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Private sector urged to help economic growth

CHINA must encourage more investment from the private sector to help sustain economic growth after the government took the lead when it unveiled its 4-trillion-yuan (US$585 billion) stimulus package.

The non-government sectors hold the majority of China's capital and it is crucial that they help the country ride out the slump, said Li Yang, director of the Institute of Finance and Banking, the Chinese Academy of Social Sciences.

"But many in the private sector are still holding a wait-and-see attitude, or even reducing spending," Li told a conference conducted by in Shanghai over the weekend.

The government's pump-priming package mainly focuses on infrastructure and social projects.

But Li pointed out that monopolies can be found in many areas and this is preventing the participation of private or foreign capital. He said China should further relax investment control on certain sectors, in which there is a monopoly, in order to attract more spending from non-government sources.

Although the government in late 2007 said it would allow foreigners to invest in the sector of construction and management of the power grid for the first time, no concrete deals have been reported so far.

At the same conference, Zhang Liqun, a researcher at the State Council Development and Research Center, said China's gross domestic product growth may just touch above 6 percent in the first quarter but he was confident it would gradually rise to 8 percent or more this year. The economy in the fourth quarter of last year grew 6.8 percent from a year earlier.

Li said the economy is likely to bottom out again in the first half of next year, or in a "W" shape.

"A real recovery would only come when the oversupply in industrial capacity is slashed and private capital makes a full comeback," Li said, adding investment has to drive China's GDP growth.


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