China Issues New Guidelines to Develop Private Economy

By Wei Chengwu and Liu Peng
Published: 2010-05-14

Original article: [Chinese]

China's State Council issued a new document yesterday on encouraging and guiding private investment, a new move that aims to further expand the investment scope and coverage of private capital.

Private capital will be allowed to establish financial institutions and will be encouraged to invest in infrastructure and basic industries, according to the document which was posted on the central government's official website on May 13.

In addition, the state will support and guide private capital to invest in the establishment of affordable housing, public housing and other government-subsidized housing projects.

Due to its stipulation of 36 articles to support the development of the private sector and because of the need to distinguish it from a previous similar document, the new document is popularly called, "The New 36 Guidelines on Non-State-owned Economy".

The new document is an amendment to the country's previous version, released by the central government in February 2005, that was the first guideline encouraging private investment.

Compared with the previous version, the new document expands the investment scope for private capital.

For instance, the previous document said private capital can only invest in electrical power, telecommunications, railways, civil aviation and the petrochemical industry in the form of a joint venture.

The new document relaxes control and puts forth more details on this regulation; stating the state will encourage private capital to invest in the construction of highways, waterway transport, ports, airports and aviation facilities in the form of the establishment of a wholly-owned enterprise or joint venture.

In addition, private capital will also be encouraged to invest in the construction of railroads and train stations and will be allowed to invest in coal transport facilities, domestic passenger railways and intercity passenger rails.

In terms of the financial sector, the new document states private capital will be encouraged to sponsor and set up countryside banks, lending firms and rural mutual cooperatives. For this reason, the State Council required the lowering of the ratio of capital contributions offered by banks for the establishment of countryside or community banks.

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