China is further opening up several major state-dominated industries to private capital by raising the ownership limit and removing some investment barriers.
China’s cabinet — the State Council — has unveiled a package of 13 measures to promote private investment in an effort to revive a sector that’s struggled against the backdrop of sluggish demand at home and rising tensions over foreign trade.
The body called for carrying out feasibility studies of private sector participation in areas ranging from railways to oil pipelines when the projects are submitted for national government approval, provided they offer a reasonable return on investment. For qualified projects, private companies can now hold stakes exceeding 10%, it said late Monday (Nov 10).
The package marks one of the most concrete steps yet taken by Beijing to support private businesses that, until now, faced stricter limits for investing than state-owned firms. It follows a years-long pullback in spending by international companies, with inbound new foreign direct investment down more than 10% in the first nine months of the year.
The goals are to stimulate “the vitality of private investment and promote the sector’s development,” the National Development and Reform Commission, or NDRC, said in a statement about the policy announcement.
Previously, private participation was “relatively low” in industries such as those mentioned in the new measures, the Economic Information Daily reported Tuesday, citing Wu Youhong, a researcher with the NDRC, the country’s top economic-planning agency. It was only in August 2024 that the government for the first time allowed private firms to raise their stakes in five nuclear power projects to 10% from 2%, according to Wu.
Private companies have been more reluctant to commit money as their earnings outlook dimmed during the longest deflationary streak in decades and as foreign governments erected barriers against Chinese goods.
Weakness in the non-state sector has profound implications for the economy, considering it contributes to more than 50% of tax income, 60% of national gross domestic product and 80% of urban employment.
Under the document, private capital is encouraged to help build and operate new local urban infrastructure projects that are relatively small in scale and have the potential to become profitable.
The government will allow for the “orderly participation” of private companies in the so-called low-altitude economy — which covers airborne activities occurring less than 1,000m above ground — promising the sector will be treated “equally” to other investors during the licensing of commercial space frequencies and launch approvals, according to the State Council.
Market access policies will also be “optimised” for private investment in satellite communication services, and firms deemed qualified will be supported to take the lead on major national technology research programmes.
The authorities will also ramp up support on government procurement for small and medium-sized companies. For qualified projects worth more than four million yuan (RM2.33 million), at least 40% of the total budget should be reserved for these firms.
Government buyers are also encouraged to raise the size of advance payments for private enterprises to more than 30% of the contract value.
China’s new policy financing tool, which is worth 500 billion yuan, will be tapped to help private investors beef up equity capital in qualified projects in key areas.
Source: Theedgemalaysia
