Thursday, 24 April 2014

China Opens 80 Projects in State-Run Sectors to Investors

Yesterday's announcement reflecting State Council decisions, is exactly in line with the Third Plenum Decisions, and reflects our thoughts in the first issue of Your Compass on China (see our first post) : please read the Bloomberg article below. As we mentioned, this brings interesting opportunities for international investors. The signs continue to point in the direction of real reform.

China Opens 80 Projects in State-Run Sectors to Investors
By Bloomberg News Apr 24, 2014 2:10 PM GMT+0800
China will offer 80 projects in industries dominated by state-owned entities for private investment as the nation seeks to let markets play a bigger role in the economy.

The opportunities are in industries including railways, ports and clean energy, according to a statement posted on the central government’s website yesterday that cited a State Council meeting. The projects are also in information technology, oil and gas pipelines, coal-to-chemicals and petrochemicals, it said.

The move builds on changes in government-dominated industries that include plans to fold developers of military hardware into publicly traded state-owned companies and the biggest asset injection into a Hong Kong-listed unit from China. Leaders are implementing the most sweeping economic-policy shifts since the 1990s while trying to sustain growth close to a target of about 7.5 percent this year.

“This is another step towards leveling the playing field for the private sector, encouraging competition while unleashing more investment to support growth,” Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, said in a note. The action is “another small measure to cushion growth while pushing through reforms.”

Leading Drive

State-controlled companies including PetroChina Co. (857) and China Petroleum & Chemical Corp. (386) have been leading a drive to find private investors amid a push by Premier Li Keqiang to give markets a bigger role in the allocation of resources. The country’s economy grew 7.4 percent from a year earlier in the first three months of the year, the slowest pace in six quarters, and a survey yesterday signaled that manufacturing has yet to respond to policy makers’ stimulus efforts.

The plan on military hardware would allow military research institutes to be incorporated into state-owned enterprises, two people familiar with the matter said this month. The policies, being drafted by the Ministry of Finance and other agencies, could be released as soon as next month, they said.

In the asset injection, Hong Kong’s Citic Pacific Ltd. agreed earlier this month to pay 226.9 billion yuan ($36 billion) to buy Chinese banking and brokerage assets from its state-owned parent. Citic Group Corp. will hold 75 percent to 85 percent of the combined business, according to a Hong Kong exchange filing.

Growth Forecast

Qu reiterated his forecast for full-year economic growth of 7.4 percent and said “more reform measures should be unveiled.”

“These will help put a floor on growth while making important steps towards adjusting the structure of the economy,” Qu wrote.

The projects will be open for public tender and outside capital will be able to participate through joint ventures, sole ownership and franchising, according to yesterday’s statement.

The next group of industries that will be opened for investment include oil and gas exploitation, public services, water conservancy and airport facilities, according to the statement.

Yesterday’s announcement “reflects the government’s aim to stabilize growth through accelerating reform of the investment and financing mechanism,” Chang Jian, chief China economist at Barclays Plc in Hong Kong, said in a note. “Opening up more attractive investment areas for private capital will help to invigorate the economy and avoid a further build-up of government debt.”