Push for investment
In the face of slowing domestic growth and troubling economic news in the United States and Europe, China has begun rolling out programmes to boost its economy.
In addition to this month's interest rate cut, government officials are fast-tracking major energy projects and encouraging private investment in reduced carbon energies, such as thermal power and natural gas.
Projects approved by the National Development and Reform Commission, which signs off on large-scale projects, 'have picked up a bit, and we expect this recovery to continue', says Stephen Green, head of China research at Standard Chartered Bank.
For now, the emphasis appears to be more on speeding up approval of projects in the pipeline rather than entirely new programmes.
'The emphasis is on allowing companies to do projects in line with the 12th five-year plan,' Green says, albeit on an expedited basis.
One reason for the measured response is that the depth of Europe's economic troubles remains unclear. The odds of a second global recession are 'close but not that bad yet, and it really depends on Europe', says Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University. 'No one really knows what will happen.'
The push for investment in energy is also driven by other factors. 'One of the things lurking in the background is energy security,' says Al Troner, president of APEC Energy Consultant, a Houston-based energy firm.
Efforts to encourage private investment in the energy sector may be tempting for foreign firms, but international companies may hesitate in the face of an end market, where government-controlled energy rates limit the potential for profit.
Because end-user prices will not be market-driven in the near future, attracting foreign capital may necessitate 'guaranteeing a minimum return on investment to the private sector, and that is possible', Lin says.
China 'needs to get off the price control tiger', Troner cautions, but that can be done by offering consumers genuine value in return for increased rates. 'They can push energy efficiency and deliver a better quality product in exchange for higher prices.'
While there is a renewed push for investment, unwritten rules remain in place. Three basic demands by local partners govern partnerships, according to Troner. 'Don't do for us what we can do already, make long-term but not excessive profits, and teach us how to do it ourselves.'
Foreign investors play a key role by bringing in new technology more than capital, Lin says. Know-how, administrative process and efficiencies remain valuable.
Partnerships and investments by foreign firms are helpful to Chinese companies, but cash and technology infusions may pale in the long run relative to a transformation in company culture. 'The one thing Chinese companies need most that no company can give is how to think commercially,' Troner says.