China:Privatization Progress Despite Pro-Monopoly Regulators

http://www.reuters.com/article/2012/05/25/us-china-economy-investment-idUSBRE84O08N20120525

Libs played and continue to play lead roles in the progress towards choice in China. Now offical policy, China continues to privatize both in state industries and allowing voluntary options  in many areas –but some coerced state monopolies, regulators aren’t going down without a fight using clever tricks to circumvent the policies, says article.

China’s basic privatization policy was published in 2010, the so-called New 36-Clauses. Inertia and a lack of detailed guidelines saw the initiative stall, following the pattern of failure seen since 2005 – when the 36 Clauses were first issued.

Resistance from government-backed giants is no small thing. Big state banks, which dominate the sector, profit massively from the guaranteed spread between lending and deposit rates, while state-owned enterprises get spared competition for the best contracts.

Reflecting the scale of earnings at the big banks, the first quarter profits at Industrial and Commercial Bank of China (1398.HK) (601398.SS), the world’s biggest bank by market value, was larger than the combined profits at JP Morgan (JPM.N), Citigroup (C.N) and Well Fargo (WFC.N).

ONLY NATURAL

“It’s entirely natural to protect your market from competition,” said Stephen Green, chief China economist at Standard Chartered Bank in Hong Kong.

“It’s great for Beijing to say these things, but it needs to be a strongly supported policy for it to have real effect.”

On Wednesday, the World Bank cut its economic growth forecast for China this year to 8.2 percent – the slowest pace since 1999 – from 8.4 percent and urged Beijing to loosen fiscal policy rather than use state investment to lift activity.

Cutting red tape and creating a fair business environment for private investors to take on state firms by improving access to bank loans, land and other resources are vital, analysts say.

Despite the barriers to the biggest contracts and the best funding costs, China has a vibrant private sector.

Unleashed by historic reforms launched by former leader Deng Xiaoping in 1978 and underpinned by China’s WTO entry, the private sector has been the most powerful driver of the country’s economic ascent in the past three decades.

But private businesses are still subject to political and social discrimination in China and the government controls strategic industries through state-owned giants…

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One comment

  1. This one’s on the House: Pa. legislators to mull booze bill again next week…

    HARRISBURG — With the clock ticking down toward the legislature’s budget deadline and summer break, the top House Republican behind the push to privatize Pennsylvania’s liquor stores vowed that debate on the measure would resume next week.Majority Le…

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