China's leader says must support privatisation -Xinhua

BEIJING, March 4 Mon Mar 4, 2013 12:57pm EST

BEIJING, March 4 (Reuters) - China must make room for private investors in sectors including railway, energy and finance over the next five years, a member of its decision-making Politburo Standing Committee was quoted as saying by Xinhua news agency.

The remarks by Zhang Gaoli, calling for more support to be given to the private sector, tacitly acknowledged Beijing's grip over industry.

"Breakthroughs must be made" to let private capital into industries, Zhang was quoted as saying before China's annual parliament session begins on Tuesday, when private investors are set to lobby for greater access to state-controlled businesses.

Economists warn that China can no longer delay freeing key sectors to let in private investment, especially if it wants its economy to keep growing between 7 to 8 percent in coming years.

The stress placed on state-owned banks that have funded most of China's rapid urbanisation to date has heightened the urgency to let private capital soak up some financing burden.

Despite generating 60 percent of economic growth and creating three out of four jobs, China's private firms are marginalised compared to their state rivals, who enjoy subsidies such as cheap bank loans and land.

Frustrated by their disadvantages, a group of private businessmen are preparing to meet on the sidelines of China's parliament meeting in the next 10 days to push for greater privatisation, a person with knowledge of their plans said.

Zhang's latest remarks would be a welcome but it is far from clear if they signal genuine appetite for change from the government.

Despite repeatedly promising greater privatisation, Beijing has supported the expansion of China's state-controlled sectors in the past decade.

The financial sector, for example, is majority-controlled by Beijing despite a series of high-profile stock market listings by China's largest banks in the mid-2000s.