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Government seeks private investment boost

Wang Yanfei
Updated: Jun 21,2016 7:38 AM     China Daily

Banking support, long-term measures key to bolstering private investor confidence as economic growth slows

The government is stepping up efforts to remove barriers to the market at a time when private investors are taking a step back.

On June 14, the State Council, China’s cabinet, issued a guideline on boosting fairness in the market, as part of efforts to reverse a slowdown in private investment.

The guideline targets policies that involve government intervention that set up barriers for market access and block private investors. Starting from next month, all departments under the State Council and policymaking bodies in local governments at the provincial level have to carry out a review of current policies and future policymaking processes.

The guideline requires that this review be conducted to see if any policies are discriminatory or restrict market entry, require projects to obtain excessive government approval, or set unreasonable barriers for sectors that are not on the market access negative list made by the State Council, which refers to business activities and industries that market operators are not allowed or restricted to engage in.

Policies will not be rolled out if they are found to not meet the above mentioned standards, according to the guideline.

The guideline was issued after the State Council finished a month-long nationwide probe in May and the National Development and Reform Commission sent teams in June to see how local authorities were implementing government policies on private investment. Growth in private investment has slowed recently, sparking concerns over its weakened support for the nation’s economic growth.

Official data show that private investment increased only 3.9 percent from January to May, down by 1.3 percentage points from the January-April period.

Li Pumin, a spokesman for the National Development and Reform Commission, admitted at a news conference earlier this month that the commission found barriers set up by local governments to be quite significant.

He said local governments need to make sure that all enterprises, including private enterprises, can benefit equally from preferential policies.

Zhong Wei, an economics professor at Beijing Normal University, highlighted the need to alleviate the effect created by State-owned enterprises, as he found that banks were more willing to issue credit to the State-owned sector of the economy and implement projects led by local governments.

“Private investors need more long-term supportive measures, rather than short-term relief, otherwise new policies will not make a significant difference,” said Zhong.

Zhang Qizuo, an economics professor at Chengdu University, said a “slowing down of private sector investment is unavoidable amid the country’s economic restructuring process”.

“On the government side, more efforts need to be made to lower the costs of private sector investment and make good use of fiscal and monetary policy to support private investment,” he said.

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