Private capital at core of plans for China's ailing economy

Beijing unveils raft of infrastructure investment plans in new reform to stabilise growth after hints of taking its hands off property market

PUBLISHED : Thursday, 01 August, 2013, 12:00am
UPDATED : Thursday, 01 August, 2013, 5:39am

The central government has put fresh investment initiatives at the core of plans to ensure stable economic growth, promising the private sector a reasonable return as top policymakers sketched out measures to counter an economic slowdown.

The State Council yesterday unveiled a raft of such measures at a meeting chaired by Premier Li Keqiang, which followed a Politburo meeting on Tuesday that vowed steady economic growth in the second half.

Investment should be encouraged to improve city infrastructure, including subways, underground pipelines and waste treatment

"Investment should be encouraged to improve city infrastructure, including subways, underground pipelines and waste treatment," said a circular after yesterday's meeting.

The same day the Beijing municipal government announced a 338 billion yuan (HK$424.2 billion) investment outlay to construct 126 projects including subways, roads, heating facilities and water and waste treatment centres. Of that, 130 billion yuan is expected to be private capital, the Beijing municipal development and reform commission said.

The introduction of private capital is a "breakthrough in deepening reform", Yang Xuhui, an official with the commission, was quoted by Xinhua as saying. The government will grant private investors "a reasonable return" through service purchases, financial subsidies and other measures, he said.

Xu Shaoshi, head of the National Development and Reform Commission (NDRC), told Xinhua that a slew of projects would be launched as part of the policy to boost private investment.

Private capital will be guided into investment projects such as infrastructure and public utilities, Xu said. It will also be encouraged in cultural and tourism industries, health care facilities and educational institutions.

He added that a long-term mechanism for the stable development of the real estate industry should be established to promote the steady growth of investment.

Xu's words will lend weight to speculation that Beijing will put up with rising property prices, which led to a rally in mainland property stocks yesterday.

The Politburo meeting chaired by President Xi Jinping on Tuesday decided the government would promote "healthy and steady development" of the property market.

"Beijing's tone hints that there will be no further tightening for the housing market in the coming months," said UOB Kay Hian analyst Sylvia Wong.

In Hong Kong, eight of the 10 best performers on the MSCI China Index yesterday were mainland developers. On the mainland, the property sector was the top performer among the five industry groups tracked by the Shanghai Composite Index.

The country's largest developer, China Vanke, added 2.8 per cent in Shenzhen while Kaisa led the gains in Hong Kong with an 8 per cent rise. China Overseas Land & Investment hit the highest level in nearly two months, up 1.6 per cent in Hong Kong.