Out of Control Policy Blog

China Invites Private Capital to Jump Start Growth and Competitiveness

After several months of retrenchment, the Chinese government seems to be opening itself back up to foreign investment. The move appears to be prodded by lower economic growth, according to the China Post.

"China says it may encourage private investment in state-controlled industries such as railways, oil and power generation in an effort to boost the efficiency of the world's third-largest economy.

"The announcement Monday by China's top planning agency comes as Beijing tries to boost growth and combat the impact of the global downturn. It would affect areas deemed strategically important and key to national security.

"The government will “speed up research into encouraging private investment” in oil, power generation, telecommunications and other fields, the National Development and Reform Commission statement said."

This appears to be a bit of a turnaround. After a wave of private financing of core infrastructure, the nation seemed to be backing off as a result of public-private partnership agreements that didn't turn out as well as they had hoped.

Yet, the government recognizes that private capital and business expertise is important to promoting economic growth and competitiveness among Chinese firms.

"Beijing has been building up elite government-owned companies to dominate domestic industries such as oil, telecommunications and finance. But officials acknowledge such companies are so far much less competitive than their private counterparts elsewhere.

"China has sharply reduced the government's role in the economy since the launch of reforms in 1979. But economists says it has to push ahead with more sweeping changes if it hopes to continue economic growth and boost incomes."

Samuel Staley is Research Fellow


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