By placing private funds in its manufacturing sector, which has been traditionally weak at best, China is aiming to capitalize the experience it has gained with its European partners and boost this sector which has been plagued by a host of issues. But by not addressing this root cause, and by funneling private monies into its manufacturing sector, China will have everything to gain and very little to lose. A cunning move indeed.
On Monday, in efforts aimed at boosting and upgrading its manufacturing sector, China has issued guidelines, including fiscal support and “innovative financing”, that are designed to channel private investments in its manufacturing sector.
With this aim the Chinese government aims to support fundraising efforts by private firms through products such as asset-backed securities, tax subsidies and corporate bonds, reads a statement posted on China’s industry ministry’s weibo account.
The statement, joined issues by sixteen major central government entities including China’s Ministry of Finance and People’s Bank of China, states China will establish a national fundraising guarantee fund as well as expand the range of asset collateral that private firms could use for borrowing.
China has struggled to reverse weak private investment in manufacturing – a key sector.
In order to stimulate private participation, including in sectors that have monopolies in industries, it has announced a slew of campaigns.
China sees the public-private partnership (PPP) model as the way out of its manufacturing mess, and it has vehemently promoted this model, especially for infrastructure projects.
In its statement, it said, it has set out 8 major tasks to tackle the weakness in its manufacturing sector and has stressed the importance of private capital shaping the manufacturing sector in order to make it “high end, intelligent, green and more services-oriented”.
While these enticing words, China not only wants to channel private sector funds in its domestic industry and is also eyeing a global market private firms which have specialization in solar energy products and high-speed trains.