How real is China's private sector?

Does one really exist or are foreign firms acting as a proxy?

The Chinese private sector has attracted a huge amount of attention since the International Finance Corporation IFC started its pioneering work with it in 2000. For outside observers, this is hardly surprising given that individual ownership, protected by laws within a democratic framework, is the hallmark of Western capitalism.

In the context of a disappearing Communist structure, the transition to a private economy seems to be the litmus test of modernization for westerners. But China has confounded expectations partly because it is not always easy to define what is public and what is private sector.

Some 2500 years ago, Confucius pointed out that the mainstay of a...

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