Beijing’s planning commission thinks the best way to motivate private investors is to insert itself into the process—very communist and not likely to succeed.
To deal with this matter, the NDRC has updated a 17-point plan to encourage private firms to accelerate their capital spending. Overwhelming as that much detail may sound, most of the points deal with how Beijing’s planners will interact with local governments to determine where private investment money should go. The NDRC plans to identify what it refers to as “key industries” that its planners believe will have “strong development potential.” After inviting input from provincial development and reform commissions, the NDRC will promote investment in these industries with private firms. The planners indicate that most of these opportunities will lie in transportation, water conservancy, clean energy, new infrastructure, advanced manufacturing, and modern agriculture.
To encourage participation, the NDRC will offer participating private businesses resource guarantees against shortfalls in supplies, credit information, and for infrastructure projects, they will streamline the development of real estate investment trusts (REITs). They will also lay the potential projects before relevant departments to shorten waiting times for approvals. For the acquisition of credit, the NDRC intends to present the projects to both state-owned and as joint-stock banks. These financial institutions will then conduct an independent review of the projects, according, the planners say, to “market principles,” though the documents remain vague on exactly what that means.
The plan strangely lacks any room for private firms to let planners know where they think the greatest opportunities lie and, by implication, where the greatest growth and profit opportunities lie. The plans do make provisions to listen to private concerns and promises regular surveys to get feedback from private companies. There is, however, no provision to solicit guidance from the private firms themselves. On the contrary, the plans suggest that private firms consult with local authorities for guidance on management and supervision.
As well thought out as all this may sound, the plans are fundamentally flawed. To deny the businesses involved any role in guidance is to immediately cut off the effort from the most intimate industry insight available. No matter how well the authorities pave the way for the projects that they prefer, they will have denied themselves the best guidance on whether those projects are the most promising. Any success then will depend almost entirely on a lucky coincidence between what the planners like and whether businesses think of those preferences are promising. And luck is a bad way for any economy to proceed.