How China Should Navigate Through the Economic Challenges

How China Should Navigate Through the Economic Challenges
November 23, 2023

Date: Nov 23, 2023

During a recent interview, Prof. FAN Gang, President of China Development Institute, provided perspectives on the development of large enterprises, insights on the importance of fostering private enterprises and how China should navigate through the economic challenges that it faces now.

Synergies and Challenges in Diverse Business Scales

Businesses of all scales have the opportunity to innovate in a variety of ways. While small businesses may specialize in specific technological fields, they often struggle to achieve systematic technological development. On the other hand, large enterprises tend to integrate multiple technologies to create more comprehensive products. The large enterprises play a distinct and pivotal role in economic modernization especially within the innovation ecosystem, as they are able to catalyze a network of SMEs and integrate them into the innovation chain.

Furthermore, thanks to their ample capital and profits, large enterprises are able to make long-term, sustained investments into R&D, thereby propelling systematic and continuous innovation in fields like cloud technology and AI. Nevertheless, the key lies in establishing oligopolistic competition within the industry structure while averting monopolization, and ensuring ample space for innovation for SMEs.

Nurturing Private Enterprises for Economic Progress

When comparing China's private enterprises with state-owned enterprises (SOEs), significant differences exist. It is crucial to focus on the development of private enterprises as they are critical to China’s economic growth.

State-owned enterprises, due to their close ties with the government and other entities alike, exhibit weaker independence. Moreover, they operate under stringent institutional frameworks and scrutiny in decision-making, necessitating cautious consideration for the use of public funds and risk mitigation, thereby limiting their investment in innovation and capacity in risk-taking. In contrast,…