Recently officials with the National Development and Reform Commission (NDRC) accepted an interview and answered questions with regard to deepening reform of investment reform.

Question: Could you please comment on the importance of pressing ahead reform of investment system?

NDRC: Since the opening up a slew of reforms have been carried out in the investment field. However, some deep-level inconsistencies and problems have not been radically solved. In particular the decision-making right of enterprises has not been fully put to effect; the basic resource allocating role of market has not been given full play; the scientific level and democratization level of government investment decisions need to be further improved; the efficiency of investment macro-control and supervision needs to be enhanced.

Pressing ahead reform of investment system is an important move in establishing and perfecting socialist market economy and currently is of great significance to strengthening and improving macro-control. First, deepening reform of investment system, establishing enterprises as the main body of investment and reducing the direct intervention of government in corporate production and management activities are conducive to the better exertion of the basic resource allocating role of market, optimization of investment structure, improvement of investment returns, the sustained, rapid, coordinated and sound development of national economy and comprehensive advancement of society.

Second, deepening reform on investment system, promoting reforms such as on administrative management, state-owned enterprises, financial revenue and financial credit are conducive to establishing corporate and banking self-inspiring and self-restraint mechanisms and promoting the further improvement of socialist market economy.

Third, deepening reform of investment system and improving the management of foreign investment and overseas investment are conducive to further expanding opening up, better utilizing international and domestic markets and resources and expanding more capacious space for economic development.

Forth, deepening reform of investment system and speeding up the transform of government function favor the shift of governments' center work to economic regulation, market supervision, social management and public service.

Fifth, deepening reform of investment system is conducive to eliminating system roots that give rise to blindfold investment expansion and enhancing the internal vitality and drive of sound economic development.

As for now enhancing and improving macro-control have created favorable conditions for pushing ahead reform on investment system. We can explore effective solutions by grasping the acute contradictions and problems in the investment field and by making use of the practice in the macro-control; prevent stagnancy under tight policy and disorder under easy policy and get reform of investment system onto a positive and healthy track.

Question: What are the chief objectives of deepening reform of investment system?

NDRC: The overall consideration of deepening reform on investment system is to give more play to the basic resource allocating role of market under the national macro-control according to the requirement of perfecting socialist market economy, and to finally establish a new investment system that features market-led investment, corporate independent decision, independent bank loan examination, diversified financing means, standardized intermediary service and effective macro-control. Speaking specifically we should reform the system of government oversight of corporate investment and allow enterprises greater independence in making investment decisions in line with the principle that "the investor makes the investment decisions, reaps the profits and bears the risks"; rationally define the government's investment functions, improve the scientific and democratization level of investment decisions and establish an accountability mechanism for investment decisions; further expand project financing channels and develop diversified financing means; nurture standardized investment intermediary service organizations, reinforce industry self-discipline and promote fair competition; perfect investment macro-control system, improve macro-control mode and perfect macro-control means; speed up legislation progress in the investment field; reinforce investment oversight, protect standardized investment and construct market order.

Question: What are the new major moves of the State Council's Decision on the Reform of Investment System?

NDRC: Generally speaking, the new major moves of the Decision are demonstrated in the following four aspects: First, the examination and approval system of corporate investment project is changed into a substantive regulation system and a registration and recording system. The Decision requires that from now on nongovernmental-funded corporate projects no longer follow the examination and approval system. The government will only conduct substantive regulation on the major projects and projects of the restricted kinds. The other projects will follow the registration and recording system.

Second, the function of government investment is rationally defined. Government investment will mainly be used in economic and social areas which are of national security and where the market cannot efficiently allocate resources, in improving public welfare and public infrastructure construction, protecting and improving bio-environment, promoting the economic and social development of less developed regions and advancing scientific and technological progress and the industrialization of high technologies. Investment funds of various governments will be rationally utilized by means such as direct investment, capital funds injection, investment subsidies and on-lending and loan interest discount. As for non-operating government investment projects the implementation of the contractor system for construction will be accelerated.

Third, investment macro-control system is improved and regulation means are bettered.Overall investment of the society will be effectively regulated with indirect control methods by comprehensively utilizing economic, legal and necessary administrative means.

Forth, the supervision and management of government investment will be perfected, accountability system will be established in government investment, balance mechanism of government investment will be improved and post-evaluation system and social supervision mechanism will be established in government investment projects; the supervision and management of nongovernmental investment will be strengthened and improved, coordinated corporate investment oversight system will be established and perfected, supervision of corporate investment activities will be strengthened according to the law and corporate investment credibility system will be established; supervision of investment intermediary service institutions will be strengthened while intermediaries such as consultation and evaluation institutions and tendering and bidding agencies will be under qualification management.

Question: what is the difference between substantive regulation system and examination and approval system?

NDRC: Difference between the substantive regulation system and the examination and approval system is demonstrated in the following three aspects: First, the coverage is different. The examination and approval system is applicable only to government-funded projects and corporate investment projects that use governmental funds; whilst the substantive regulation system is applicable to major projects and restricted projects in which the enterprise does not use government funds as investment.

Second, the content of approval is different. Under the old examination and approval system the government examined a corporate investment project from both the perspectives of a social manager and of an investor; under the substantive regulation system the government considers a corporate investment project only from the perspective of social and economic public management. The content of examination is mainly focused on aspects such as "maintaining economic security, rationally exploiting and utilizing resources, preserving bio-environment, optimizing major arrangement, protecting public interests and preventing monopolies", instead of examination of an investor on the project's market prospect, economic returns, fund source and product technological solution etc.

Third, the procedures are different. Under the examination and approval system there were usually three steps, that is, "project proposal", "feasibility study report" and "project starting report", whilst under the substantive regulation system there is only one "project application report" step.

To certain extent the implementation of substantive regulation system is a major system innovation in China's management of investment in fixed assets. To ensure the smooth implementation of this system Investment Project List Ratified by the Government 2004 was released as an appendix to the Decision.

Question: The Decision suggests to perfect the registration and recording system. What is the meaning and importance of the implementation of the registration and recording system?

NDRC: The implementation of the registration and recording system is an important content of deepening reform of investment system. After the implementation of the Decision, for most corporate investment projects the government no longer approves them. Instead enterprises can make their independent decisions and put them on the records of the competent departments in charge of investment in the local governments. By the effective implementation of the registration and recording system the government can comprehensively grasp information on investment intent, duly and accurately monitor the investment operation situation, timely release investment information and guide the direction of non-governmental investment. Per the requirement of the decision the government will reinforce the direction and supervision of registration and recording work not only to faithfully implement the registration and recording system but also to prevent disguised examination and approval in the name of registration and recording.

Question: What kind of impact will this reform of investment system have on foreign investment?

NDRC: The reform of investment system adheres to the basic national policy of opening up. It not only has not changed China's policies and measures to encourage foreign investment but has created more favorable system environment for overseas businessmen to invest in China as well. This reform further simplifies the substantive regulation procedure for investment projects, even for foreign investment projects which, too, only need to be ratified for the "project application report"; further expands the substantive regulation purview of provincial governments, which is raised from $30 million to $100 million for encouraged and permitted foreign investment projects and from $30 million to $50 million for restricted foreign investment projects.

By People's Daily Online