicki G who wrote (840)	2/10/1999 11:42:00 AM
From: Vicki G	Read Replies (1) \| Respond to of 1170

China private sector news, maybe good for us: _________________________________________________________ Friday February 5, 12:16 am Eastern Time China private sector gets a fairer deal -analysts BEIJING, Feb 5 (Reuters) - Constitutional changes enhancing the status of China's private sector will help dismantle ideological hurdles but are unlikely to boost the economy in the short term, analysts said on Friday. Nevertheless, over time private enterprises would find it easier to obtain bank financing and expand their operations, analysts said. And the constitutional revisions were likely to be just the start of government policies aimed at improving the business climate for the fastest-growing sector of the economy. ''There will be some impact, but not in a dramatic way,'' said Zhao Xiao, an economist at the China Centre for Economic Research at Peking University. China's Communist Party last week proposed landmark amendments to the constitution that would enshrine a key role for private enterprise and the rule of law. The draft amendments were expected to be approved by a full session of the National People's Congress, or parliament, scheduled to begin on March 5. Under the amendments, individual, private and non-state sectors would be described as an ''important component'' of the socialist economy instead of merely ''complementing'' the economy. The changes point to Beijing's growing need to boost the private sector to stimulate the flagging economy. ''After the role is enhanced, their potential for higher growth will increase,'' said an economist at a government think-tank who requested anonymity. The legal change would make it easier for private enterprises to get more bank credit, guarantees and expand their business scope, he said. ''A series of government policies to support private firms are expected to be unveiled,'' he said. China's robust economic growth in the past two decades has been largely powered by the flourishing non-state sector, including collective and private enterprises. Gross industrial output of private firms shot up by an annual average 47 percent during 1981-1997 while that of collective firms surged 20 percent. Output of state firms increased by just 7.5 percent in the period. The non-state sector -- including mixed private-public collectives -- accounted for 75 percent of gross industrial output in 1997 against just 25 percent in the early 1980s. However, the state sector sucks up two-thirds of all bank lending, resulting in a severe misallocation of capital. ''But the private sector has long way to go. There cannot be a change overnight,'' said the government economist. He estimated that China's 960,000 strong private firms contribute some 20 percent of Gross Domestic Product. Bank loan officers face harsh punishment if loans to private enterprises go sour, so they feel safer lending to state firms, Zhao said. China's economy grew 7.8 percent last year, powered by massive state spending on infrastructure. Investment by the non-state sector remained flat, but state sector investment surged 22 percent in 1998. The Economic Daily said on Wednesday that the cabinet's State Economic and Trade Commission had drafted regulations on guarantees for borrowings by smaller enterprises, which are mostly collectively or privately owned. The ministry would select 10 provinces and cities to launch a pilot scheme and gradually expand it, the newspaper said. -- Beijing Newsroom (86) 10-6532-1921; Fax (86) 10-6532-4978 -- Email: 1 Copyright © 1999 Reuters Limited. All rights reserved.