Government Policies and Private Enterprises Development in China: 2003-2006

The relationship between government policy and economic development has been a long-standing topic in both academic research and policy debate. The government of a transitional economy is playing an even greater role in its economy. In the past three decades, the Chinese economy has been growing very rapidly, due to the rapid development of the private sector. The performance of private enterprises in China, however, is still highly affected by government policies. In this paper, we examined the performance change of Chinese large-sized private enterprises during 2003-2006, and tested possible determinants of this change. We conclude that the Chinese government’s discriminating policies against private enterprises are the main cause of the private sector’s downturn.