China's new push to open state controlled industries may look bold after a decade of stuttering privatization progress, but Beijing faces stiff resistance from vested interests in its effort to extend its World Trade Organisation dividend.
Beijing's leaders, its top think-tanks, the World Bank and private sector economists all largely agree that for China to build on reform-fired growth after its first decade of WTO membership, state firms must be more competitive and capital better allocated.
The question is whether publication this week of detailed plans to allow private investment in highways, health care and railways will really help dilute state involvement in a range of industries where top executives enjoy ministerial level status and firms get preferential access to capital and contracts.
"The issue is not just about writing a document," said Yao Wei, China economist at Societe Generale in Hong Kong. "Is it a level playing ground? You ask private firms for money, but when they go to banks, can they get the same lending terms as state-owned firms? Do they get subsidies like state-owned firms?"
China's basic privatization policy was published in 2010, the so-called New 36-Clauses. Inertia and a lack of detailed guidelines saw the initiative stall, following the pattern of failure seen since 2005 — when the 36 Clauses were first issued.
Resistance from government-backed giants is no small thing. Big state banks, which dominate the sector, profit massively from the guaranteed spread between lending and deposit rates, while state-owned enterprises get spared competition for the best contracts.
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