PRIVATE MONEY MAKERS: Workers of Wanxiang Group headquartered in Hangzhou, Zhejiang Province, manufacture products independently developed by the group (WANG XIAOCHUAN)

Ba Shusong, Deputy Director of the Research Institute of Finance of the Development Research Center of the State Council, agrees with the NDRC, saying that private investment should take over for government investment.

Ba thinks that launching a series of measures to encourage and guide the sound development of private investment will be an important starting point for China to accelerate the transformation of its economic growth pattern.

"During the financial crisis, it was reasonable to stimulate economic growth via investment, since the crisis had broken original market expectations. Private investors, in turn, became more prudent; hence it was difficult to make them become a major force of economic growth. But as the economy recovers, market expectations become clear and government-led treatment should give rise to a long-term market-oriented strategy. Private investment must replace government investment and provide a sustainable impetus for economic growth," he said.

Ba said China's economic growth relies on two impetuses: export growth and government-led fixed asset investment. Since the financial crisis has led to "a dive" in exports, China's economic growth has been readjusted to rely less on external demand. Domestic consumption and private investment will, in all likelihood, become the source of driving power for future economic growth.

Enforcement

Zhang Hanya, Chairman of the Investment Association of China, thinks that whether this policy can become a true impetus for private investment relies on the enforcement by related government departments.

Zhang said allowing private capital to enter more industries would undoubtedly put pressure on state-owned and state-holding enterprises. It is possible that some state-owned capital will establish a "glass door" (welcoming private capital in public but setting up various obstacles for it) by making use of their influence.

Zhang also thinks that the most important thing for the development of private capital is not industrial access, but the financing difficulty after its entrance. In this aspect, the policy should be clearer and more specific.

"When granting loans, financial institutions prefer big enterprises to small businesses and prefer state-owned and state-holding companies to private enterprises. Since there lacks a sound multi-level capital market mechanism, it is sometimes difficult for private capital to be transferred to private investment," Zhang said.

Related Provisions

The government encourages and supports private capital to:

- Invest in the construction of highways, water transportation, ports, civil airports and general aviation facilities.

- Invest in the construction of hydropower and thermal power plants, and participate in the construction of nuclear power stations by buying shares.

- Enter the oil and gas exploration and exploitation sector by cooperating with state-owned oil companies. The government supports private capital's participation in the construction of storage and pipeline facilities and networks of crude oil, natural gas and refined oil by buying shares.

- Enter the basic telecom operation market by buying shares.

- Enter the sectors of urban water, gas and heat supply, sewage works and waste disposal, public transportation and landscaping.

- Actively participate in restructuring of public utility enterprises. Qualified public utility projects can transfer ownership or the management right to private capital via market-oriented operation ways.

- Invest in the construction of affordable houses.

- Enter the financial service sector, and the restrictions on the proportion of private shares will be relaxed. Private capital can purchase shares of commercial banks and participate in restructuring of rural and urban credit cooperatives.

- Enter scientific and technological programs for national defense, and participate in restructuring of military enterprises, in the development and industrialization of high technologies for both civil and military use, and in the production and research work of military enterprises.

- Participate in the reform and restructuring of state-owned enterprises by buying shares, asset acquisitions and other means.

(Source: Opinions on Encouraging and Guiding Sound Development of Private Investment by the State Council)