OPINION> Commentary
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OPINION> Commentary
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Expand investment system to suit changes
By Hu Shaowei (China Daily)
Updated: 2009-01-13 07:35 China has achieved miraculous economic growth in the past three decades since the reform and opening-up, with investment having been one of its main engines. Such investment-driven development strategy has been crucial to a sustained and fast-growing economy. It has become an outstanding "China model" in which the East Asian nation can take pride. Along with its improving investment climate at home and abroad, the country's unceasing reforms and improvements made in the investment system have kept up the pace and momentum of its investment growth. Since the reform and opening-up initiative was embraced in 1978, the developing Asian nation has been trying to bring sweeping reforms to its previous rigid investment system. This has been done in the hope of breaking the highly-centralized management model developed in the era of the planned economy and establishing a market-centric multiform and multi-channel investment structure. In early 1979, a reform package was launched in the field of the country's infrastructure construction to change its main fund channel from the previous fiscal revenues to bank loans. As another measure to coordinate the move, the rationing and bidding system was introduced to the country's investment projects. As a result, non-planned investment began to grow and a new investment management model took shape with mandatory planning and guidance playing their roles side by side. Also, the final decision on the examination and approval of some projects was passed on to local departments from top authorities. Such experimental moves to turn to economic means in investment management did help achieve a satisfactory investment result at that time. In July 1988, the State Council, the Cabinet, outlined a program on the reform of the country's investment management system. The move came along with rising calls for the establishment of an efficient investment financing system suitable to the market economic system, made at the third plenum of the 14th Communist Party of China (CPC) Central Committee in November 1993. These and a series of other measures adopted afterwards gave the market a larger role and stressed decentralization of project approval authority and the accountability mechanism in the process. These, along with a clear definition of investors' investment scope and their financing channels, greatly helped boost non-governmental enthusiasm to invest throughout the country. The State Council passed a formal resolution on the reform of the investment system in July 2004, signaling the initial formation of China's investment system framework adapted to the socialist market economy. The move laid a solid foundation for an improved investment system.
Now the country is actively mapping out policies to deepen reform of its investment system. Its main purpose is to further expand enterprises' power for self-decisions, reduce government intervention and simplify procedures. Also, industrial polices are due to be adjusted and the enterprise access system to be set up. With all these done, it is expected that social investment can be better regulated through economic, legal and other necessary means. Improving systems have created an ideal context for participation of conditional enterprises. The establishment of the system for independent decision-making and the consciousness among investors have contributed a lot to a steady and relatively rapid economy. This has also helped prevent some local governments from following a blind investment strategy and break the government-dominated investment model. However, all the encouraging achievements have not quite overcome the complexity and arduousness in the country's efforts to reform the investment system. The country is yet to adjust its investment system to suit ever-changing conditions. The absence of a scientific decision-making and social participation mechanism, along with excessive administrative intervention, have also given rise to new problems to the country's fixed asset investment, such as to its management system and distribution and returns. To change such situations, efforts should be made to further expand enterprises' self-investment initiatives and simplify project approval procedures. The government should also gradually relax management and control of some investment projects and focus more on post-event supervision. Unofficial investment should be encouraged and allowed access to such projects as infrastructure, public utility and other industries and fields that are not prohibited by law. Also, further action is needed to expand enterprises' financing channels. The aim should be to allow them to raise funds through transfer of stock ownership so that a multilayer fund-raising capital market can be gradually set up. At the same time, unremitting efforts should be made to promote some auxiliary reform measures to give the market a bigger role in the distribution of resources. The government should change its outdated investment ideology and try to transform itself into a services-oriented institution. Also, a scientific project approval accountability system should be set up, in which relevant administrative agencies are committed to justness in their work and held accountable for their decisions. In addition, the country should constantly review and change, if necessary, the list of the confirmed investment projects on a dynamic basis. For sustainable development, the country should strengthen the functions of the land and environment authorities and ensure their 100 percent participation in any major investment project. This is necessary to fend off any problem arising to endanger the country's ecology and environment. The author is a senior economist with the State Information Center (China Daily 01/13/2009 page8) |
