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More previously forbidden economic sectors even the national defence industry have been opened to private investors, according to a new policy released by the State Council yesterday.

The decision shows great commitment to supporting China's surging private economy.

The government will soon step up additional concrete measures to allow private enterprises to invest in electricity, civil aviation, telecom-munication and other sectors heavily controlled by the government.

In the long-awaited document, private companies are allowed to invest in any sectors "if Chinese laws do not forbid them from doing so."

The document said that private companies can even invest in infrastructure construction, public undertakings, financial services and even the national defence industry, which used to be monopolized by the State firms.

The package of measures was introduced after long-time research by a group of cabinet departments including the National Development and Reform Commission (NDRC) and the State Council Research Office. Lin Yueqin, a researcher with the Economic Research Institute under the Chinese Academy of Social Sciences, told China Daily the decisions in the documents are "comprehensive and encouraging."

"It is another milestone for the government to deliver their backing over the essential contributors in China's economy," said Lin. "But we need more efforts to implement them." He said the efforts were a continuation to spur the development of the private economy after the Promotion Law on the Medium and Small Enterprises took effect in 2003 and the government launched reforms on the investment and financing system last year.

The NDRC spokesman said the government should attach great importance to the status of the private sector as China is becoming more market-oriented and integrated into the global economy.

He said the private economy now accounts for one-third of China's economy, while in 1978, the rate was less than 1 per cent.

The Research Association on the Private Economy said that production value of the private economy topped 2 trillion yuan (US$241 billion) in 2003, rising from 42.2 billion yuan (US$5.1 billion) in 1989.

The private sector has also contributed greatly to solving China's thorny unemployment problems. Statistics unveiled at the beginning of February indicate there were 3.44 million private companies that have hired more than 47.14 million employees by June of 2004.

Despite those achievements, NDRC spokesman admitted that financial headaches were the top difficulty facing private companies.

He said the government is encouraging private companies to seek capital both from banks and the stock market.