Govt extends support for global business growth

Source:Global Times Published: 2014-12-28 18:03:01

Overseas expansion can ease industrial pains, elevate competitiveness

Illustration: Lu Ting/GT

Editor's Note:

China's State Council has decided to increase its financial support for the overseas expansion of local enterprises. The decision came following an executive meeting convened by Chinese Premier Li Keqiang Wednesday. The Global Times interviewed three experts to get their views on this topic.

Chen Ruiming, senior strategist at Haitong Securities Co Ltd

It is inevitable that the Chinese government will accelerate the promotion of its "going global" strategy. Doing so will help stabilize economic growth and promote structural readjustment through the export of excess capacity. This strategy is reflected in other recent actions by the central government, including spearheading the creation of the BRICS New Development Bank and the Asian Infrastructure Investment Bank, as well as the development of the One Belt and One Road initiative (a trade development and infrastructure investment campaign inspired by the historic Silk Road).

The recent meeting held by Premier Li illustrates the government's commitment to raising the international competitiveness of Chinese products. Measures formulated at the meeting will see the government adopt more relaxed financial policies to promote the export of Chinese equipment, especially heavy equipment used in infrastructure construction.

The government will also lift geographic restrictions on the issuance of yuan-denominated bonds by domestic enterprises and commercial banks. That means issuances will no longer be confined to leading financial hubs like Singapore and London. Investors outside of these key centers will now have more opportunities and incentives to hold renminbi-denominated assets. This will widen the scope of cross-border yuan use and ultimately further the internationalization of the Chinese currency.

It was also put forward at the meeting that Chinese policy banks should play a bigger role in providing long-term foreign exchange funds to businesses looking to expand globally. Commercial lenders will contribute as well, but policy banks will play a leading hand as they are generally less concerned with maximizing profitability. These institutions also have greater access to capital through transfers from the State and the offering of low-yield bonds.

Zhang Jianwei, deputy chairman of the Shanghai International Chamber of Commerce

China's "going global" strategy can help the country deepen economic ties with its neighbors. Of course, Chinese enterprises are in urgent need of financial support to help them expand in overseas markets. At the same time, China needs to export its excess capacity by helping enterprises go global. It has been proven that overseas expansion is an effective way for a country to accelerate the upgrading of domestic industries. The US did so in the 1950s and Japan followed suit in the 1960s and 1970s.

Large- and medium-sized State-owned enterprises have been the first beneficiaries of specific going-global support measures, particularly enterprises in the infrastructure construction and heavy equipment industries.

The Chinese government has more than enough funds to support its latest measures, since China continues to post relatively steady GDP growth.

Zhao Xijun, deputy dean of the School of Finance at Renmin University of China

The One Belt and One Road initiative is a long-term macroscopic program of strategic development for the entire State. Recent policies to promote Chinese enterprises going global are a part of promoting the One Belt, One Road program. Of course, measures to strengthen global competitiveness of Chinese enterprises have a broader significance. Simplifying examination and approval procedures, broadening financing channels and improving cross-border yuan settlement will help all local businesses extend their reach. Indeed, all Chinese enterprises can now benefit from going global, regardless of their size or scale.

The government has pledged its commitment to innovating export credit insurance products and vigorously developing the insurance of overseas investments. This marks a break from previous policies, which focused on export rebates and subsidies. The new measures are more market-based and conform more with international norms.

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