China to open new areas to private investors, says Xinhua

BEIJING (AFP) - China will launch 80 new pilot projects allowing private investment in areas previously dominated by state-run firms, official media reported on Wednesday.

The report follows an earlier Communist Party pledge to let markets play a greater role in allocating capital, seen as a key step towards rebalancing the world's second-largest economy to ensure sustainable growth.

The pilot projects cover areas including transport infrastructure, oil and gas pipelines, renewable energy and the coal, chemical and petrochemical sectors, Xinhua news agency reported, citing a meeting of the State Council, or cabinet.

"The move aims to accelerate reform of the country's investment," Xinhua cited a council document as saying. "The projects will be open to public bidding, and the government encourages the participation of private capital in the construction and operations of those projects."

The Communist Party last year pledged to allow markets to play a "decisive" role in resource allocation, as the country's growth slows from the double-digit figures seen a few years ago.

State-owned enterprises (SOEs) have for decades dominated strategic sectors such as energy and telecommunications.

But analysts argue that investment flowing from state banks to government-run firms has led to large-scale misallocation of capital in recent years.

GDP grew at its weakest pace for 18 months in the March quarter, data showed this month, testing Beijing's resolve to implement reforms which could be a short-term drag on the economy.

Analysts have warned that reforms to the state sector could meet with a pushback from SOEs and some politicians, amid reports that the families of Chinese leaders have amassed vast wealth from investments in state firms.