Govt aims to encourage private investment
The State Council, China's cabinet, on Wednesday announced measures to encourage private capital to invest in public sector projects, including easing market access thresholds and use of the Public-Private-Partnership (PPP) investment model.
The cabinet has picked seven fields - including transport, water conservancy, municipal infrastructure and energy facilities - as key areas for attracting private investment, Li Pumin, a spokesman for the National Development and Reform Commission (NDRC), said at a press conference on Wednesday.
Ou Hong, an official with the fixed-assets investment department at the NDRC, said at the press conference that the cabinet focused on three methods: relaxing market access thresholds, offering better investment returns, and adopting the PPP investment model.
The State Council announced specific policies for each sector. For instance, in the area of transportation, ownership and management rights for intercity and suburban railways will be opened to private capital, and the railway ticket pricing mechanism will be improved at the same time, according to a statement published Wednesday on the central government's website.
The statement also called for use of the PPP model to finance new projects, under which local governments and private firms share the profits and risks involved in the projects.
As the central and local governments lack sufficient funds to meet the huge demand for public sector projects, it is appropriate to use the PPP model to replace local government financing vehicles (LGFVs), which raise money by taking out bank loans and have added to local government debt, Cui Jun, a professor at the Renmin University of China, told the Global Times on Wednesday.
Local governments had accumulated total debt of 17.9 trillion yuan ($2.92 trillion) by the end of June 2013, up 67 percent from the end of 2010, according to data released by the National Audit Office in June 2013, the latest official data available.
The State Council released new rules on October 2 saying that local governments are prohibited from using LGFVs to finance future projects.
Public sector projects such as infrastructure that take a long time to provide returns on investment may not appeal to small and medium-sized private enterprises, but will be of interest to larger firms, according to Cui.
However, under the PPP investment model, avoiding possible loss of State-owned assets should be a priority, and there should be careful supervision of the projects, Cui noted.
Ou said at the press conference that the NDRC will issue new rules about the PPP model in the near future, but didn't unveil any further details.
The PPP model will make public sector projects possible without raising local government debt by a significant margin, and this will help to support the growth of investment in fixed assets, Liu Xuezhi, an analyst at Bank of Communications, told the Global Times on Wednesday.
According to data from the National Bureau of Statistics (NBS), fixed-assets investment, a major indicator of economic activity, grew by 15.9 percent in the first 10 months year-on-year, the slowest growth in the past 13 years.
The NDRC announced Tuesday that China had approved construction projects for four railway lines worth 66.24 billion yuan ($10.79 billion) in total, the Xinhua News Agency reported Wednesday. It was the third time this month that China has approved new railway projects, Xinhua said.
The NDRC said at the press conference that fixed-assets investment in railways reached 590 billion yuan in the first 10 months this year, with private capital accounting for just 53 billion yuan of that total. It also said the annual goal for a total of 800 billion yuan to be invested in railways will be accomplished.
However, the extensive investment does not mean the government will start a new round of major economic stimulus, Liu said.
Partnership with private companies fuels growth
China's top economic planner singled out on Wednesday seven areas for public-private partnerships to fuel the country's economic growth.
The National Development and Reform Commission said the plan will be implemented as soon as possible.
Li Pumin, secretary general of the NDRC, said it is a practical move to re-adjust the economic structure and seek more areas for growth.
"As the government focuses on improving public services, environmental protection and the use of natural resources, the NDRC will take effective measures in tackling monopolistic behavior and further create diversified investment methods to offer more opportunities to businesses in China," Li said.
The seven areas are: a national communications network for oil and gas, health and elderly care services, grain storage and water resources, transportation, clean energy, environmental protection and supportive infrastructure for oil, gas and other mineral resources.
China's economic growth slowed to 7.3 percent in the third quarter, raising concerns that expansion could fall in coming months to below 7 percent - a rate not seen since the global financial crisis.
"Transportation projects including rail, airport and road construction works in central and western China, along with the fast pace of urbanization, are crucial in boosting investment growth, as well as ensuring nationwide employment," said Liu Yuanchun, assistant dean of the School of Economics at Renmin University of China.
China's investment in fixed assets climbed by 15.9 percent year-on-year to top 40 trillion yuan ($6.5 trillion) from January to October, according to the National Bureau of Statistics.
Fei Zhirong, director general of the NDRC's department of basic industries, said that for all of 2014 China planned to invest 800 billion yuan in rail development and start operating 7,000 kilometers of new railroad lines.
Ou Hong, inspector of the Department of Fixed Asset Investment of the NDRC, said that the central government has encouraged public-private partnerships to create more areas for market growth as part of economic reform.
The public-private partnership model is where a service or venture is funded and operated through a partnership between government and the private sector.
Wang Wei, director general of the NDRC's Department of Social Development, said, "We are expecting to seemore public-private partnership contracts signed in China soon that deal with longterm upkeep, like indevelopedmarkets," said Wang.
Ou Hong, an official with the fixed-assets investment department at the NDRC, said at the press conference that the cabinet focused on three methods: relaxing market access thresholds, offering better investment returns, and adopting the PPP investment model.
The State Council announced specific policies for each sector. For instance, in the area of transportation, ownership and management rights for intercity and suburban railways will be opened to private capital, and the railway ticket pricing mechanism will be improved at the same time, according to a statement published Wednesday on the central government's website.
The statement also called for use of the PPP model to finance new projects, under which local governments and private firms share the profits and risks involved in the projects.
As the central and local governments lack sufficient funds to meet the huge demand for public sector projects, it is appropriate to use the PPP model to replace local government financing vehicles (LGFVs), which raise money by taking out bank loans and have added to local government debt, Cui Jun, a professor at the Renmin University of China, told the Global Times on Wednesday.
Local governments had accumulated total debt of 17.9 trillion yuan ($2.92 trillion) by the end of June 2013, up 67 percent from the end of 2010, according to data released by the National Audit Office in June 2013, the latest official data available.
The State Council released new rules on October 2 saying that local governments are prohibited from using LGFVs to finance future projects.
Public sector projects such as infrastructure that take a long time to provide returns on investment may not appeal to small and medium-sized private enterprises, but will be of interest to larger firms, according to Cui.
However, under the PPP investment model, avoiding possible loss of State-owned assets should be a priority, and there should be careful supervision of the projects, Cui noted.
Ou said at the press conference that the NDRC will issue new rules about the PPP model in the near future, but didn't unveil any further details.
The PPP model will make public sector projects possible without raising local government debt by a significant margin, and this will help to support the growth of investment in fixed assets, Liu Xuezhi, an analyst at Bank of Communications, told the Global Times on Wednesday.
According to data from the National Bureau of Statistics (NBS), fixed-assets investment, a major indicator of economic activity, grew by 15.9 percent in the first 10 months year-on-year, the slowest growth in the past 13 years.
The NDRC announced Tuesday that China had approved construction projects for four railway lines worth 66.24 billion yuan ($10.79 billion) in total, the Xinhua News Agency reported Wednesday. It was the third time this month that China has approved new railway projects, Xinhua said.
The NDRC said at the press conference that fixed-assets investment in railways reached 590 billion yuan in the first 10 months this year, with private capital accounting for just 53 billion yuan of that total. It also said the annual goal for a total of 800 billion yuan to be invested in railways will be accomplished.
However, the extensive investment does not mean the government will start a new round of major economic stimulus, Liu said.
Partnership with private companies fuels growth
China's top economic planner singled out on Wednesday seven areas for public-private partnerships to fuel the country's economic growth.
The National Development and Reform Commission said the plan will be implemented as soon as possible.
Li Pumin, secretary general of the NDRC, said it is a practical move to re-adjust the economic structure and seek more areas for growth.
"As the government focuses on improving public services, environmental protection and the use of natural resources, the NDRC will take effective measures in tackling monopolistic behavior and further create diversified investment methods to offer more opportunities to businesses in China," Li said.
The seven areas are: a national communications network for oil and gas, health and elderly care services, grain storage and water resources, transportation, clean energy, environmental protection and supportive infrastructure for oil, gas and other mineral resources.
China's economic growth slowed to 7.3 percent in the third quarter, raising concerns that expansion could fall in coming months to below 7 percent - a rate not seen since the global financial crisis.
"Transportation projects including rail, airport and road construction works in central and western China, along with the fast pace of urbanization, are crucial in boosting investment growth, as well as ensuring nationwide employment," said Liu Yuanchun, assistant dean of the School of Economics at Renmin University of China.
China's investment in fixed assets climbed by 15.9 percent year-on-year to top 40 trillion yuan ($6.5 trillion) from January to October, according to the National Bureau of Statistics.
Fei Zhirong, director general of the NDRC's department of basic industries, said that for all of 2014 China planned to invest 800 billion yuan in rail development and start operating 7,000 kilometers of new railroad lines.
Ou Hong, inspector of the Department of Fixed Asset Investment of the NDRC, said that the central government has encouraged public-private partnerships to create more areas for market growth as part of economic reform.
The public-private partnership model is where a service or venture is funded and operated through a partnership between government and the private sector.
Wang Wei, director general of the NDRC's Department of Social Development, said, "We are expecting to seemore public-private partnership contracts signed in China soon that deal with longterm upkeep, like indevelopedmarkets," said Wang.
