China needs to strengthen its efforts to boost the private sector in order to keep the economy on the right recovery path, a report by the Asian Development Bank said on Thursday.
“A smaller share of government-led investment projects contributing to growth points to some positive changes in the structural reforms,” said Zhuang Jian, a senior economist with the bank.
“But the government needs to boost the private sector to ensure that the economy grows in a healthy way.”
Zhuang's remarks come at a time when China is switching from the old investment- and export-driven model toward one mainly driven by consumption.
The nation's investment rate, or fixed capital formation over GDP, declined starting from 2015, after it was sustained at elevated levels of around 45 percent from 2009 to 2013, data from the National Bureau of Statistics showed.
Investments undertaken by government agencies－in such areas as transportation and public utilities－only take up around one-third of total investment while the rest comes from enterprises, both State-owned and private, according to the Asian Development Outlook 2017 released on Thursday.
Zhuang said he expected the share of the investments undertaken by government agencies to further decline in the future, because of the effects of deregulation and the leveling of the playing field.
In order to see further progress in the rebalancing process, more efforts are needed to improve the environment for non-State investment, he said.
Jurgen Conrad, head of the economics unit at the ADB China Resident Mission, said such efforts included continued financial reforms to attract savings to the most productive projects, encouraging investments in innovation and a movement toward higher technology in the production chain.
The bank's Chief Economist, Yasuyuki Sawada, said that as long as the government keeps up the efforts to implement structural reform, a moderate decline in growth speed, dragged by the government's shift to financial stability, was not at all worrisome.