Private capital to face wider choices

16:21, May 14, 2010      

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China's government has opened a new range of government-run industries to the private sector, either through investment in existing companies or establishment of new firms.

Water projects, power generation, mining, and logistics -- currently mainly state controlled -- would be opened to the private sector, said a statement on the central government website, www.gov.cn.

The statement also reiterated the opening of sectors including affordable housing construction. Private investors could also participate in the establishment of financial institutions by investing in commercial financial institutions and establishing rural banks, credit companies, credit guarantee companies, and rural fund cooperatives. They are also allowed to invest in cooperation with SOEs oil and natural gas sectors.

Focus 1: Allow the use of private investments for establishing financial institutions

"Private investors could participate in the establishment of financial institutions by investing in commercial financial institutions and establishing rural banks, credit companies, credit guarantee companies, and rural fund cooperatives."

China's "Commercial Bank Law" never restricted private investment for banks, said Zhao Xijun, deputy director of the Finance and Securities Research Institute under Renmin University of China. Barriers existed in private investments for commercial banks because most of the major shareholders or controlling shareholders are state-owned institutions or large state-owned enterprises.

When commercial banks are established, its initial main source of funds is state-owned capital. During that time, private capital was not yet large enough in strength and size to participate in commercial banks. However, after many years of development, private enterprises have grown and are able to invest in financial institutions, but the barriers still exist and encouraging policies need to be introduced.

For private capital, encouraging policies can expand their investment fields, and for the commercial banks, it can expand their investment channels. The government also introduced a series of measures to encourage private investments in the financial sector. Instead of the restrictive orders, these measures are aimed at encouraging and supporting the development of private enterprises.


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(Editor:祁澍文)

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