China to allow private investment in 80 projects

Beijing to allow private sector to bid on 80 projects as part of privatisation reform

PUBLISHED : Thursday, 24 April, 2014, 1:14am
UPDATED : Thursday, 24 April, 2014, 1:14am

China will allow private investment in 80 projects spanning the energy, information and infrastructure sectors as part of reforms to increase privatisation, said Premier Li Keqiang, amid signs Beijing will not use forceful stimulus measures to fight any short-term dips in economic growth.

The 80 projects involving solar energy, hydro power, wind power, and oil and gas pipelines - previously areas monopolised by the state - will be open to public tender, Li said. In future, other sectors such as utilities, airports and oil and gas exploration will also be open to more private investment, he told a weekly cabinet meeting. His comments were posted on a government website and no further details were provided.

A top mainland government official was quoted by state news agency Xinhua as saying that China will not use forceful stimulus measures to fight any short-term dips in economic growth.

Li Pumin, secretary of the National Development and Reform Commission, was quoted as saying that macro-economic policies would not change as long as inflation was under control and employment and economic growth stayed above a minimum level.

Last November, president Xi Jinping unveiled sweeping reforms to encourage private participation in state-owned enterprises (SOE's), which include some of the world's largest companies.

Allowing more private investment in China's centrally planned economy is part of the government's plans to reduce state intervention and let market forces play a bigger role.

Investment by state-owned companies and provincial and city governments, which have combined outstanding debt of US$3 trillion as of June last year, have been criticised by some analysts for being inefficient.

Liao Qun, chief economist at Citic Bank International, said freer flow of state capital will help ease funding pressures on SOEs and stimulate the nation's fixed asset investments, one of the major sources to stimulate economic growth, other than domestic consumption and exports. A cooling real estate market weighed down fixed-asset investment growth on the mainland to 17.6 per cent in the first quarter from the same period last year. It was the lowest rate - in year-to-date terms - since the end of 2002.

"Allowing private capital into the state controlled sector will help in ensuring the nation to achieve economic growth of 7.5 per cent this year," said Liao.

Last week, China announced GDP growth of 7.4 per cent in the last quarter, the slowest since 2012. It beat market expectations of 7.3 per cent but came in below the government's 7.5 per cent target for 2014. Liao believes the central government would not allow massive privatisation to happen at this stage.