Slowdown 'logical' response to falling returns
There are logical reasons for slowing private investment in China, and the government will take necessary measures to improve the situation such as establishing a special State guarantee fund, an official said at a press conference held by the State Council Information Office on Monday.
The official also said that the objective of government investment should be to make up for shortfalls in private investment, not to compete with it.
China has been facing slowing growth in investment, especially by private enterprises and in the manufacturing sector.
Private-sector fixed-assets investment rose 2.8 percent year-on-year in the first half of 2016, down from 3.9 percent growth from January to May, showed data released by the National Bureau of Statistics (NBS) on July 15.
The proportion of private investment in overall investment slumped from 65.1 percent in the first six months of 2015 to 61.5 percent in the same period this year, according to the NBS data.
There are some "logical" reasons for these trends, such as the slowing domestic economy, Zhang Yong, deputy director of the National Development and Reform Commission, said at the conference.
Liu Dongliang, a senior analyst at China Merchants Bank, told the Global Times on Monday that the investment returns of traditional industries such as steel and coal, to which private capital used to flow, have dwindled significantly for reasons such as supply gluts. This situation has caused private investment growth to slow down.
Feng Liguo, an associate research fellow at the Chinese Enterprise Federation, told the Global Times Monday that some investment opportunities still exist, such as in the high-tech sector, but investors are worried about putting money into unfamiliar industries.
Zhang also stressed that government investment has not "crowded out" private investment, as government capital has avoided competitive fields such as the real estate sector in recent years. Instead, public-sector funds have focused on areas such as infrastructure, where private money is unlikely to go.
"Private and government investment should complement each other," Zhang said.
According to Zhang, the biggest problem faced by domestic enterprises is financing difficulties, and the government has suggested a series of measures to improve the financing and investment system.
Such measures include establishing a State financing guarantee fund and setting up an online supervision platform for investment projects, Zhang noted.
Liu said that government guarantees might to some extent induce financial institutions to grant more loans, but problems still exist.
For example, the government must decide on how such guarantees will be handled, such as via legal documents.
