Experts hope for surge as China optimizes rules for COVID-19

The recently issued guideline on boosting private investment is expected to play an integral role in energizing markets and help China shore up growth during the fourth quarter and next year, officials and experts said.

On Nov 7, the National Development and Reform Commission, the country's top economic planner, issued a guideline containing 21 measures designed to encourage private investment in key areas and infrastructure projects such as railways, highways and ports.

According to the guideline, the government will support individuals and private businesses in the efforts to facilitate scientific and technological innovation, as well as those helping to steady critical supply chains.

The government will use pro-market and reform measures to boost the vitality of private businesses, adding that this will help mobilize more stakeholders in investment, stabilize market expectations, increase employment, promote economic development and help achieve Chinese path to modernization.

Boosting effective investment is seen as key to maintaining growth amid the challenging and evolving epidemic situation, and has so far worked fairly well despite waves of outbreaks across the country, experts said.

However, a new guideline encouraging investment from social and private means at this time of the year is particularly meaningful.

Liu Baokui, a researcher at the Institute of Spatial Planning and Regional Economy at the NDRC, said that private investment is an indicator of economic vitality and the new measures come at a critical time, as the relaxation and optimization of COVID-19 regulations is expected to embolden previously timid private investors.

"Private investment was hampered during the first outbreak in early 2020, but quickly recovered in the latter half of that year and throughout last year, laying a solid foundation for economic recovery," Liu said. "However, private investment waned due to the evolving global situation, the resurgence of COVID-19 in some cities and the country's lethargic property market."

He said that the new guideline comes as China is optimizing epidemic prevention and control policies to better coordinate management of COVID-19 and economic development, and it will make incentives to boost private investment even more effective.

"Private investment now accounts for more than 55 percent of overall investment, making it a key driving force in bringing the economy back on track," he added.

The guideline also emphasized the importance of protecting the property rights of private businesses and the legal rights and interests of entrepreneurs, thus creating an enabling environment for business and investment.

Wang Qing, chief analyst at Golden Credit Rating International, said in an interview last month that the guideline will not only encourage a rapid ramping up in private investment, but will also contribute to economic growth.

Notably under the new guideline, the government will encourage private businesses to invest in manufacturing.

The recovery of the manufacturing sector has been bumpy due to the evolving COVID-19 situation. Figures from the National Bureau of Statistics on Nov 30 showed that China's official manufacturing purchasing managers' index came in at 48 for that month against 49.2 for the previous month, making it the lowest figure in seven months. The 50-point mark separates contraction from growth.

This comes against the backdrop of a weakening property market and dwindling global demand.

"Manufacturing investment is an integral area in overall investment, and private investment in manufacturing takes up more than 80 percent of total investment in manufacturing," said Liu. "Promoting private investment in manufacturing will not only help generate growth next year, but will also help private manufacturers strengthen their resilience."

He added that streamlining investment procedures for private manufacturers, as noted in the new guideline, will help private businesses temper market expectations and help the sector shake off the disruptions caused by COVID-19.

Yang Yinkai, deputy secretary-general of the NDRC, told a news conference last month that the efforts to implement the guideline and encourage private investment in manufacturing have already begun.

"The government will make sure to treat private investors equally," he said. "Various types of funding, such as investment subsidies and interest discounts, will also be made widely available to eligible private investment projects."