Private capital investment channels poised for expansion


"Non-government loans should not be oppressed, but guided", said Gao Dekang, a deputy to the National People's Congress and chairman of the board of Bosideng Group, in his proposal of "Encouraging and guiding the healthy development of civil investment". Mr. Gao says that it is because of difficult access to investment that large amount of civil liquid capital goes to civil loaning.

It is in the nature of capital to go after profit. When it runs into all sorts of industrial policy barriers and is not properly guided, it tends to barge about and head for where the profit is. This is the very cause that civil capital flocks into loaning, the stock market, the housing market, and the art market.

Long time of accumulation makes civil capital an enormous force that is not to be trifled with. Take Jiangsu Province as an example, in 2011, civil investment accounted for 65.4 percent of total fixed assets investment in the province. Meanwhile, many medium- and small-sized companies find it difficult to access loans. According to a report published by All-China Federation of Industry and Commerce: 90 percent of medium- and small-sized companies have difficulties getting loans from banks; in the past 3 years, 62.3 percent of medium- and small-sized companies financed through civil loaning.

"The healthy development of civil investment requires not only government guidance, policy support, and help from financial institutions, but also favorable social investment environment and a market economy system", said Gao Dekang, who points out that civil investment focuses mainly on labor-intensive manufacturing industries and low-end service industries, and has difficulty in getting involved in other social and public undertakings such as finance, transportation, medical care, and education.

The government work report proposes to "improve and implement policies and measures for developing the non-public sector; break up monopolies and relax restrictions on market access; encourage nongovernmental investment in railways, public utilities, finance, energy, telecommunications, education, and medical care; and create a fair environment in which economic entities under all forms of ownership can compete and develop together". This means that civil capital will have more options.

The finance industry, particular small-sized financial institutions that are geared to the needs of small- and mini-sized enterprises and agriculture, rural areas and farmers, will become an important destination of civil capital. "With such fierce market competition, it is hardly possible for a small company to develop and grow merely by accumulation of original capital", said Zhou Xiaoguang, a deputy to the National People's Congress and chairperson of the board of Neoglory Group. In last December, Neoglory's small-amount loan company was approved and established. By January 20 this year, the RMB 200 million Yuan loan had been all given out, benefiting 500 companies, with more still applying.

The Proposal about Making More Efforts in Financial Reform and Optimizing Nongovernmental Loaning Environment put forwards by China National Democratic Construction Association proposes to construct financial organizations as soon as possible by creating law system of regulating civil financial operation and formulating civil loaning management rules so as to expand investment channels for nongovernmental capital, and to accelerate the construction of nongovernmental credit system in order to improve nongovernmental financial investment environment.

Besides finance, social public undertakings, including transportation, medical care, and education, that have been hardly accessible to civil capital due to high market access, will also attract the inflow of civil capital.

"When capital is in the market, it flows like water, piling up when it is blocked by large dams or even going out of the system to seek other paths", said Zhao Fengqi, a deputy to the National People's Congress and president of Jiangsu Suqian Urban Construction Investment Company, who points out that in the past civil capital tended to gather in highly competitive industries; now, however, civil capital should be allowed to flow into railway, city planning, energy, telecommunication, and other sectors. The key is to improve supporting facilities, refine relevant policies, and create conditions for private capital to enter in an orderly manner. First, fairness: through policies and measures, ensure that governmental capital and civil capital are on the same starting point of competition; and second, order: when civil capital enters key areas that would affect national interest and people's livelihood, it needs to be guaranteed and guided by laws and regulations, and corporate governance structure should be standardized, shareholding system should be restructured, and third-party supervision should be thoroughly implemented.

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