Beijing has rolled out another major document to promote private investment. The General Office of the State Council recently issued the Several Measures on Further Promoting the Development of Private Investment. The Measures propose 13 policies organized around three goals: expanding market access, clearing bottlenecks and strengthening guarantees. These moves send a strong signal about the government’s desire to boost private investment and should help further stimulate its vitality and growth.
Private investment is a key weather vane for economic activity and plays a vital role in stabilizing growth, employment and expectations. Since China began tracking private investment in 2012, it has consistently accounted for over half of the country’s total investment. The new measures focus on the difficulties private investors have faced in entering certain markets.
The measures state that for projects that require national-level approval and offer certain returns — such as railways, nuclear power, hydropower, cross-province power transmission lines, oil and gas pipelines, imported liquefied natural gas receiving and storage facilities, and water supply — a special assessment must be conducted on the feasibility of private capital participation. The project’s feasibility study report must include a dedicated section on the topic. For eligible projects, the equity stake held by private capital can exceed 10%. This policy not only clarifies the key areas open to private investment but also quantifies the potential ownership stake for qualified projects.
The measures also propose that industry authorities and local governments should detail the specific requirements for private capital to join construction projects, with the project approval department reviewing private participation and determining the equity ratio. This marks a good start for expanding private investment in critical sectors.
Regarding market access, the measures also list several other areas, including new projects in urban infrastructure, infrastructure construction for the low-altitude economy, and commercial aerospace. Many of these sectors are related to the development of “new quality productive forces.” If these policies are properly implemented, private capital will have more investment opportunities.
Notably, the measures propose supporting more private investment in producer services, such as industrial design, common technology services, inspection and testing, quality certification, and digital transformation. Producer services are the “adhesive” of industrial development; they run through the entire chain of production and are a key support for extending and adding value to industrial chains. Private enterprises, being flexible and close to the market, are a natural fit for the highly professional, integrated and innovative characteristics of producer services. As the service industry’s share of the Chinese economy surpasses 50% and continues to rise, producer services hold enormous growth potential, offering a vast arena for private capital.
To clear bottlenecks, the measures propose strengthening regulatory oversight of network infrastructure operations to protect the legal rights of private enterprises in areas such as power grid connections, use of oil and gas pipeline facilities, and allocation of transport capacity. They also encourage and support private firms to accelerate the construction of testing platforms that can drive industry development. State-owned enterprises, universities and research institutes are encouraged to provide market-based testing services to private firms, while authorities are to explore simplifying the approval process for building these testing bases. The government will also support leading private enterprises and third-party service providers in building digital empowerment platforms.
The measures also include a series of initiatives to address the problem of insufficient financing support for private investment projects. These include increasing support from the central government budget for eligible private investment projects, making good use of the financing coordination mechanism for small and micro enterprises, and actively supporting more qualified private investment projects in issuing real estate investment trusts in the infrastructure sector. These policies will help strengthen financial guarantees for private investment.
When it comes to expanding private investment, many commentators suggest upholding equality between all forms of ownership, strictly protecting property rights according to the law, and enhancing policy stability. Ultimately, this requires a combination of an effective market and an enabling government: correctly handling the relationship between the government and the market so that the market plays the decisive role in resource allocation while the government better plays its part. At the 16th Caixin Summit, themed “Resilience and Patience,” renowned economist Wu Jinglian pointed out that based on the actual situation of companies that have managed to stand out, the government’s “smart” approach is not to designate industries or give policy preference to certain technologies, but rather to cultivate an environment from which innovative enterprises can emerge. In his view: “Perhaps most startups will not grow into towering trees. But we have tens of millions of enterprises. If we cultivate a good business environment, even if just one percent, or one-tenth of one percent, emerge, the Chinese economy will be invincible.” Liu Shijin, former deputy director of the Development Research Center of the State Council, believes that an effective market and an enabling government are not in opposition; a truly enabling government is one that makes the market effective. Clearly, by focusing on expanding access, clearing bottlenecks and strengthening guarantees, the new Measures not only help boost private investment but also help foster a positive environment for enterprises to emerge and thrive.
After nearly half a century of development and accumulation since the reform and opening-up, China does not lack private capital. This represents a significant opportunity for the country’s economic development. The measures send a strong signal encouraging private investment. The key now is the expectations and confidence of market players, especially entrepreneurs. In particular, we must be vigilant about the “last-mile” problem of policy implementation. Breaking down the “glass doors, spring-loaded doors, and revolving doors” that obstruct private investment will surely bring a significant “investment multiplier” to the Chinese economy.
