Chinese gov'ts to focus on real economy

Updated 2016-12-28 09:20:50 Global Times
Profit for China's major companies in 2016

Profit for China's major companies in 2016

Continued restructuring, political reforms needed in 2017 to help businesses: experts

Chinese companies will face a challenging year in 2017, and the central and local governments will have to accelerate economic restructuring and political reforms to help the real economy grow, experts said on Tuesday.

The real economy is surely facing various problems as noted at the recent Central Economic Work Conference, in addition to economic work conferences in some provinces and by some Chinese CEOs, said Feng Liguo, an expert at Beijing-based China Enterprise Confederation (CEC). "It's been an issue hovering around in recent years. The traditional advantages in industry, for example manufacturing, have been fading away but the new growth engines have not emerged," Feng said.

Government agendas

At East China's Jiangsu Province's economic work conference it was agreed that the real economy has been fundamental for local economic growth, and that helping local enterprises will be a focus for the government in 2017, news site people.com.cn reported on Sunday.

More work should be made to improve market confidence, particularly in private investment as well as in local manufacturing, Li Guoying, acting governor of East China's Anhui Province said at a meeting on Sunday, according to the central government's website.

In South China's Guangdong Province - where secondary industry has contributed to nearly half of its GDP growth - revitalizing the real economy is one of its priorities for 2017, financial news site eastmoney.com reported on December 19.

Sluggish global economic recovery along with shrinking demand and higher costs at home have weighed in on the real economy.

Zong Qinghou, the beverage billionaire of Hangzhou Wahaha Group, mentioned on Dialogue, a TV program of China Central Television that aired on Sunday, that many small- and medium-sized enterprises went bankrupt in 2016 as high taxes and other administrative fees became too much of a burden.

Fuyao Glass Industry Group Co Chairman Cao Dewang recently complained about high costs in the Chinese manufacturing sector, allegedly a major reason why his company opened a factory in the U.S.

Issues to address

Problems to be tackled next year include getting financial institutions to play a bigger role in helping companies grow, pushing firms to invest more in research and development and improving the business environment from a government level, experts noted.

Out of the top 500 Chinese enterprises, 261 manufacturing companies, with total net profits of 467.9 billion yuan (.33 billion) in 2016, have posted consecutive decreases in growth since 2011, according to the CEC's annual report.

These firms account for 17 percent of the total net profits of the 500 companies. Meanwhile, the net profits of China's big five banks have continued to grow in the recent years, accounting for 34 percent of the total net profits of the 500.

"Banks earn profits through enlarging the spread between deposit and lending rates, which means companies have had to pay more in interest rates for their bank loans," Feng said.

Redefining the relationship between banks and companies is crucial to saving the real economy, Tian Yun, director of the China Society of Macroeconomics Research Center, told the Global Times on Tuesday. "The essence of financial tools is in allocating resources to push industries forward, not to squeeze out as much profit as possible," he said.

An increasing number of online financial platforms involved in fraud in 2016 shows that some financial tools have been used for chasing profits instead of serving the economy, Tian noted. "The government should take this issue more seriously," he said.

As part of the government-initiated supply-side reform, political reforms in sectors such as public services and State-owned enterprises are expected to make progress in 2017, which is crucial for the development of companies and industries, according to Tian.

"Streamlining governance will help boost the energy of companies, for example some administrative fees will be slashed, and governance will become more 'company-centered'," he added.

In spite of the short-term progress in industrial profits, industries have to continue restructuring in the next year, for example shifting from a labor-intensive model to a technology-driven one, Feng said.

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