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

The relationship between government policy and economic development has been a long-standingtopic of academic research and policy debate.The government of a transitionaleconomy plays an important role in the process of economic development.Over the pastthree decades,the Chinese economy has been growing very rapidly,in particular because ofthe rapid development of the private sector.However,the performance of private enterprisesis still affected by government policies.In the present paper,we examine the changes in largeChinese private enterprises’performance during 2003-2006 and test the determinants ofsuch changes.We conclude that the Chinese Government’s discriminating policies againstprivate enterprises are the main cause of the private sector’s downturn.