China to further reform on investment system

In his directions on the implementation of the State Council's Decision on Reform of Investment System promulgated recently (hereinafter referred to as Decision), Chinese Premier Wen Jiabao stressed that pushing this reform forward is of great significance for a perfect socialist market economic system and more effective macro-control.

He highlighted the fundamental purposes of the reform on the investment system. The core of the reform, he said, is to give a full play to the market in terms of resources allocation by relieving enterprises of intervention from the government. It is the enterprises that should play the leading role in investment activities. This means they should make investment decisions at their own discretion and shoulder risks of losses while banks should extend loans on their own account.

The government, on the other hand, is expected to perform its well-defined duties which involve formulating development plans and industrial policies and guiding the social investment with legal and economic levers. The government should make more scientific investment decisions in a more democratic way through an optimized decision making process for government investment projects. A strict system will hold decision makers responsible for their loss-making investments. Premier Wen firmly believes that this reform will play a positive role in adjusting the structure, deepening the whole reform and switching the model of economic growth.

The State Council held a video conference on July 22 to deliver Wen's message and make specific arrangements to carry out the reform. Vice Premier Zeng Peiyan urged local governments and departments concerned at the meeting to push the reform forward actively and steadily and focus on the following points.

The first is the investment management system. Decisions of investment should be made by investors, that is, businesses, and the parties benefiting from the investment should take risks. Businesses will never have to go through any approving process for non-government sponsored projects. In stead, they will be subject to a confirmation system or a registration system. Large enterprises will be freer to make investment decisions and companies will have more channels to fund their projects. The government encourages the social capital to step into industries and fields as long as laws and regulations do not deny them to enter into these areas. Financial institutions should improve their fixed assets loans system and sharpen their ability of loans check-up to ward off financial risks.

The second point targets at the government investment mechanism. The purpose is to make government funded projects more productive. The government investments are mainly channeled to social and economic fields which concern the national security and the market doest work well for. Decisions should be made scientifically and democratically. Responsibilities for a project should be defined well and the process of approving should be streamlined. The capital should be put under proper control and the way of construction should be optimized. The operation system for non-profit government investment projects should be in place as early as possible. Local governments should attract social capital into utilities and infrastructure projects.

The third task is to strengthen and improve the macro-control on investment to achieve a balanced aggregate and better structure. Legal, economic and administrative measures should be combined with economic tools including market access, prices, interest rates and taxation to leverage the investment of the whole society. The government should navigate the social investment through planning, policies, information disclosure and market access control.

The fourth priority is given to the supervision of investment to secure the market order of investment and construction. Corporate investment, government investment and investment intermediaries will be put under the watch of a comprehensive supervision system. Various investors should act within the legal framework which is expected to be in place as early as possible and carried out carefully.

Zeng pointed out the deepening the reform on investment system serves the same aim of strengthening and improving macro-control, that is, promoting the stable and fast development of the national economy. He concluded his speech by requiring local governments and various departments concerned to take on their own responsibilities to carry out the State Council's Decision.

By People's Daily Online