Private investment in China

May 27, 2012 12:00 AM

China's top economic planner has signalled it wants to boost private investment in its key industries, putting heavy emphasis on the energy and financial sectors.
China will lay out detailed rules and directions to encourage private investment in seven key sectors by the end of June. The rules will supplement a similar plan that was first unveiled in 2010 but has not been successful, an official with the National Development and Reform Commission, China's most powerful planning agency, was quoted as saying.

Below are details of the main sectors that were targeted for private investment in the 2010 announcement:

ENERGY
-- The private sector was encouraged to join state-owned oil companies in oil and gas exploration and development, and also to invest in storage and pipeline transportation facilities of crude oil, LNG and gasoline.
But the industry remains dominated by China's triumvirate of state oil firms and the government only opened up its shale gas sector to private firms earlier.

POWER
-- Private firms were encouraged to enter China's renewable energy sector, as well as to invest in construction of hydro and thermal power plants. They would also be allowed to hold shares in nuclear power plants.
The announcement also said China would further open up its power market and reform pricing to create a more profitable environment for private investors.

FINANCIAL SERVICES
-- The State Council said that private companies could invest in financial institutions and it lifted shareholding limits by private firms. But progress has been slow and the cabinet only approved a pilot project in March to legalize private lending in Wenzhou and allow private investors to buy into local banks.

TRANSPORTATION
-- Beijing is encouraging private firms to invest in motorways, water transportation, ports, civil airport and aviation facilities construction.
-- The transport ministry published detailed plans in April that would allow private firms to bid for railway construction projects. Their subsidiaries will also be permitted to list shares and pension funds would be allowed to invest in such companies.

TELECOM
-- The 2010 guideline said that private investors would be allowed to provide value-added telecom services in the country.

LOGISTICS
-- Private capital was encouraged to enter China's merchandise wholesale, retail and logistics sectors.

AFFORDABLE HOUSING
-- Private investors were encouraged to build affordable housing projects - one of the key pillars of the government's 12th Five-Year development plan aimed at addressing a widening income gap and public anger over high property prices.

MUNICIPAL SERVICES
-- The cabinet gave its support to private investors to engage themselves in various municipal services, including water, heating, gas supply, garbage disposal and public transport.

WATER CONSERVATION
-- Private firms were encouraged to move into land and water conservation projects, comprehensive utilization of water resources, and irrigation and water conservancy with government subsidies, compensation schemes and other policy benefits.

DEFENCE INDUSTRY
-- Private investors were given the green light to participate in research and development of technologies. They were also promised to be able to take part in military tenders.

HEALTHCARE
-- Private capital was given government support to set up hospitals and other medical services, such as clinics and community healthcare centres. They were also encouraged to participate in the privatization of public hospitals.

EDUCATION
-- The government encouraged private companies to set up high schools, secondary and primary schools, and other educational institutions.

SOCIAL WELFARE
-- China's cabinet promised to support private investment in social welfare with various policy tools including lending support and land supply.

CULTURAL TOURIST AND SPORTS INDUSTRIES
-- The government promised to open up areas such as publishing, entertainment, tourism and gaming industries to private investors.

LAND REMEDIATION AND MINERAL RESOURCES EXPLORATION
-- The government promised to give private investors full access to China's mining rights market. Firms were also encouraged to take part in land remediation projects as well as the restoration of the environment in mining areas.

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