Five projects are lucky enough to be the first to get approval from the State Development and Reform Commission recently. This means that the "approving mechanism" introduced by the reform of the investment regime has begun to work.

The five items involve investment in the technical upgrading of Luoyang Thermal Power Plant under Datang Group, Tankeng Hydro-power Plant over Oujiang river in Zhejiang Province, PVC project of Shenyang Paraffin Wax Chemical Co., Dahongshan Iron Ore Mining project of Kunming Iron&Steel, and the pure alkali project under Qinghai Alkali Corporation.

They are all in compliance with the national standard on economic safety and environmental protection. And they are on the right track of the vision of production planned by the government.

The State Council promulgated its decision on the reform of investment system in July this year. The step is regarded as significant both in China's market economy system and its macro-control endeavor underway.

This round of macro-control, the fifth one since the founding of the People's Republic of China, is focused on cooling down the overheating sectors like iron and steel, cement and aluminum.

In fact, either overinvestment or blind investment has been a recurring problem in China's economy. The fundamental reason is believed to lie in the system.

Under the old investment system, all the projects are subject to the approval of government at various levels whose consideration was based only on the scale of the investment. Before making any decisions, the government even had to take factors like environmental protection, land supply, market prospect and technologies into account.

Businesses as investors then embarked on a long haul to go through all the red tapes before green light was finally given. But market opportunities wait nobody.

Once the investment was proved to be wrong, banks were supposed to face the consequence, even though they did not have the final say on credit extension.

The new investment system frees the government from the decision making if the investment is made by enterprises. Businesses decide whether or where they put their stake in based on their judgement on the market. And banks decide whether or to whom they extend their loans.

But the empowerment does not mean indulgence. Rather it indicates the government will conduct the macro-control in a more market-oriented way. Projects to bring more production capacity for iron and steel are on the top list of investments subject to government approval.

Under the new investment system, the government is responsible for development planning, guiding the fixed assets investment, channeling foreign investment to certain industries, putting investment information disclosure system in place, and making scientific market access available.

The new investment system also makes it possible for the government to adopt various tools such as subsidies, discounts, prices, interest rate and taxes, formulate and adjust the credit policy, as well as impose standardized land use regime.

Local government showed particular enthusiasm in this spending spree. They injected capital 5.2 times as much as the central government.

The new investment system makes it very clear that the government investment should improve public infrastructure, protect ecological environment, boost the development of the less-developed areas, promote the sci-tech progress and industrialization of hi-techs, and concentrate on fields where the national security is concerned or the market cannot allocate the resources effectively.

It is even more important that the reform also highlights the supervision of the government investment activities. It is expectable that the system will keep a tight rein on imprudent and blind investment in the government, especially local officialdom.

By People's Daily Online