Inspection teams will propose measures to boost confidence
Weak demand, overcapacity, low investment confidence and high operational costs are the main factors behind slower investment growth from the private sector this year, Xinhua reported Saturday, citing findings from a government survey.
The findings were published by Xinhua after nine inspection teams visited 18 provinces to find out why private sector investment has been slowing since the beginning of this year.
Sharp slowdown
The nation's total fixed-assets investment rose by 10.5 percent to 13.26 trillion yuan ($2 trillion) in the first four months, compared with the 10.7 percent growth recorded in the first quarter of 2016, official data showed in May.
However, private sector investment only registered growth of 5.2 percent year-on-year in the first four months, the lowest rate since data collection began in 2012, according to a Reuters report on Saturday (US time).
The rate was around 10 percent in 2015, and as much as 25 percent in 2013, the Reuters report said.
The inspection teams, headed by senior officials from nine ministries including the National Development and Reform Commission, the Ministry of Industry and Information Technology, and the Ministry of Finance, talked to 3,000 entrepreneurs and visited 500 private companies.
They will propose recommendations to local governments so that they can address relevant issues in order to stabilize private investment and boost confidence among private investors, Xinhua reported, without detailing the measures.
The central government is counting on the private sector to invest more as the economy undergoes a transition from reliance on heavy industries to services-led growth, experts said.
However, the overall economy is still slowing, which hurts the confidence of private investors, Zhang Ning, a research fellow at the Chinese Academy of Social Sciences, told the Global Times Sunday.
"It is somewhat like the stock market. When the benchmark index is at a low level, retail investors will tend to rein in their investment," Zhang said.
Many of the factors listed by the survey are long-standing ones and the private investment growth rate has been slowing since 2012, Zhang also noted, adding that it has dropped more significantly since the start of this year.
One reason for this, he said, was the country's fiscal and taxation reform, in which business tax in all industries is being replaced by value-added tax, and company data is now being reported more accurately.
The private sector provides 80 percent of all the jobs in China, and contributes more than half of the country's tax revenues and 46 percent of exports, the Xinhua report said.
But as well as the slowing growth rate of private sector investment, its proportion in national total investment is also dropping, according to Xinhua.
Help for real economy needed
Private sector investment is mainly focused in the property and manufacturing sectors, Shanghai Securities News reported on May 25.
The report also said some private investment is flowing overseas or into the services industry.
Based on the 12 provinces that have published their January-April data so far, the costal regions are doing better with a smaller slowdown in private investment than the central and western provinces, while Northeast China has seen the biggest decline.
Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times Sunday there is a tendency in the country for capital not to flow into the real economy but rather to be put toward pursuing short-term gains in the financial markets, and this also includes investment from State-owned enterprises.
"The number of private equity firms far outnumbers that of venture capital firms, and the former barely enters into the real economy while the latter serves as an incubator," he said, noting this tendency is caused partly by the slowing economy but needs to be guarded against.
To better harness private sector investment, local governments should work on building up a platform of industries that suit local growth potential, Dong said, noting that this is a better option than simply working on improving government services for firms.
