China to Conduct Examination of Incentives Created to Encourage Private Investment

China to Conduct Examination of Incentives Created to Encourage Private InvestmentChina will be conducting a one month sweeping examination of the series of incentives that was created to encourage private investment which were designed in boosting the role of said investment in the country economic development. The examination reviews implementation of the 39 State Council documents that was released in 2014 may have encourage social investment in several key innovation sectors. The examination will be conducted throughout May in 18 provinces and regions in China.

The review was announced by Premier Li Keqiang during an executive meeting of the State Council,and Li stated that any decrease in private investment might affect the vitality of the Chinese economy. Even more private investment is said to be the crucial driving force of the country’s private economy that provided 80 percent of the total employment opportunities in China. China’s economy has increased by 6.7 percent year on year for the first quarter, this is within the 6.5 to 7 percent yearly growth target set by the government in March. This steadied nerves internationally in regards to the country’s economic performance, a year after the stock markets tumbled and negative expectations were seen domestically and internationally. But still concerns are still placed on the table as the private investment increased in the first quarter by 5.7 percent only, a decrease by 7.9 percent points compared to last year.

Premier Li called on local governments to provide support for private investment and the government should not offer umbrellas to save them. As china is going through an economic transition from an export oriented economy to a consumption driven one, the momentum of private investment is considered as a driving force for the long term for economic growth. It also reflects the private business sector confidence in the nation’s economy. Ever since 2005, the State Council is carrying out incentives in hopes to encourage private investment and a number of major infrastructure projects that was off limits to private investors are now opened up for social investment. Private entrepreneurs can invest in projects especially in the energy, water, transportation and environmental protection and urban utilities.

But the implementation of the incentives faced several setbacks such as red tape and difficulty in getting loans. What is bothersome is the private investors were not treated the same as their public counterparts and still faces several restrictions. The examination is said to be complete by the end of the month and is expected to be steady the momentum of the private investment growth. Problems found during the examinations should be handled properly and a third party evaluation is carried out towards the implementation of the incentives that will encourage private investment.

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