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Wednesday, 1 May, 2002, 09:29 GMT 10:29 UK
China looks to private firms for jobs
Migrant workers rest on a Beijing street
Urban unemployment could double over the next few years, the ministry said
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By Duncan Hewitt
in Shanghai

China's private sector created almost a third of all new jobs in the country in the first three months of the year, according to a survey by the Ministry of Labour.

The figures come as the Chinese government is starting to acknowledge that it will have to rely increasingly on private businesses to create new jobs - a task made increasingly urgent by the country's entry into the World Trade Organisation (WTO).

But private businesses still face many obstacles to growth.

And some observers fear that without policies aimed at helping the private sector, companies could suffer when the economy is opened up to greater competition.

Engine of growth

The latest figures are further evidence of the changing balance of power in the Chinese economy.

Private firms now produce a third of China's GDP - just a few percentage points less than the state sector - and in the first quarter of this year they created almost 30% of new jobs.

Many others came from what are known in China as 'collective enterprises', which in practice are often also privately run.

And close to 20% of new jobs were in the service sector, up 3% from a year ago.

A spokesman for China's Ministry of Labour said the government now saw the private sector and service industries as a key engine of economic growth and job creation.


Yet many private business people claim that the authorities have still been slow to back this up with concrete policies.

Though China's state-run banks are now more prepared to offer loans to private businesses, the majority of their lending is still to state firms, and very few private businesses have been allowed to list on China's stock exchanges.

Even much talked about plans to create a NASDAQ-style second board to raise venture capital for high-tech firms appeared to have been delayed.

Critics warn that without better access to funds many private Chinese firms could struggle in the next few years as they face the increased competition brought by China's entry into the WTO.

This could also affect China's ability to create the jobs the government says will be needed to absorb those laid off by the state sector.

The Ministry of Labour warned this week that the number of registered urban unemployed - a figure seen as the tip of the iceberg - could more than double in the next few years to 20 million people.

See also:

19 Mar 02 | Business
China's unemployment challenge
19 Sep 01 | Business
Inside China: Workers on the move
06 Aug 01 | Business
'Two million jobs to go in Asia'
05 Mar 01 | Business
China says WTO will hit growth
26 Nov 00 | Asia-Pacific
China hopes for domestic job boost
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