China Cuts Red Tape as Premier Li Shows Stimulus Reluctance

Some Chinese investment projects, including those for airports, paper pulp factories and gas fields, will no longer need pre-approval from the nation’s economic planning agency.

In all, 117 “approval items” can go ahead without authorization or be approved by local governments, according to a list published by the State Council on May 15.

Premier Li Keqiang pledged to reduce the government’s role in the world’s second-biggest economy after a new leadership took over in March. In comments published this week, Li signaled authorities are reluctant to use stimulus to counter a slowdown, saying China must rely on market mechanisms to aid growth.

“It shows the government of Li Keqiang is thinking differently from the one of Wen Jiabao about growth,” said BNP Paribas SA economist Ken Peng, who is based in Beijing. “Government-led investment is no longer a focus for China’s overall growth strategy.”

The immediate effects of the regulatory change will be limited, with fixed-asset investment growth probably similar to that of 2012, Peng said. The pace of investment gains unexpectedly decelerated last month, and industrial output trailed estimates.

“The reduced regulatory requirements will certainly make it easier for investors,” Peng said. “But don’t expect this to push up economic growth because it’s money not paperwork that will determine investment deals.”

Unprofitable Airports

Among China’s regional airports, 134 were unprofitable in 2012 with combined losses of 2.9 billion yuan ($472 million), Li Jiaxiang, head of the Civil Aviation Administration of China, was quoted as saying in yesterday’s Global Times newspaper. The number of airports will rise to 260 by 2020 from 183 currently, he said.

Investment in gas and wind power plants can be authorized by provincial-level authorities, along with rare-earth processing and intracity rail projects. China CSR Corp Ltd. and China CNR Corp Ltd., the country’s main suppliers of locomotives and rail cars, are among companies that may gain from a possible boom in light rail construction.

According to the government list, polyester projects with daily output of more than 300 tons and sugar plants with daily processing capacity of more than 1,500 tons no longer need pre-approval from the National Development and Reform Commission.

The changes intend to “seriously reduce administrative intervention in microeconomic activities” to “further unleash benefits from reform” and to “enhance growth momentum,” the government said in a statement.

Li’s predecessor Wen rolled out a stimulus program of 4 trillion yuan ($586 billion at the time) and allowed an unprecedented bank lending spree at the end of 2008 to shield the economy from the global financial crisis, leaving an overhang of debt from the loans.

— With assistance by Xin Zhou

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