Beijing to open door to private capital

PUBLISHED : Thursday, 16 February, 2012, 12:00am
UPDATED : Thursday, 16 February, 2012, 12:00am


The mainland will take bolder steps to reform its quasi-socialist economic system by introducing private capital into industries that have long been monopolised by state firms.

The government will push ahead with fiscal and financial reforms, including to the value-added and resource taxes, the State Council said in a statement yesterday following a cabinet meeting chaired by Premier Wen Jiabao .

The meeting was to discuss the year's plans for economic reform. '[We] will perfect and realise the measures to promote the development of non-publicly-owned businesses, and will encourage private capital to enter key sectors such as railways, urban utilities, finance, energy, telecommunications, education and medicare,' said the statement. Those sectors have long been dominated by state firms, despite years of calls from private businesses for the government to scrap such monopolies that are seen as juxtaposing free-market doctrines.

The government said it would expand an existing, small-scale, trial to replace business tax with a value-added tax. Central authorities introduced a pilot programme for value-added tax reforms in selected regions last year, in a move seen as an attempt to reduce the financial burden on struggling small- and medium-sized firms.

The government also said it would allow private capital to be used in micro-lending.

Small firms, many of which are export-oriented manufacturers, were squeezed hard last year by tightened monetary conditions imposed by Beijing to fight inflation. The monetary policy adjustments and weakening external demand led to the collapse of underground credit networks in bustling cities such as Wenzhou, Zhejiang, prompting fears that the crisis might spread to other parts and lead to a broader financial crisis.

The government also said it would speed up reform of the pricing and taxation of energy and natural resources, such as electricity, oil and water.