China features 4 major tendencies for investment in 2004

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Last updated at: (Beijing Time) Friday, December 05, 2003

China features 4 major tendencies for investment in 2004

Investment in China will maintain a rapid growth in 2004 though a little slower than this year. The annual growth rate will be expected to hit by 17 percent with four major tendencies.

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Investment in China will maintain a rapid growth in 2004 though a little slower than this year. The annual growth rate will be expected to hit by 17 percent with four major tendencies.

The first tendency

In terms of the economic elements, the way of non-governmental investment will gradually transfer from mainly centering on expansion and extensive production to raising the technological content and intensive production. The growth in 2004 is expected to reach somewhere by 19 percent.

1.The policy environment will be further liberalized, leaving more space and fields for non-governmental investment. As clearly stated at the Third Plenary Session of the 16th Party Congress it is to clean up and revise the laws and regulations that set limits to the development of non-public economies, to give free rein to market access by allowing non-public enterprises to enter the infrastructure, public utilities and other industries and fields not forbidden by the laws and regulations. The non-public enterprises will enjoy the same treatments as other enterprises in terms of investment and financing, taxation, the utilization of lands and foreign trade.

2. Civilian-owned enterprises have initially acquired the ability for making relatively large-scale investment. They can not only promote the upgrading of products and technologies, but also lay a foundation for the further development of non-governmental investment.

3. Despite the worries among experts with the central bank caused by the overheating of bank loans this year, the measures to be brought out will not have an obvious influence on non-governmental investment. Compared with this year, there will be more capital sources from private enterprises.

The second tendency

Proactive fiscal policies will be continued but there will be some alterations in terms of the strength and direction. In view of regional distribution, the investment in east and middle areas is faster than that in the west and the regional imbalance is aggravating.

1. The investment for the west development will be weakened. In view of the policy environment, though the nation will stick to its proactive fiscal policy, the strength and direction will be altered. China will issue 110-billion-yuan state bonds in 2004, 30 billion less than this year, an apparent weakening in strength. As regards the direction of investment, except for that decided this year, the rejuvenation of the northeastern old industrial base, the establishment and improvement of public health system, employment and reemployment, the reform of agricultural specialty tax all require the central government to increase fiscal expenditure. Therefore, the capital for backing up the development in the west will be somewhat weakened.

2. Compared with the eastern and middle regions, the western region depends much more on the state policy especially on state bonds. As analyzed from the increase of regional investment, there will be a sharp fall in the increase rate of the investment in the western region if the state support weakens.

3. With regard to the newly-started projects, the western region is far inferior to the middle and eastern regions in the light of stamina. During the first 10 months this year, there were only 24,338 newly-started projects in the west, 3,489 and 14,412 fewer than those in the middle region and eastern region respectively. Normally, the fewer the newly-started projects are, the lesser the investment potential will be and it is not likely to see a relatively fast increase.

The third tendency

As regards the channels of management, the ratio of investment for updating and renovation continues to rise as against the fixed assets investment in society as a whole and the state's policy on interest subsidy funds for technological renovation will continue to expand with an increase rate of about 19 percent.

1. As the promotion of quality and benefit is needed before an expansion of current investment, the state interest subsidy fund for technological renovation will not be cancelled next year but expanded in scale.

2. Investment in the past two years saw an excessive increase and the rate of investment, expected to reach about 45 percent, is unduly high. There are overheating investment and low-level overlapping constructions in some regions and industries. The state will encourage technological renovation, and set a certain limit on launching new and large-scale projects.

3. The acceleration in the increase of enterprise benefits this year has laid a capital foundation for the large-scale technological renovation next year. The oversupply in the market in general will not change, which will force enterprises to enhance their investment on equipment, raise the technological level and the standard of their products. Though the relatively high base this year goes against the high increase of investment on technological renovation next year, the latter will maintain a relatively high increase rate.

The fourth tendency

Analyzed from the industrial structure of the investment, with the constant increase of residents' consuming demand for service, the tertiary industry will become a new focus for the foreign direct investment and the structure of the investment will continue to be optimized.

1. The quickening of the updating of the consumption structure and residents' growing consuming demand for service will provide a long-term impetus for the investment in the tertiary industry with service industry as a mainstay.

2. With the further expansion in the opening-up, the tertiary industry will become a new focus for foreign direct investment.

3. The negative impact of Severe Acute Respiratory Syndrome (SARS) on the tertiary industry will by and by die out and there will be a tendency of recovering increase next year.

Article from Economic Daily; translated by PD Online staff member Gao Lanrong.

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