By the EO Editorial Board
News, Cover, Issue No. 578
July 16, 2012
Translated by Zhu Na
Original article: [Chinese]

Wen Jiabao last week led two discussions on the state of the economy [this editorial was published in July], and, on the subject of the so-called "new 36 clauses" for promoting private investment, the premier said the country's railway, energy, telecommunications, health and education sectors are in particular need of "visible and encouraging moves to boost the confidence of investors."

You can tell that Premier Wen isn't satisfied, but he didn't quite say so. We need to ask - why isn't he satisfied?

In February, during talks with experts and scholars about the Government Work Report, Wen promised that a detailed implementation plan for the "new 36" would be worked out in the first half of the year. At the end of June, government departments released a series of documents – we can hardly say that they neglected the task of drawing up the rules.

So, why is Wen still calling for departments to "pay close attention" to these efforts? Perhaps, his calls are linked to China's current economic situation. The priority is to promote steady growth, especially in investment.

In 2008, state-owned enterprises played a leading role and state finances were used to back infrastructure projects, but in the current situation this doesn't seem prudent or realistic.

Moreover, the State-owned Assets Supervision and Administration Commission (SASAC) has also said that centrally-controlled state firms are currently preparing to pass a harsh "winter". Given these circumstances, the role of private investment will be key. However, this will depend on whether the market is able to attract these private funds, especially towards monopoly industries and other areas that hitherto have been off-limits to private funds.

If the "new 36" can't be properly implemented, then private investment will face an uphill struggle, and uncertainty will persist around the question of whether China's economy can be stabilized.

The detailed implementation rules introduced over the past few months seem promising for some sectors, but the documents released by many departments are full of officialese and don't offer any real breakthroughs.

Looking back at the "old 36 [clauses]" from 2005, little seems to have changed, if the rules couldn't be implemented then, what makes us think that the old wine poured into new bottles will have a different taste?

No wonder, the detailed implementation rules weren't seen as a cause for celebration. Private entrepreneurs doubted the sincerity of some departments, couldn't see any evidence of genuine change and even some new doubts emerged.

Therefore, it's not hard to understand Wen's request that the relevant authorities make "visible and encouraging moves."

When the financial crisis hit in 2008, Wen said that confidence is more important than gold and currency reserves. Right now, he certainly realizes that China is at a critical period of its growth - without sincere and substantial policies to dispel the fears of entrepreneurs, what will give investors confidence?

In the absence of that confidence, how can China's economy be stabilized?

Wen Jiabao has publicly stated that he doesn't want to waste his last year in office and his call for "visible and encouraging actions" is different from his regular pragmatic and low-key style.

One thing is clear: China's private enterprises are in desperate need of encouragement, and its economy is also in desperate need of the confidence that this kind of encouragement would bring.

We don't know how the relevant departments will understand Wen's use of the word "visible", and we're not sure how they'd go about "encouraging people".

It's obvious that Wen doesn't want another set of detailed implementation rules or a reiteration of the policy statement.

If a good policy fails to be implemented, then either policymakers had no intention of promoting it or the balance of power lies with vested interests groups.

As for the question of what the relevant departments ought to be doing; the answer is pretty clear.