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UPDATED: March 8, 2012 NO. 10 MARCH 8, 2012
Giving Private Investment More Room
An effective implementation mechanism for encouraging private investment is badly needed in China
By Lan Xinzhen

China's Central Government is trying to open more sectors to private investment in a bid to harness its vigor for economic development.

The country has at least 20 trillion-30 trillion yuan ($3.18 trillion-4.77 trillion) in private capital awaiting the green light to invest, according to the All-China Society of Private Economy Research. If put into good use, it will play a big role in propelling China's economic growth.

In May 2010, the State Council unveiled a favorable policy for private investment—Several Opinions on Encouraging and Guiding the Healthy Development of Private Economy (New 36 Clauses).

The policy seeks to encourage and guide private investment into more areas including oil, defense and technology, finance, transportation, power, communications and other infrastructure sectors, which have restricted opportunities for private investment.

Two years later, involved departments have yet to issue detailed implementation measures for the policy, which has caused rarely seen but strong dissatisfaction from the National Development and Reform Commission (NDRC), the country's top economic planner.

Allowing private investment in various sectors of economic and social development has come to a key phase. Whether the policy can be well carried out will affect the development of the private economy, said Zhang Ping, Minister of the NDRC.

Forty supporting policies are needed, and the obligation of issuing those policies was assigned to related departments two years ago, said Luo Guosan, Deputy Director of the Investment Bureau of the NDRC. "What we need to do now is to urge them to stipulate those policies as soon as possible. Any department that fails to do so should be held responsible," said Luo.

Railways, finance, energy and public utilities are four main areas that private capital had the most difficulties getting into during the past year. And yet, these will be key areas of the Central Government's monitoring of policy implementation, said Luo.

What's the hold-up?

Although the task of making detailed implementation measures was assigned to specific government departments in May 2010, most departments haven't accomplished the task yet.

Discrimination against private companies makes it hard for them to access key industries that are traditionally monopolized by state-owned enterprises (SOEs), said Liu Yingxia, Vice Chairwoman of the All-China Federation of Industry and Commerce (ACFIC) and Board Chairwoman of the Harbin Xiangying Group Co. Ltd.

The new policy aims at stimulating private investment and reducing monopolies, which is bound to put heavy pressure on SOEs since they will be forced to compete. Therefore, those SOEs will find all kinds of excuses or exert their influence on the government departments to hamper its implementation, Liu said.

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