Private stimulus
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If recent assurances by the government of boosting private investment are adequately fulfilled, it will amount to yet another stimulus as important as the 4-trillion-yuan one that China initiated in 2008 to fight the global recession.
On Monday, the State Council announced guidelines that relevant government departments and local governments have to follow to speed private investment in a wider range of key industries, such as public utilities and financial services.
Undoubtedly, it highlights growing resolve on the part of the authorities to create a fair and transparent environment for private investment.
Since it has become increasingly evident that the country can no longer rely on the government-led investment boom to sustain economic recovery, policymakers have pinned high hopes on private investment to drive future growth. Private companies have played an important role in creating jobs, boosting domestic consumption and facilitating economic reforms, but their growth potential has yet to be tapped fully.
A surge in private investment is certain to help as State enterprises rein in expansion plans in concert with government exit from stimulus policies.
The latest effort to expand investment opportunities and streamline administrative procedures is surely a shot in the arm for the private sector.
Nevertheless, it is not the enlarged scope of investment but the improved profitability of the private sector that will determine the ultimate effect of such a policy crutch.
A countrywide survey by the National Bureau of Statistics revealed that annual average salaries of workers in the private sector was 18,199 yuan ($2,688) in 2009, merely 55 percent of average salary levels in the non-private sector.
It may be deduced that low profitability is a key factor for such a wide income disparity between the private and non-private sector. As such, it seems unlikely whether the private sector can become a powerful growth engine without narrowing this considerable income gap first.
