Caixin
Jun 12, 2012 11:49 AM

Closer Look: Policies to Promote Private Investment Just Symbolic

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A number of policies were unveiled in May and June to promote private investment in sectors dominated by state-owned enterprises. This wave of measures was a response to a July deadline set by the central government this year. Industry experts welcome the long-waited move, but remain cautious about the real impact of hasty regulation.

In May, the Ministry of Railways, China Securities Regulatory Commission and China Banking Regulatory Commission (CBRC) all made public plans to open to private money. In addition, in June the State Tax Administration brought out a 33-item tax reduction plan for private investors.

These will be soon followed by policies from the Ministry of Housing and Urban-Rural Development and the Ministry of Water Resources.

Rushing out policies within a few months could result in "rough guidelines," which can hardly answer the needs from the market, said Chen Yongjie, deputy secretary-general of China Center for International Economic Exchanges.

For example, the new CBRC policies aim to encourage private companies to set up rural banks. It lowered the threshold of the main sponsor to own a stake in the new bank from 20 percent to 15 percent, but failed to change the rule that only financial institutions can be the sponsor.

Only several dozens banks can be sponsors for rural banks, and they don't have the incentive to have a private company on board, said Zeng Gang, research head at the China Academy of Social Sciences' Institute of Finance and Banking. "Lowering the stock requirement gives more options to the sponsor bank, not private capital."

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