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Tales from the Development Frontier
Table 1.4 Contribution of Private and Individual Business Firms to the Economy, China, 2006–08 Contribution
2006
2007
2008
Urban fixed investment, %
15.6
18.3
19.2
Share of total exports,a %
13.8
16.0
17.0
Share of tax payments, %
14.0
12.7
13.6
Share of short-term bank loans, %
2.71
Annual increase in employment, millions
10.2
3.06 10.0
3.37 9.3
Source: Minying 2009. Note: Private firms employ eight people or more; individual firms employ seven or fewer. a. Private firms only.
firms (seven workers or fewer) to 5.7 million by 1995 (OTNIC 1997). Although largely neglected by China’s banks, which extended only 3 percent of short-term loans to private business, China’s private sector contributed 13–19 percent of aggregate investment, exports, and fiscal revenue during 2006–08; these data exclude contributions from firms partially or fully owned by non-Chinese investors, including investors from Hong Kong SAR, China, and from Taiwan, China (table 1.4). Firms partially or fully owned by foreign investors have come to play a key role in China’s vastly expanded foreign trade, accounting for more than 55–58 percent of total exports during 2006–08 (NBS 2013a); note that foreign–invested firms include private, partially private, and partially state–owned firms. Job creation is the greatest achievement of China’s private sector. Private businesses added 30.3 million workers over 2006–08. During the decade ending in 2010, domestic private and individual firms added 89.4 million workers, far more than aggregate job growth of 40.2 million (NBS 2011). Without private sector job growth, aggregate formal employment would have been substantially lower in 2010 than in 2000 or 1990. Comparisons with other transition economies highlight China’s extraordinary wealth of entrepreneurial resources. The ex-socialist countries of the former Soviet Union and Eastern Europe “have lower rates of entrepreneurship than are observed in most developed and developing market economies” (Estrin and Mickiewicz 2010, 26) (figure 1.1). Rawski (2011) assembles comparable data for China and finds an annual average of 61.6 enterprises per 1,000 people during 2000–05. Even though these data appear to contain substantial underestimates