PRIDE OF THE PRIVATE SECTOR: Mingde Heavy Industry Co. Ltd., a Nantong-based private company in Jiangsu Province, unveils a vehicle carrier it produced independently for a Norwegian company in June 2010 (HE JIANRONG)
Encouraging and guiding healthy development of private investment was at the forefront of the State Council's latest measures to invigorate the private sector.
The State Council's notice, introduced on July 26, will promote another guideline issued earlier in May. Private capital will be encouraged to play a role in the industrial sector, including primary industries and infrastructure construction; science, technology and industries related to national defense; financial services; and reorganizing of state-owned enterprises, said the State Council.
Relevant policies and measures were divided into 40 assignments for more than 20 ministries and commissions under the State Council, such as the National Development and Reform Commission (NDRC), the Ministry of Commerce and the Ministry of Finance (MOF), as well as local governments. These designated responsibilities meant to promote private investment reflect the government's determination to break down barriers now facing private capital, said Chen Yongjie, Director of Department of Research with the All-China Federation of Industry and Commerce.
Urging each ministry to play its role in promoting private investment will safeguard the legitimate interests of private investors and ensure the rapid growth of private capital, said Huang Guitian, Deputy Dean of the School of Economics at Peking University.
Playing the role
While at least one ministry will lead each of the 40 assignments, the leading ministry can request collaboration of up to a dozen other ministries and commissions to ensure the assignment's completion.
The NDRC, MOF, the Ministry of Transport, Civil Aviation Administration of China and other relevant ministries are responsible for promoting private investment in infrastructure projects including highways, water transportation routes, ports, airports, power grids, and mining and drilling facilities.
The Ministry of Housing and Urban-Rural Development, NDRC and MOF are responsible for boosting private investment in municipal utilities. The NDRC and MOF, in addition to the Ministry of Health, Ministry of Civil Affairs and Ministry of Human Resources and Social Security will also facilitate private investment in health care, education, training and other social welfare programs.
The State Council notice also allows private investors to offer financial services. Private investors are encouraged to take stakes in commercial banks during their fund raising and to restructure rural and urban credit cooperatives. They can also establish village- and township-based banks, small loan companies and rural savings and credit cooperatives. The China Banking Regulatory Commission, People's Bank of China, NDRC, MOF, State Administration of Taxation, Ministry of Industry and Information Technology (MIIT), and insurance and security regulators will supervise these financial activities.
The notice requires the MOF, NDRC and the Ministry of Science and Technology (MST) to promote private investment in homegrown technology-oriented research and development (R&D) and to focus on products with higher added value by offering tax cuts and other incentives. Private companies should own IPR-protected core technologies and make breakthroughs in other major national R&D projects, according to the State Council notice.
Strategic emerging industries must not be neglected, and private investment should be widely applied to the latest information technologies to upgrade traditional production processes across China's many industries. Those in the private sector are invited to invest in environmental, medical and new energy industries to spur growth and innovation. The NDRC, MOF, MIIT, MST and the Ministry of Environment Protection will be responsible for related incentives and supervision over investment in these fields.
The notice particularly addresses the importance of creating an environment conducive to boosting private investments, requiring the Legislative Affairs Office of the State Council be responsible for revising laws, regulations or rules that could suffocate private investments. Such revisions are expected to safeguard the legitimate interests of private investors and nurture an investment environment for fair competition. While drafting laws, rules or policies involving private investments, legislators are required to take into consideration opinions and suggestions from relevant chambers of commerce and private companies, in order to meet their reasonable demand.
Ministry and commission efforts should provide guidance and standard administration services regarding private investment, said the notice. For instance, relevant departments have to collect more data on private investment in order to precisely record and reflect the development and distribution of private investment in China. Major investment supervisors like the NDRC, and industry administrators, as well as industrial associations, are required to closely monitor changes in private investment and make analyses in order to guide investors. An information disclosure platform should be established to keep the public up to date on industrial policies, development blueprints, market access standards and industrial trends in domestic and overseas markets. The platform will help private investors avoid blind investment, said the notice.
Private capital boomed soon after the Chinese Government launched the reform and opening-up policy in late 1978. The government has since consistently supported private capital, raising its proportion in the country's fixed-asset investments year by year.