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May 24, 2012

China plans to boost Private Investment in Energy and other Infrastructure

China signaled on Wednesday it wanted to ramp up private investment in its energy sector, in line with recently unveiled government plans to fast-track infrastructure investment to help combat a protracted economic slowdown.

That followed the announced plan to allow private investment into the vast railway sector, which is struggling with mounting debts and a corruption scandal while attempting to resolve infrastructure bottlenecks.

Allowing private firms to pour money into the railways, banking, energy and healthcare sectors will give a boost to the world's second-largest economy as the government shuns fresh fiscal stimulus.

The moves seem to be designed to avoid stimulus that would increase imbalanced investment and attempt to make more efficient investments.




The government is drafting guidelines to encourage private investment across industries, with special focus on the heavily state-controlled electricity, oil and natural gas sectors, according to an article by the official Xinhua news agency.

Government agencies are expediting the drafting of new rules for private investment and are expected to unveil them by June, said Xinhua. It did not say whether foreign investors would be allowed to participate in any of the sectors mentioned.

Separately, the National Development and Reform Commission (NDRC), the state planning agency, announced about 100 new projects, mostly in the energy sector, on Monday alone, a number roughly equal to the total approvals announced in the first 20 days of May, the 21st Century Business Herald said on Wednesday.

He Yifeng, an economist at Hongyuan Securities, said he expected private investment to enter the energy, railway, highway sectors more quickly once the government clears barriers, but investment in the banking sector could be slow.

"The large-scale private investment will take time," he said.

Opening up the lucrative industries to private investors, including foreign investors, could help also spur market competition and improve economic efficiency.

The NY Times had an article reporting of economic slowdowns in the interior of China


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