Adjust font size:

Reuters:

Private investment growth slowed to 2.8 percent in the first half of 2016. The government has consistently stressed that steps shall be taken to boost private investment, but the effect seems unimpressive. Could you give an explanation for this? Thank you.

Sheng Laiyun:

Thanks for your question. In the first half of the year, private investment continued to slow in growth, registering a rise of 2.8 percent from January to June, which is 1.1 percentage points lower than growth from January to May. Speaking from a broader background, the slowdown is linked to its adjustment to the whole economic structure. Around 50 percent of private investments went to the manufacturing industry. As the Chinese economy entered a new stage of transformation and development, the traditional industry is in need of market clearance due to severe overcapacity, which, together with a tighter market environment as well as the falling prices of industrial products, lowers enterprises' desire for investment. This is a primary reason for the slowdown of private investment growth.

Secondly, a recent nationwide survey conducted by nine inspection teams from the State Council found that private investment in some places is facing high market access and inadequate reform as well as the Glass Door/Swing Door phenomenon, that is, policies that exist but have gone unfulfilled. These limits are unfavorable for the growth of the private investment despite the fact that they are willing to participate.

Thirdly, it is related to the finance cost of private investment. Many of the private investment entities are small businesses who have difficulties in getting loans or get more expensive loans.

The above reasons combined affect the growth of private investment.

I'd like to stress the following points: First, as the adjustment is related to the larger background of industrial restructuring, an appropriate slowdown reflects this restructuring and favors the adjustment of traditional industries as well. Second, I'd like to emphasize that the structure of the fixed assets investment continues optimizing despite a slowdown of growth in the fixed assets investment, especially in the private investment. Speaking from the industrial structure, although the growth in the secondary industry investment slowed, the tertiary industry investment maintained double-digit growth rates. Tertiary industry investment went up 11.7 percent in the first half of the year, whose proportion continued to rise. The hi-tech service industry grew faster and maintained high growth, registering a rise of 13.1 percent in the first half of the year, among which the information transmission software and information technology service industry investment went up 22.5 percent. Moreover, there have been some investments in strengthening national vulnerable industries, for example, investment in the water environment and the public facility management grew 26.7 percent. Though the investment growth slowed, the structure continued to optimize.

Last but not least, some new indicators are performing well. Of the fixed assets investment, the total planned investment in new construction projects increased 25.1 percent in the first half of the year, maintaining a high growth. Meanwhile, the recent market environment has improved, seen especially in the PPI's continued narrowing, which is favorable to business profits and helps stimulate or attract private investments as well. When the market environment turns good, business profits will improve and the enterprises will become more motivated to increase investments. The State Council put forward specific improvement measures and policies for the problems and affecting factors in private investment in its recently issued document "Notice on Further Boosting Private Investments." As long as the policies are implemented, private investments will improve, since the leading indicators perform well in a changing market environment. Thank you.

Print E-mail

Go to Forum >>0 Comment(s)

Add your comments...

• User Name Required
• Your Comment
• Enter the words you see:    
  Racist, abusive and off-topic comments may be removed by the moderator.