Next phase of upgrade mapped out

'Vitality, resilience and innovation' urged as focus of economic reform

Vice-Premier Liu He said on Friday that China will further promote economic upgrading by vitalizing private enterprises, deepening the reform of State-owned enterprises and enhancing financial markets' ability to serve the real economy.

The world's second-largest economy has maintained steady and improving growth momentum despite head winds, as shown by major indicators such as GDP growth, employment, inflation, international payments, corporate profits and fiscal revenue, Liu, the vice-premier in charge of economic policies, said in a joint interview with several media organizations.

Supply-side structural reform, the key to proceeding with economic restructuring, has borne fruit but "should deepen with a focus on enhancing economic entities' vitality, resilience and innovation, to prompt economic transformation and upgrading as well as a virtuous economic cycle", Liu said.

He particularly called for supporting the development of private enterprises by improving their access to financial services and easing burdens of all kinds, and improving the financial system's ability to serve the real economy, especially through accelerating rule-based reforms of the capital market.

Another key measure highlighted by Liu was to deepen the reform of State-owned enterprises, especially mixed-ownership reform, to improve SOEs' corporate governance structures and internal incentive mechanisms.

Commenting on some State-owned banks and enterprises having provided liquidity support for or merged with private enterprises recently, Liu said it is a good sign of "the mutual dependence and cooperation between SOEs and private enterprises".

"When private enterprises recover, State-owned capital can withdraw, while when SOEs face difficulties, private enterprises can step in to enhance efficiency," Liu said, ruling out the scenario of State-owned capital squeezing out private capital.

Liu stressed China's commitment to developing the private sector of the economy as part of its fundamental economic institutions, as well as the urgency of rectifying some market entities' deeds of avoiding giving financial support to private enterprises.

The vice-premier also commented on the recent slump in China's stock market, saying several factors, including interest rate hikes by major economies' central banks, Sino-US trade friction, domestic economic restructuring and changes in market expectations, have led to the decline.

Despite recent drops, many international investment institutions have reached a consensus that "China's stock market is becoming one with the highest investment value across the world", Liu said, citing the A-share market's low valuation and the improving quality of listed companies.

Liu said that to help the market shake off the recent weakness, a slew of reform measures that were worked out by the country's three top financial regulators were released on Friday.

Among them were market stabilizing measures such as allowing financial management subsidiaries of banks to invest in the capital market, as well as encouraging local government-managed funds and private equity funds to help companies that have promising prospects but are trapped by risks brought about by stock-based collateral.

In typical stock-based collateral situations, stocks are pledged as collateral for loans. The recent broad decline in the stock market has brought the risk of the large-scale sale of the pledged stocks by some listed companies' lenders.

Measures to bolster the capital market released on Friday also covered areas of the reform of fundamental market rules, encouragement of long-term capital, support for the reform of SOEs and the development of private businesses, and market opening-up, Liu said.

Liu Chunsheng, an associate professor at Central University for Finance and Economics, said, "Liu's remarks have helped shore up the market sentiment and stabilize the market's expectations by identifying the key areas of China's economic upgrading and reform in the next phase."

More measures to support private enterprises, among which tax and fee cuts are the most significant, can be expected, the scholar said.

Wang Jun, an economist of the China Center for International Economic Exchanges, told China Business News that the country should further deepen reform to encourage private investment and accelerate economic opening-up to shore up the economy.

Contact the writers at zhoulanxv@chinadaily.com.cn