Wednesday, May 23, 2012

China to Boost Private Energy Investment to Bolster Economy

China to boost private energy investment to bolster economy

11:27pm EDT
By Pete Sweeney and Langi Chiang

SHANGHAI/BEIJING (Reuters) - China signaled on Wednesday it wanted to ramp up private investment in its energy sector, in line with recently unveiled government plans to fast-track infrastructure investment to help combat the nation's slowing economy.

Beijing is drafting detailed guidelines to encourage private investment across industries, with special focus on the heavily state-controlled electricity, oil and natural gas sectors, according to an article by the official Xinhua news agency.

Government agencies are expediting the drafting of new rules for private investment and are expected to unveil them by June, added Xinhua. It did not say whether foreign investors would be allowed to participate in any of the sectors mentioned.

Separately, China's economic planner announced about 100 new projects, mostly in the energy sector, on Monday alone, a number roughly equal to the total approvals announced in the first 20 days of May, the 21st Century Business Herald said on Wednesday.

"The NDRC has started to accelerate its new project approvals in March and April, compared with the pace in the first two months," Liu Yuhui, of the Chinese Academy of Social Sciences, a government think-tank, told the Herald.

On Tuesday, the state-backed China Securities Journal said China would fast-track approvals for infrastructure investment, after data last month showed the pace of investment in the likes of roads, bridges and property was at its weakest in nearly a decade.

Last weekend, the Ministry of Railways, which has been struggling against mounting debts and a corruption scandal, announced it would allow private capital to flow into rail projects.

The new openness to private capital in industries previously reserved for the state was announced by top Chinese leaders at the annual parliamentary meeting in March.

Private investors have funded Chinese power generation capacity but have been locked out of the grid where under-investment prevents power from being used efficiently. When the natural gas sector was being developed a decade ago, private producers flourished but were later forced to sell to the state.


China's economy stuttered unexpectedly in April, fuelling expectations of more stimulus to boost growth, although a package as big as the massive 4 trillion yuan ($630 billion)spending plan one rolled out in 2008-2009 appears unlikely.

On Wednesday, the World Bank cut its economic growth forecast for China this year to 8.2 percent from 8.4 percent and urged Beijing to rely on easier fiscal policy rather than state investment to lift activity.

Premier Wen Jiabao signaled Beijing's willingness to take action in remarks at the weekend, saying more priority would be given to maintaining growth.

The 21st Century Business Herald said the recent flurry of new investment approvals had not translated yet into additional demand for loans from commercial banks.

It cited people close to state banks as saying the country's top four lenders only extended new loans of 34 billion yuan in the first 20 days of this month, partly because they lost 270 billion yuan in deposits during the same period.

The top four banks are Industrial and Commercial Bank of China (601398.SS: Quote, Profile, Research, Stock Buzz), Agricultural Bank of China (601288.SS: Quote, Profile, Research, Stock Buzz), China Construction Bank (601939.SS: Quote, Profile, Research, Stock Buzz) and Bank of China (601988.SS: Quote, Profile, Research, Stock Buzz). A loss in deposits will hurt their ability to lend, as they all have to meet regulatory requirements on loan-to-deposit ratio.

"The latest internal guideline from the central bank is that overall credit quota will not be relaxed, but commercial banks can apply to frontload their loans if needed," the newspaper said, citing a senior executive at an unnamed bank.

Chinese banks made 681.8 billion yuan new loans in April, missing market forecasts of 800 billion yuan.

($1 = 6.3231 Chinese yuan)

(Additional reporting by Don Durfee in Beijing; Editing by Edmund Klamann and Mark Bendeich)

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