Real economy needs more private investment

Gu Shengzu, vice chairman of the Financial and Economic Affairs Committee of the 12th National People's Congress (NPC), during an interview with China.org.cn on March 3, 2017. [Photo/China.org.cn]

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 during an interview 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 percent growth, while the figure in south China's Shenzhen in the same period was a positive 70 percent 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 hand, 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.

"I have been to some cities in this region. Currently, a considerable number of enterprises are troubled by severe outflows of investors and talent. If this problem cannot be solved accordingly, the revitalization of this old industrial region will face a big obstacle," he said.

In regard to the development of the real economy, Gu cited a series of facts and figures. "China's private investment maintained a 20 percent growth rate for a decade until 2014. The figure dropped to 10 percent in 2015 and drastically declined to only 3 percent 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 percent, 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.

Gu admitted that the real economy is challenged by the problem of capital shortage in terms of financing. "Currently, return on investment is only about 3-5 percent in the real economy, while interest costs are several times higher than the figure on investment," he said.

"So, such a circumstance can easily make enterprises unprofitable and therefore simply give up," Gu said.