How Many "36 Guidelines" Do We Need?

By EO Editorial Board
Published: 2010-04-09

Cover Editorial - EO print edition no. 463
Translated by Tang Xiangyang
Original article:
[Chinese]

The answer is quite simple: we only need one.

The "36 guidelines" were first issued by the central government in February of 2005; they indicated the determination of China's policy-makers to promote private enterprises through various policies and by providing them with equal market entry opportunities with their state-owned counterparts. Five years later, it's reported that some ministries are drafting a new Notice on Encouraging and Guiding the Healthy Development of Private Investment, which are referred to as the "new 36 guidelines".

If the policy released five years ago really needs to be replaced now, please tell us first, where are the results of those equal entrance opportunities and promotional policies? Who is responsible for setting up the "glass ceiling" (referring to obstacles private enterprises face when entering some industries) for the private enterprises? Will the State Council please hold them accountable no matter who they are?

Though the makers of the "new 36 guidelines" have claimed that this new policy will be easier to implement, compared with the old, we are not so forgetful.

From 2005 to 2007, ministerial agencies issued 37 policies in support of the "36 guidelines" and even more at the local level. Yet owners of private enterprises didn't feel "spring coming" as expected by the policy implementation.

Yes, the "36 guidelines to promote the non-state-owned economy"clearly stated the principles of treating state-owned and privately-owned enterprises equally and providing them both with equal entrance opportunities. It makes clear that the government will allow private capital to enter fields and industries that it is not prohibited access to by law, and that sectors and industries open to foreign capital are also open to private capital.

However, with these guidelines, private enterprises still find it impossible to be an equal player.  "Glass doors" are even stronger than ones you can see.

As the new "36 guidelines" move forward, we have to find out: In the past five years, who has gone against the principles of equal opportunity and fair pay; impeded private capital from entering fields such as the infrastructure of  transportation, telecommunications and energy, municipal public projects, science and technology projects concerning national defense, and the financial sphere? Who stole the cheese that should belong to private companies?

What we do know is that one year after the "36 guidelines" were issued, the State-owned Asset Administration and Supervision Commission announced that state-owned enterprises would dominate seven major domains. Meanwhile, the openness of municipal public programs was short-lived; private enterprises who had entered the field were edged out. Benefiting from the four-trillion-yuan stimulus package, projects concerning railway and road construction were assigned to state-owned enterprises.

This is the reality of the situation five years after the "36 guidelines" were issued which is why Premier Wen Jiabao had to restate at a meeting of the State Council's standing committee that the government would encourage and guide private capital to enter fields and industries that it is not prohibited from.

But, do we really need a new "36 guidelines"? In 2001, when China joined the WTO, the National Planning Commission, which is now known as the National Development and Reform Commission, issued a Notice on Promoting and Guiding Private Investment. If we consider the "36 guidelines" issued in 2005 as the central government's effort to lift the policy to a national level, then how can we perceive the new "36 guidelines" currently being drafted? If the old policy did not reach its original goal, will the new one be able to?

From 2001 to 2010, beginning at a low point the Chinese economy experienced a new period of growth, then triumphant progress; afterwards the economy sunk due to the financial crisis, and now once again the economy is warming up to enter a period of growth. During the past ten years, private capital was once encouraged and popular, then discouraged, doubted and even elbowed out, and now is being reintroduced and encouraged again. With doors to the market being repeatedly opened and closed, pragmatism and opportunism have dominated the attitude towards private capital of departments and local governments. Adding fuel to the fire, the special interest groups are also trying to elbow out private companies, forcing them to endure even worse conditions.

We only need one "36 guidelines". Whether we can escape the vicious cycle of the past ten years lies in whether our government can abandon its pragmatism and properly position private enterprises in the Chinese economy. The "36 guidelines" will take effect if the government dares to resist lobbying from  special interest groups and smash through the "glass ceiling". If not, perhaps in less than five years, the "36 guidelines" will have to be revised again.