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China pledges to allow private investors to compete fairly with state firms for infrastructure deals

China’s top economic planning agency said on Tuesday it would take measures to ensure private investors can compete fairly with state firms in infrastructure projects, traditionally the domain of government-backed enterprises.

The government has sought ways to increase private investment in infrastructure projects, leery of worsening the balance sheets of already indebted state-owned enterprises and local governments.

Big-ticket infrastructure projects have been a policy focus this year to help cushion a slowdown in the world’s second-biggest economy, but with private investment growth easing to the single digits, the state has had to do much heavy lifting. Government spending soared 13 per cent from January to July from a year earlier.

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A two-year-long effort to guide private capital into projects such as metro systems and hospitals via public-private partnerships has generated little interest. China is working on a draft law to govern such partnerships, which the government says have been deterred by imperfect and inadequate legislation.

“We have to create a clear and predictable market environment for private investment,” Hu Zucai, vice-director for the National Development and Reform Commission told a press conference on Tuesday.

He added that “innovative” forms of private investment such as public-private partnerships should be encouraged if necessary.

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Hu said the 165 key infrastructure projects specified in the government’s current five-year plan provide clear direction on how “social capital”, a phrase China uses for private investment, can enter each industry.

“I heard some private investors say they have the capital but are not sure where to invest in. I think the plan provides very clear guidance,” Hu said.

He said airports, telecom infrastructure and oil and gas extraction are areas that should be further opened to private investment.

So far, fewer than one-quarter of projects announced by the government as public-private partnerships have found private investors, official data shows.

Investors had signed up for 619 of 2,531 projects with a total value of 1 trillion yuan (HK$1.16 trillion) through the end of July, reform commission said on Tuesday.

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Thee cabinet said in July that the government will implement reforms to attract more private investment into railway, petroleum, natural gas, power and telecommunications sectors.

To further lure investment, the cabinet on Monday said the authorities plan to cut the annual tax burden for businesses by more than 500 billion yuan within the next one to two years.