NDRC: 4 trillion yuan stimulus not crowding out private investment

An official from the National Development and Reform Commission (NDRC) stated that the four trilllion yuan stimulus package that the government launched November last year will not crowd out private investment, when speaking about the stimulus package's performance Tuesday.

The central government announced the stimulus package last November to bolster the country's economy amid the global economic downturn. Some critics doubted the package, as it may affect private investment since the investment space and funding sources of private investment will be limited.

Official from the NDRC responded Tuesday that if the package is carried out effectively, the package will not affect private investment.

He explained that due to shrinking domestic demand, and low enterprise and investor confidence from the latter part of last year, the government launched this timely, direct and effective measure to deal with the economic downturn.

The four trillion yuan was mainly directed to the construction of some infrastructure projects, including railways, roads, airports, water conservancy, and projects for upgrading urban power grids. All of these areas that the package boosted investment are the areas that people urgently need for their daily lives, but the market mechanism is not fully functioning in these areas, he added.

It is proven that the package has helped to maintain economic growth, and optimize the investment structure to lay a good foundation for future development. It is a measure that gives benefits to the people, but does not take benefits from the people, according to the NDRC.

In addition, if carried out effectively, funding sources of private investment will not be crowded out by the central government's investment; in fact, the relatively loose monetary policy will provide a strong guarantee for funding sources of private investment, he explained.

Loans in the first nine months of this year reached 8.67 trillion yuan, up 5.19 trillion yuan year-on-year. The banks gave more support to small and medium-sized enterprises (SMEs) this year. In the first half of 2009, loans that went to these SMEs made up 54.3 percent of total loans to enterprises, up 24.1 percent from the beginning of this year. Due to the sufficient money supply and stable interest rate, the costs for the SMEs to get the loans did not grow dramatically.

"Due to the effectiveness of the four trillion yuan stimulus package, government investment actually led and drove private investment," the official was quoted as saying.

He also explained what the government will do to promote private investment. The government will continue to improve the four trillion yuan plan to increase support to the SMEs, introduce new measures on promoting private investment, enhance the management of the central government's investment and lead private capital to invest in more areas encouraged by the government, like infrastructure construction and ecological environmental construction.

As for the performance of the four trillion yuan stimulus package, he said that it played a significant role in stabilizing economic growth, expanding domestic demand and guiding economic structure adjustment amid the financial crisis.

He added that the four trillion yuan package will begin focusing more attention on agriculture, structure adjustment, independent innovation, energy saving, carbon emission reduction, and ecological construction.

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