The long-awaited investment financing reform has been put onto the
fast track. The draft will be sent to the State Council for primary
reading,
China Business Post reported, saying that the
scheme was likely to be completed within the year.
An
official with the State Development and Reform Commission (SDRC),
who attended the drafting of the scheme, said that the reform aimed
to lead social investment into different sectors, introduce market
mechanisms in investment, financing, operation and management
processes, and accordingly allocate resources with high
efficiency.
Meanwhile, The Regulation on Government Investment has also been
drafted.
Investment entrance and withdrawal
The basic principles of the planned reform are to let investors
decide enterprise operations, enjoy profits and shoulder relevant
risks. Under the macro-control policy, the government will bring
the market mechanism into full play, and standardize the government
investment at the same time. The goal is to establish a new
investment financing system where investors can make decisions
themselves, and banks can examine lending applications
independently as well as allow for multiple financing methods,
qualified intermediaries and efficient macro-control from
government.
Experts believe that the reform will adjust government's economic
policies fundamentally.
The fundamental measure of the reform is to restructure the
investment entrance and withdrawal system, which is key to
investors, especially for those who start businesses.
Government will go on eliminating all kinds of investment entrance
policies: define clearly the industries where investments are
encouraged, allowed, limited or prohibited by government; break the
industrial monopoly and eliminate local protectionism; set up a
financial system which can meet different needs of private
investors; perfect the credit guarantee system for SMEs.
As
for the preferential tax policy, these enterprises, which invest in
government-supported industries, are likely exempt from some
enterprise income tax, and investors will be exempt from relevant
personal income tax. Chinese government will also deepen the reform
of its approval system, lowering operation costs, especially
trading costs.
Room for private investment
Since the SARS breakout this spring, Chinese government reduced or
exempted tax for SARS-hit industries, and approved the building of
some important infrastructural projects. Meanwhile, The State
Council made the economic revival plan post-SARS. These moves might
be efficient in the short term. However, the fundamental measure,
to drive the economy through voluntary investment, is still
necessary and urgent.
"China doesn't lack capital, the key problem is to raise the
efficiency of capital utilization. The improper resource allocation
was the reason for low capital utilization efficiency," said Wu
Xiaoling, the vice governor of the central .
Minister of SDRC Ma Kai viewed the draft reform scheme as an
important task for the newly renamed ministry. He promised to
further expand the independence of enterprise, reduce the scope and
industries of government investment, and simplify approval
procedures for better investment environment.
Sources with the SDRC said that the reform aimed to create a fair
market environment. Except those industries in which investment are
prohibited by law and regulation, competitive sectors, like water
supply, public transportation, gas, electricity, heating and
environment protection, will be open to all investors.
Develop bond market
The development of a bond market, including treasury bonds,
financial bonds, corporate bonds, municipal bonds and mortgage
bonds, is a core task of investment financing reform. In China,
corporate bonds have been ignored for quite a long time, and there
have been no bonds issued by local governments. Experts say that
government usually emphasizes stock markets but ignores bond
markets, but these measures have handicapped China's growing
securities market.
Policy makers now have realized that a mature bond market would
reduce the risk of financial systems. Thus, the development of a
bond market has become a major task of financial reform.
The bonds issued by local government will be the highlight of
reform. Experts say that at least 500 billion yuan (US$60.4
billion) are needed to offset the capital gap of urban
infrastructure construction. For example, the scheduled investment
of 2008 Beijing Olympic Games is 300 billion yuan (US$36.2
billion), while Beijing's fiscal revenue in 2001 was only 45
billion yuan (US$5.4 billion).
At
the beginning of this year, Beijing
Municipality once planned to issue Olympic bonds. However, the
idea was vetoed by the Budget Law, which prohibited local
governments issuing bonds.
Besides, SDRC will increase the issuance of corporate bonds to
bolster key construction projects.
(China.org.cn by Tang Fuchun, July 17, 2003)