With increasingly fierce international competition, Chinese enterprises, no matter the state-owned or the non-state-owned, have to continuously adjust themselves to adapt constant changing market and abide by the rules and the laws of market functioning without depending on the government’s protection. The practice of twenty-four –year reform and opening has proved that the positive effects aroused by the government’s protection are not evident. The industries, who have not been protected or less protected, are just ones with higher competition in China, such as the industry of electrical household appliances, textile and light industry. At present, no matter from performance or quality, Chinese fine electrical household appliances have been as good as Japanese, Korean and European famous ones. And their producers have begun to emerge into international market. However, these industries, which are highly monopolists and much protected by the government, are the ones with difficulty to bear competitive pressure from the foreign countries, such as the industries of telecommunication and financial service. Therefore, Chinese enterprises have to abandon to depend on the government protection, change management ideas and systems according to the market running rules, and emerge themselves to the international competitive environment. Thus, Chinese enterprises must develop in depth toward market-oriented.

I.          Non-state economy

1. The future changes of non-state economic policies, statutes and economic environment

The 16th National Congress of the Communist Party of China opened in November 2002, of which  raised, "We have to firmly and unshambly support and guide non-state nonstate economic development”；“We have to enlarge the market access field of the domestic non-government capital, and adopt measures to realize fair competition in investment and finance, taxation and foreign trade, etc. ”；"We have to improve investment environments, carry out national treatment to foreign investment, and make statutes and policies more transparent”；“We have to perfect law systems on protecting private property”；“We have to establish the distribution principle according to the manufacturing elements' contribution, such as the labor, capital, technology and management and so on”. The promulgation of such policies has supported more non-state economy, especially non-public ownership economy.

After the 16th National Congress of the Communist Party of China, we will constantly make and improve some laws and regulations, which are in line with the international practices and benefit the development of non-state economy. Above all, the first Civil Law (Draft) of New China that is much concerned by the public has been submitted to the highest national legislature for consideration and will be soon shown to the public. In order to perfect legal systems about private property protection, the Civil Law (Draft) illustrates the private ownership in a special section. It contains some basic principles on Law of Property and property protection, which are applicable to the citizen's and non-public ownership enterprises' properties. The Draft provides that the private ownership in the Civil Law includes that natural person and the subject of non-public ownership economy, such as the individual and the private economy, enjoy the right of completely dominating their movable or immovable properties in an all-round way. Secondly, we will annul the policies and the statutes that discriminate against the private and the individual economy's development, and revise and perfect the policies and the statutes that support and perfect the private and the individual economy's development, so that we can guide and support the private and the individual economy to take brand and credit as the center of starting work for the second time by speeding up the capital reorganizing and uniting, taking actively part in the international competition, improving constantly their own quality and overall competitive power. Then, Interim Provisions on Restructuring State-owned Enterprises with Foreign Investment Et has been published in November 2002 and shall come into force since January 1st, 2003. This Provision together with previous Notice on the Relevant Issues concerning the Transfer of State-Owned Shares and Corporate Shares of Listed Companies to Foreign Investors has formed the policy system of foreign capital introduction to reorganize state-owned enterprises and will exert a great influence on adjusting and optimizing the distribution of state-owned economy.

According to the WTO Agreement and the report of the working group, China will open wider fields for the foreign trades in 2003, the second year after China's access to WTO. For example, the minimum registered capital is requested to reduce to 3 million RMB for Chinese enterprises to obtain foreign trade operating power；Joint ventures with foreign shares in the minority will obtain the whole foreign trade operating power；We will cancel the non-discrimination treatment between the production for the domestic sales and the production for export and between the product for export and the product for import, and will give national treatment to the import products；We will further provide service fields in business, telecommunication, retails and finance, etc. by increasing the proportion of the foreign capital, of which can even be more than 50%. This means China will gradually and finally merge into the global economic system. Chinese enterprises will have more fierce competition with the world enterprises, even the one of developed countries in a higher level.

2. The development trend of the non-state economy

(1) The non-state economy will go into more extensive fields

The market entrance of the non-state economy is bound to follow the strategic adjustments of the state-owned economy. One of the important measures of the adjustments is to withdraw from most of the creative industries, which certainly means the entering of the non-state economy. On the one hand, great quantities of small and middle state-owned enterprises, especially the small-sized, are directly transformed into the non-state owned enterprises. On the other hand, large and middle-sized enterprises are transformed to the state-holding ones and are implemented the property rights for diversification, which is also predicated the access of the non-state economy. At the same time, China, as one of the WTO members, has to follow these two basic principles: one is the WTO market access; the other is the national treatment. China will give the equal treatment to Chinese enterprises including the ones invested by the foreign capital, the foreign-owned enterprises in China and other non-state enterprises. It means all competitive industries will enjoy equal entering permission and production, operation terms regardless of their ownership and capital source. Particularly according to China's promise, we will guarantee the non-discrimination treatment in supply of goods, service price and acquirement from these industries, such as communication and transportation, energy resources, basic telecommunications, other production facilities and factors, etc. Under these conditions, the non-state economy will gradually join the industries monopolized by the state-owned and will have an equal competition with the state-owned enterprises.

(2) The property rights of the non-state enterprises will become more distinct and diversified; the actions of the production and operation will become more normalized.

In the second year of China's access to WTO, though WTO doesn't make any regulations for its members' enterprise system, it forces China to accelerate the reform of the enterprise system and speeds up the reform of the property rights' diversification of the company system. In accordance with the requirements of the modern company system, for the non-state enterprise, even if the property right is clear, it should have a reform to adapt to the globalized market competition environment. In this environment, the non-state enterprises, especially the family enterprises, have to attract more investment subjects to expand their scope and increase competitive strength. In order to maintain their long-term vitality, the non-state enterprises also have to strictly follow the market rules and related statutes, perfect administration structure and encouragement and restraint system according to the requests of the market competition, understand the property right of different investment subject and relevant profit, and standardize actions of production and management.

(3) The foreign direct investment, especially the exclusive foreign investment will increase rapidly

China's access to WTO and the implementation of all kinds of policies of attracting foreign capital will certainly stimulate more multinational enterprises to come into China and make further effects to domestic enterprises. During twenty-four years' reform and opening, many famous foreign enterprises have founded the joint ventures, cooperative and foreign-owned enterprises. The quantity of products in the market-share is increasing continuously, which has exerted a great influence to Chinese economic development. For many years, our national policies and measures of high tariff, anti-dumping system and project examination and approval system had once protected effectively domestic enterprises and made some industries have more strong international competitive power, particularly such enterprise groups as Haier, Baogang and Changhong and so on. However, when joining WTO, the tariff will decrease obviously and the government administration means will be weakened and even secede. Only through direct competition with foreign enterprises, can domestic enterprises survive and develop, which is the life-and-death choice for domestic enterprises. Recently, the exclusive investment to China by the foreign trader increases sharply. However, in the past it is mainly the joint venture or cooperative enterprises with Chinese enterprises. In 2000, the amount of the contract money of joint ventures and cooperative projects was 27.765 billion dollars, which decreased to 25.837 billion dollars. But the amount of the contract money of the exclusive investment increased 25.33% from 34.309 billion dollars in 2000 to 42.999 billion dollars. This means, even if in China, the competition between our enterprises and foreign large enterprises will become more and more fierce.

We can predicate the non-state economy will play more important role in the development of Chinese economy and will make more contribution to the rising of the national economy.

II.       The state-owned enterprises

1.The future changes of state-owned economic policies, statutes and economic environment

In the aspect of market-oriented reform of state-owned enterprises, it’s proposed to establish new state-owned assets management scheme in line with the market in the 16th National Congress of the Communist Party of China. “Laws and regulations shall be formulated to establish state-owned assets management scheme that the Central Government and Local Government shall perform responsibilities as promoter on behalf of nation, enjoy ownership interest, unified in right, obligation and responsibility, and combine assets management, personnel management with business management”; “Government at all levels shall carry out strictly laws and regulations concerning state-owned assets management, insist the separation of government and enterprise, division of ownership and right of management, and make enterprises manage their business on their own and responsible for profits and losses”. It’s necessary to push forward the property diversified reform of state-owned enterprises. “Except that the few enterprises shall be management by state in sole proprietorship, stock-holding system shall be implemented actively and develop mixed ownership economy. Therefore, the investment project is going to be diversified and key enterprises shall be state holding.”

After the 16th National Congress of the Communist Party of China, there issued two laws. One is Law of State Property Management, which define the sole promoter role of state property, hence to realize the true separation between government and enterprises, government and capitals; the other is Law of Bankruptcy. In the current world, whether the law of bankruptcy is sound is becoming the important symbol weighing the maturity of market economy of one state. After 15-year-implementation in trial of modern enterprises, some of the items have been contradictory with the reality of China reform. It’s urgent to formulate one sound bankruptcy law. The new version of Law of Bankruptcy (Draft) has been revised in three times and has been formed in the base of widely listening to the ideas from each ministry and province and city. New bankruptcy law treats state-owned enterprises and non-state enterprises in equal position because the nonreplaceable role of state enterprises has disappeared totally. With the absorbsion of foreign fund and non-state capital, the problem of state-owned enterprises has not been a troublesome one.

With the access to WTO and China’s immersion to global economy, state-owned enterprises would compete at higher level like non-state enterprises. State-owned enterprises must face more fierce challenge from more fields and more dimensions.

2. The development trend of the state-owned enterprises market-orientation

(1) The more absolute separation will be realized between the government and the capital and between the government and the enterprise

The new operating system of the state-owned capital will be formed in 2003 and related laws will be published. The new system will establish the sole deputy of the state-owned capital. Thus, the long-existing problem that many departments fight for the capital ownership will be resolved and the provider of the state-owned capital will become distinct. As the provider, he will fulfill the owner's responsibility, and enjoy the owner's rights and interests, which cannot be replaced by the administration function. It means, following the opening of the capital provider, the government function separation from those of enterprises will be resolved basically, the government control to resources and the government monopoly to industries will be greatly weakened, and the external autonomy and the internal decision-making right of the state-owned enterprises will be strengthened greatly. After the separation between the government and the capital, the government will take great pains to build market system, create sound environment for the enterprises, and provide the guarantee for the enterprises to set up modern enterprise system.

(2) The company reform of the state-owned enterprises will develop in depth

Building modern enterprise system is the inevitable request of developing socialized mass production and market economy and the way of the state-owned enterprises reform. In the future, for the large and middle-sized enterprises, except some special fields (such as related with the national safety and the national economy and the people's livelihood), most of them will shift their system to the non-state owned exclusive investment companies in order to realize the diversification of the investment subject and the clear property rights in a greater degree, to absolutely break away from the government control, to establish scientific and effective administration structure and  the systems of the encouragement and restraint, to standardize the enterprise running, to transfer the enterprise operating system, and to strengthen the enterprise's adaptability and competitive power.

(3) The actions of the state-owned will be more market-oriented and normalized

Recently, the market-oriented action of the state-owned has reached to a quite high level, such as the acquirement of the factors, the price making and so on. But there is some certain non-market parts in the administration system, especially in the large state-owned enterprises. For example, there are some enterprise managers appointed and removed by the government, and the incomes distribution of the managers still follows the standard of the government. With the separations between the government and the capital and between the government and the enterprise, this phenomenon will decrease greatly. Most managers will be selected and employed from the growing market of the professional manager whose income will be decided by the board of directors of the company himself. At the same time, the mutual restraint system of the company administration organization will be further perfected and its operation will be standardized day and day.

(4) The large and middle-sized state-owned enterprises, especially the small-sized ones, will gradually withdraw from the state-owned fields

With the perfectness of the social security system, the small-sized state-owned enterprises and the middle-sized enterprises with long-term loss will go into the non-state economy through bankruptcy, most and even all of them will withdraw from the state-owned fields and be reformed to the non-state enterprises, or be changed to the ordinary state joint-stock enterprises. The ordinary state joint-stock enterprise is not the state-owned enterprise any more, but the typical mixed ownership enterprise. Most importantly, with the promulgation of laws and policies concerning foreign capital to reorganize the state-owned enterprises, and transferring the state-owned and the legal stocks of the listed company to the foreign trader, etc., the state-owned enterprises will withdraw in more fields. By selling the state-owned property right to the foreign trader or attracting the foreign trader to join stock, we can promote the enterprise to establish the modern enterprise system, improve the company administration structure, realize the sustainable development of the enterprise, and strengthen the competitive ability.