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State Council lays out plans for industrial progress in rural areas

Updated: Dec 23,2015 8:41 PM

The State Council, at its executive meeting on Dec 23, presided over by Premier Li Keqiang, laid out plans to integrate and restructure various industries in rural areas to substantially increase the ratio of direct financing to further boost the real economy and to lower the price of coal-fired electricity.

The State Council pointed out that the integration of agriculture, industry and services in rural areas is an important measure to help raise the efficiency of agriculture, improve farmers’ income and contribute to rural prosperity.

First, local governments are encouraged to explore different methods of integration, for example, developing market-oriented services such as farmland trusteeship, logistics and agricultural product processing industry. New business models involving “the Internet Plus”, such as rural e-commerce and custom-made agricultural products, should be promoted to help agriculture connect with tourism and healthcare.

Second, the government also asks to diversify business operators. College graduates and returning migrant workers are encouraged to develop family farms. Leading local enterprises should be supported to work with farmers through direct investment, shareholding or long-term contracts, to engage in moderate-scale operation. Rural services that are subject to commercial operation should be open to social capital.

Third, the government will establish a mechanism to connect benefits. The government will increase incentives for local enterprises to lead farmers, while the contractors and operators that enjoy policy support should guarantee farmers benefit from the cooperation through a combination of minimum wages and dividends.

Fourth, the government will enhance policy support. The central government will arrange special funds for such integration through trials. Agricultural products’ raw processing companies will enjoy preferential electricity prices. Social investments in high-standard farms or forests to a certain scale will receive corresponding policy support as well.

Ways to make more effort to reform the financial system and optimize financial structure were also discussed at the meeting. The development of direct financing and carrying out structural reform on the supply side was urged. Those at the meeting also called for mass entrepreneurship and innovation to promote stable economic development.

First, the State Council decided to develop multi-level capital markets, such as the stock and bond markets. The strategic emerging board in the Shanghai stock market was put forward to support innovative enterprises in financing. Start-up enterprises with special ownership structures can go public in China.

Second, the State Council decided to increase the number of direct financing instruments. Financing products such as project revenue bonds and convertible bonds are encouraged to promote trial projects of infrastructure assets securitization. Meanwhile, the review process will be simplified for domestic enterprise to raise funds overseas.

Third, they called for strengthening the regulation on intermediary organs such as rating organizations and accounting and law firms. Qualified financial institutions will be allowed to apply for the license to trade securities.

Fourth, they called for balanced development of investment and financing. They decided to encourage more insurance funds be invested in the capital market, standardize trust and bank financing capitals, and to develop private equities such as venture and angel capitals.

Fifth, to protect investors’ legitimate rights and interests, the State Council urged strengthening supervision and risk prevention and a crackdown on financial fraud and illegal fundraising.

Furthermore, they also decided to reduce the price of electricity. Starting Jan 1, 2016, the grid purchase price of coal-fired power will be reduced by about three cents per kilowatt-hour on average in China.