By Xing Bao

A LACK of "giants" is casting an ever heavier shadow over the city's private businesses.

Statistics show the number of local-based private enterprises already exceeds 240,000, accounting for more than half of all kinds of businesses in the city.

But only one Shanghai-based company has managed to enter the top 100 private enterprises nationwide. Yet, in neighbouring Zhejiang Province, the figure is as high as 20.

Few private companies in Shanghai have registered capital exceeding 100 million yuan (US$12.05 million). It is reported the average registered capital of the city's top 100 private enterprises is just 42.7 million yuan (US$5.14 million).

How come such a vast metropolis as Shanghai, which takes the lead nationally in many ways, loses out so badly when it comes to fostering large-scale private enterprises?

Tough environment

"Shanghai lacks good soil for the growth of private business," said Chen Huqi, an official from the Standing Committee of the Shanghai Municipal People's Congress.

"Compared with neighbouring cities, Shanghai is much stricter in its control of private companies, with heavy taxes, difficulty in financing and high environmental standards imposed upon them."

Echoing Chen's words, Lu Zhilin from the Shanghai Small Enterprises' Association, showed similar concerns about the tight reins on the operations of local private businesses.

He cited a remark once made by the boss of the Sichuan-based Hope Group, one of the country's biggest private enterprises - the best management the government can provide for private businesses is no management at all.

But even if the municipal government removed some of its tight control on the private economy, on which the city's top leadership has already reached common ground, a big doubt still lurks in the minds of industry analysts: does Shanghai have enough room for the private economy to grow?

Crowded out

Chen Wei, an expert at Shanghai Academy of Social Sciences, says local State-owned enterprises, which are expected to become overwhelmingly strong with the government's support, have left little space for the growth of private enterprises.

In contrast to neighbouring Jiangsu and Zhejiang provinces, which started encouraging private businesses much earlier, Shanghai, this favourite son of China, has long been the place where large State-owned enterprises concentrated.

"When people in Jiangsu and Zhejiang had to depend on themselves to open businesses and create jobs, Shanghai has a large number of State-owned enterprises as the backbone of its economy," said Jiang Tiezhu, an expert on the private economy from the Academy.

Given the sheer number of SOEs, Shanghai couldn't have felt as much urgency when it came to developing the private economy as some other cities.

"The lack of courage with which local entrepreneurs have explored the market outside Shanghai is another great hurdle," he added.

Many local companies just limit their market to Shanghai. Fears of potential difficulties and simple uncertainty hinders them from getting stronger.

Jiang went on to point out how this relates to the local culture.

Not long ago, he led a team making a survey of the three most prosperous cities in China - respectively Shanghai, Beijing and Shenzhen. The survey found Shanghai had the least entrepreneurial enthusiasm of the three.

"In Shanghai, highly-educated and capable youths prefer to be senior white-collars instead of bosses of their own businesses," Jiang said.

In Shenzhen, when encountering the rich, people would ask how they had become so prosperous, and think of ways to surpass them.

But in Shanghai, locals would first doubt the source of the treasure - whether it had been legally earned.

The cultural background is different.

"Instead of rearing big bosses, Shanghai is traditionally the home of compradors, or professional agents who are expected to use their brains rather than their money," Jiang said.

Despite this characteristic, which seems to hinder the fostering of formidable players in the private sector, local private enterprises are still urged to blaze a trail for their future growth.

"Enterprises should take advantage of Shanghai's geography, and a major part of their role lies in their intermediary function to link up with global players," he said, predicting most of the private businesses in the city may still be small- and medium- sized in the near future.