Reform of investment system deepened


Updated Wed, 28 Jul 2004 00:00:00 GMT

The State Council, China's cabinet,has just publicized a major decision on deepening the reform of its investment system, enabling businesses to make final decisions on investment and the market to allocate resources.

The decision was made in the course of the government's macro-control over the overheating sectors of the economy, which the government has attributed to "blind investment" and "wasteful duplication" in some industries. 

According to the new rules, the government's santioning of investment projects will be strictly limited, and all businesses not using state funds will merely need to report the projects for the record, provided they conform to the state's macro-economic policies. 

Investment of government funds will be limited to certain sectors pertaining to national security or public welfare, including support for underdeveloped areas, environmental
protection, advancement of science and technology, and industrialization of high technology.

Currently all large investment projects in China, whether sponsored by state-owned or private organizations and enterprises,must pass an examination and approval process by governments at different levels or relevant departments. 

"The reform will reduce the government's direct intervention in enterprises' activities, enable the market to better distribute resources, optimize investment structure, raise investment efficiency and promote the sustained, fast, coordinated and healthy development of the national economy and all-round social progress," an official with the State Development and Reform Commission told Xinhua in an interview.

   Businesses not using state funds will only need governmental authorization for important and restricted investment projects relating to public social interests, the decision says. 

A catalogue released by the State Councl lists those "important and restricted fixed asset investment projects" requiring governmental sanctions, in the fields of agriculture, energy and power, transportation, information industry, raw materials, machinery manufacture, light industry and cigarette, high and new technology, urban construction, social causes, finance and investment abroad. 

"Other projects, no matter how large the scale, only need to be put on record, and enterprises will make decisions and take risks by themselves," the decision says.

The decision encourages non-governmental capital to enter unrestricted infrastructure, public welfare and other fields.

It also makes clear that Chinese methods of investment macro-control will be improved. "Through comprehensive use of economic, legal and necessary administrative measures, all investment activities will be effectively managed mainly through indirect regulation and control," the decision says.  

The Chinese government has tightened money supply and land use to such overheating sectors as steel, cement and electrolytic aluminum since late last year, after rapid investment triggered concerns of inflation and pressure on commodity and energy supplies.

The decision calls for enhancement and improvement of supervision and management over investment. "Auditing departments should strengthen audit and supervision over projects invested by the government," it says, encouraging the public and news media to keep an eye on projects invested in by the government.