China in Dire Need of Private Investment

Gu Shengzu, vice chairman of the financial and economic affairs committee of the 12th National People’s Congress, elaborates his views on China’s economic development, saying that private investment is needed to boost the real and regional economies.

Gu made the remarks in a talk with china.org.cn on the sideline of the ongoing annual NPC session in Beijing. He used the word “differentiation” to describe last year’s regional economic development in China. “There’s a very important variable in China’s economic growth, namely private investment–which fell fastest in 2016, while behind the fall was differentiation,” he said.

Gu cited two examples to illustrate his point of view. “Private investment in northeast China’s Liaoning Province in the first half of last year stood at a negative 60% growth, while the figure in south China’s Shenzhen in the same period was a positive 70% growth. So, we can see an obvious differentiation in these two places,” he said.

He stressed that the country’s real estate market is particularly in a state of differentiation. “On the one hand, housing prices are skyrocketing in first-tier cities. On the other, the real estate market is faced with an overcapacity in second- and third-tier cities. This is a differentiation, too,” he explained, adding that the rules and regulations for the property market should vary from city to city, and different measures should be taken in different cities.

Speaking of the revitalization of the old industrial region in Northeast China, Gu said that it is very important to create a good environment in order to attract more investors and talent.

With regard to the development of the real economy, Gu cited a series of facts and figures. “China’s private investment maintained a 20% growth rate for a decade until 2014. The figure dropped to 10% in 2015 and drastically declined to only 3% in 2016,” he said.

Gu recognized that the amount of private investment actually reflects China’s real economy, which is faced with serious difficulties. “A large amount of private capital is flowing out of China. Our direct investment in foreign countries has increased by 40-50%, showing that private capital is flowing abroad rather than domestically. It is a good thing for private capital to go abroad, but an overly-fast growth can have an impact on our real economy,” he said.