Private Partners

By Zhang Shasha

There is hardly any Chinese who has not tasted Laoganma， the chili sauce brand that can jazz up any food， be they lovers of spicy food or not. Especially for overseas Chinese students， it is a must-buy item on their shopping list when they scour supermarkets in an unfamiliar country since it can solve their food problems by imparting a familiar flavor from home. It is apt because laoganma means godmother in Chinese.

The sauce gets its name from Tao Huabi， a woman who once lived in a remote village in southwest Chinas Guizhou Province. The death of her husband forced Tao to open a bean jelly store to raise her two sons， and due to her kind ways， she was called laoganma by the people who came to her store. Tao also tried her hand at making chili sauce and to her surprise， it won more applause than her jelly. She focused on the sauce and in 1997， opened the Guiyang Nanming Laoganma Food Co. Today， it has become one of the best known privately owned brands in China.

Taos entrepreneurship has gained national recognition. On October 24， she was named as one of the top 100 outstanding private entrepreneurs over the past 40 years of reform and opening up by the All-China Federation of Industry and Commerce.

Timely tribute

The list features entrepreneurs from all walks of life. They are from traditional industries， or exploring innovative fields， committed to the construction of the Belt and Road Initiative， or devoted to public affairs， contributing greatly to the economy and society.

“This year marking the 40th anniversary of Chinas reform and opening up， the list is a timely move to underline the contributions of private enterprises，” Zang Yueru， Director of the Institute of Market and Price at the Academy of Macroeconomic Research， an economic think tank， told Beijing Review. “It also serves as a strong rejoinder to those who have been saying that private investors will be forced out of the market by state-owned enterprises. The acknowledgement of private investors will stabilize market confi dence.”

Over the past 40 years， private companies like Laoganma have infused vitality into Chinas economic development. Laoganmas annual sales reached 4.5 billion yuan （$645.8 million） in 2016. According to Tao， from 2012 to 2014， the companys taxes amounted to 1.8 billion yuan （$258.3 million）， making it one of the major taxpayers in Guizhou.

At a symposium on private enterprises on November 1， President Xi Jinping， also General Secretary of the Communist Party of China （CPC） Central Committee， underlined the important role that the private sector plays in pushing the development of the socialist market economy， promoting supply-side structural reform， seeking high-quality development and building a modernized economy.

“Over the past 40 years， the private sector of the economy has become an indispensable force behind Chinas development，” Xi said.

Private enterprises account for 50 percent of Chinas tax revenue， 60 percent of GDP， and 70 percent of technological innovations. They also provide 80 percent of urban employment and 90 percent of new jobs.

“Our countrys private sector should grow stronger instead of weaker and march toward a broader stage，” Xi said. “All private companies and private entrepreneurs should feel totally reassured and devote themselves to seeking development，” Xi added.

Some private companies have recently encountered difficulties in marketing， financing and restructuring. Xi attributed these problems to the combined effect of multiple factors including external and internal as well as objective and subjective ones.

“These difficulties are obstacles in the process of development， issues in the course of progress and pains as the country grows， and they will surely be solved through development，” Xi said.

Xi demanded the implementation of policies and measures in a number of aspects to create a better environment for the development of private enterprises and address their diffi culties. These include eas- ing the burden of taxes and fees， expanding the fundraising channels and leveling the playing fi eld.

A step forward

The government has renewed efforts to assist private companies. On October 22， the Central Government decided to facilitate the bond issuance by private companies， with liquidity support from the central bank to professional institutions. Funding support will be offered to smaller fi nancial institutions to enhance their capability to serve private fi rms.

The central bank has also said it will increase the quotas of relending and rediscount to fi nancial institutions by 150 billion yuan （$21.6 billion） to ensure that targeted loans are channeled to private firms， following an expansion of the same amount in June.

As some listed private companies choose to raise money in a risky way by pledging their stock against loans due to fi nancing hurdles such as the lack of credit records and other collateral， these measures will help to alleviate the problem.

Following the principle of market orientation， fi nancial institutions will then turn to assist the bond issuance of companies with good prospects and technological competitiveness but facing temporary difficulties， the central bank said.

“Financing is a big issue for private enterprises，” Zang said. Tax reductions and an optimizing business environment also play a crucial role in promoting the private sector. Zang highlighted the importance of local governments transforming their way of serving private enterprises. She also emphasized the need to deepen reform by easing market access to key fi elds with stable long-term returns such as energy and transportation industries.

Although government support has a big part in boosting the private sector， the enterprises themselves have a key role to play in their development.

“In the past， some private enterprisers continued to expand in unfamiliar fields such as real estate and fi nancial services，”Zang said. “However， investing blindly and irrationally in unfamiliar areas may bring potential risks to their capital chain.”

Once again Tao and Laoganma serve as an example. Tao， though she cant read or write， has still been able to build a thriving business for 20 years because all along， she has been focusing on one product， the spicy sauce， something she knows well. Her confi dence stems from her superior products and these have fetched her sufficient liquidity for her business operations. As a result， she doesnt need to float initial public offerings to raise funds for new operations.

“Of course， private enterprises also require transformation of business modes and innovation，” Zang said. “But they should take into account their available pool of professional talent and technology.”

With the passage of time， Laoganma is no longer just a jar of hot sauce； it is also part of the Chinese palate. And there are numerous Chinese private enterprises like Laoganma， which have become an integral part of Chinas economy.