Further policy boosts coming for private sector
▶ Companies face moment of crisis from financing woes
More favorable policies are expected to be launched to underpin China’s private sector in its time of need, analysts said on Monday.
Over the weekend, the nation’s leadership sent rounds of support messages to the country’s private businesses and entrepreneurs. The private sector is the source of more than 80 percent of urban jobs in China, and it accounts for more than 70 percent of technological innovation, 60 percent of GDP and 50 percent of taxes.
The messages come amid intense discussion on the roles of public and private capital.
Feng Liguo, a research fellow with the research center at China Minsheng Bank, said that China’s private sector is mired in a crisis for many reasons, including turbulence in the stock market. About 2,000 of China’s 3,500-some listed companies are private enterprises.
“Because of losses in the stock market and an alarming ratio of stock rights pledges, many original management teams’ shares have been diluted to State capital, and that’s one facet of the current crisis for private companies,” Feng told the Global Times on Monday
Confidence has been harmed, and the top leaders’ reassurance to private companies is both timely and needed, Feng said.
Ma Jun, a policy adviser to the People’s Bank of China, the central bank, said tax cuts and fee reductions in 2019 are expected to reach the equivalent of, or even surpass, 1 percent of GDP, news site cnstock. com reported on Monday.
Ma also said more steps will be taken to provide meaningful help to private companies financing difficulties. Regulators will move to ban lenders’ discrimination against private companies and roll out special funds to shore up banks’ willingness to lend to them.
Feng urged policymakers to fast-track policies such as elimination of discrimination against private firms, further tax reductions and better protection on property rights to ensure the private sector recovers from its crisis.
Feng said the overall tax burden is too heavy and there should be an annual tax cut of 1 trillion yuan ($144 billion) for several consecutive years to achieve a good result.
Lian Ping, chief economist of the Bank of Communications, said that the private sector’s problems have worsened, in part due to companies’ reckless expansion. Now companies face more than just high operating costs – they also have difficulties in financing.
For so the proble a threat t survival.
“A number of approaches are needed to address these woes, such as creating a benign overall environment for private companies to issue bonds, pooling funds, and speeding up collateral facilitation,” Lian said.
Action on many of these fronts has been reduced as part of China’s deleveraging campaign, so what’s important next is to regulate any overstepping moves while letting compliant businesses take off as soon as possible, Lian said.
“Top officials have sent strong and clear mess sages to the market, but it is only when ordinary credit officers start extending more loans can private companies’ credit shortages be alleviated,” Feng said.
In signs of a pick-up, the private sector achieved faster growth in fixed-asset investment in the first three quarters. The figure reached 30.16 trillion yuan($4.3 trilgrowth lion), up rate up 0.3 percentage point from 8.7 percent year-on-year, with the the first haalf of 2018, China’s statistical authorities said.
On Friday, Vice Premier Liu He said China’s economy may seem to be in some difficulty from a short-term perspective
“Top officials have sent strong and clear messages to the market.” Feng Liguo,
a research fellow with the research center at China Minsheng Bank
or when viewed through specific cases. However, its development prospects are very bright when being judged from a historical perspective.