Reformer Xi Jinping expected to boost investor confidence
Deutsche Bank chief says incoming mainland president raises hopes for private enterprise
The incoming leadership's reformist bent should help restore investor confidence in private mainland companies after a string of accounting scandals, said Henry Cai, held by some as the godfather of the Chinese capital market.
In an interview with the South China Morning Post, Cai, the Asia chairman of corporate finance at Deutsche Bank, said: "Coming from a family of a revered revolutionary leader and economic reformer, Xi Jinping has raised optimism in China's private sector as well as the confidence of foreign investors. The new government has rekindled hopes of big reforms."
Cai said the fact that Xi's father, Xi Zhongxun, was a key architect of early market reforms could have influenced the incoming president's support for the private economy.
He also said Xi was seen favourably by business leaders in Zhejiang province, the mainland hub for private enterprise, where Xi's efforts expanded the private sector and helped businesses move up the value chain and innovate.
"The private sector in Zhejiang accounts for 95 per cent of the province's overall gross domestic product, suggesting the new regime will promote private enterprise," Cai said.
After arriving as governor and party secretary in Zhejiang in autumn 2003, Xi set about encouraging factories and heavy industry to move further inland in favour of privately funded research and development facilities. The campaign paid off. Investment in research and development by private industry grew fourfold to 31.6 billion yuan (HK$39 billion) in 2007 from 2003.
Cai said the incoming leaders needed to redefine the functions of the government, market and private enterprise, which should lead to a transition from a centrally planned economy to a market-driven one.
"The lengthy government process has led to corruption under the state-run economic model in the past decade," he said, adding the new leaders would undertake more reforms and move closer to the late paramount leader Deng Xiaoping's core principle of "small government, big market", giving precedence to private enterprise in the reform.
The average time for regulatory approval of new H-share placements, for example, has been shortened to two weeks from three to four months, which was "unprecedented", Cai said.
Moving forward, corporate activities, such as new share issues, should require less involvement of the government, he said.
"The role of the government is likely to set clear boundaries and monitoring. China will initiate big reforms and dramatic cuts in the government's approval process while cracking down on corruption," he said.