State, Private Investment To Rise In China, While Foreign Investment Falls

According to Chinese government projections, both state investment and private capital will play increasingly larger roles in the economy in 2001-05.

The forecast was compiled by the Investment Research Institute (IRI) of the State Development Planning Commission in the "Forecast of Investment Scale and Investment Capital Sources" for China's 10th Five-Year Plan (2001-05).

The IRI concluded that during 2001-05, the structure of China's fixed-asset capital investment will continue to change and that state budgetary investment and privately raised capital will increase, while foreign investment and bank loans will decrease.

As evidence of China's reform policies, the country's proportion of budgetary investment has declined substantially since the government adopted its reform and opening policies in the late1970s. By 1996, state budgetary investment accounted for only 2.69% of China's total investment, the report noted.

The government has maintained this state investment around RMB 50 billion to RMB 60 bln (US$6.0 bln to $7.3 bln) in recent years, according to the report.

The IRI predicted that because the government needs to adopt an expansionary fiscal policy to stimulate economic growth and because it faces an arduous task in building the nation's infrastructure, China's annual budgetary investment during the 10th Five-Year Plan period is expected to reach RMB 100 bln (US$12.1 bln).

Bank loans will continue to hold an important position in China's fixed-asset investment, but their relative importance will decrease.

The IRI expects bank loans to increase 13% annually over 2001-05, to reach RMB4.55 trillion (US$549.8 bln), or about 22.5% of China's total capital.

This would be a decrease of 1 percentage point compared to the Eighth Five-Year Plan period (1991-95).

Although China's foreign investment has increased continually for a relatively long time, the important of this source of capital will decrease relative to China's overall investment.

The IRI believes that during 2001-05, China's "actual" or utilized foreign capital will grow 4% annually to total RMB 3.023 trln (US$365.5 bln) over that period.

Of this amount, US$204.7 bln, or RMB1.72 trillion (at current exchange rates), will be actual foreign investment. According to the report, this will account for 8.5% of China's total investment, an amount that will continue to decrease proportionally during the 2001-05 period.

The IRI also concluded that the increase in private capital's share of China's overall investment will depend on investors' ability to accumulate capital, their ability to invest through the capital market and the growth of the capital market itself.

The report predicted that the proportion of China's private capital will increase gradually relative to the country's gross domestic product and will reach 24.8% by 2005.

The total of China's private capital is expected to reach RMB13.46 trillion (US$1.6 trillion) during 2001-05, to account for 66.5% of the nation's overall investment 2 percentage points higher than in 1991-95.

(Source: CIEC)

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