October 18, 2016 / 6:20 AM / a year ago

UPDATE 1-China state firms launch $1.8 bln fund to invest in poor regions

(Adds State Council policy document)

SHANGHAI, Oct 18 (Reuters) - A group of 51 enterprises run by China’s central government has launched a fund to invest in the country’s poorest regions, as part of a state plan to use market forces in the fight against poverty.

The fund starts at 12.2 billion yuan ($1.83 billion) but firms including the Three Gorges Project Corporation, the State Grid Corporation and the State Development and Investment Corporation will gradually increase it to 100 billion yuan, the State-Owned Assets Supervision and Administration Commission (SASAC) said on Monday on its website (www.sasac.gov.cn).

According to the official Xinhua news agency, 70 million people still live on less than 2,300 yuan per year, which is China’s official poverty line. China has said it aims to reduce that number by at least 10 million annually, starting this year.

Xinhua said the fund will invest in resources, construct industrial parks and promote urbanisation in China’s poorest regions.

It said priority regions included ethnic minority and border areas as well as old “revolutionary bases” of the Chinese Communist Party.

In a separate document published on Tuesday, China’s cabinet said it would launch a pilot programme at the end of the year to develop hydropower and mineral resources in some of the most poverty-stricken regions.

It said the programme would allocate stakes in hydropower and mine projects to rural collectives to give impoverished communities a bigger share of the profits.

China is in the middle of a sweeping reform programme designed to rejuvenate its lumbering state sector and create industrial champions competing internationally.

But the government and the Communist Party have delivered mixed messages to giant state firms, saying they should be more responsive to the market while fulfilling their social and political responsibilities.

At a meeting this month, President Xi Jinping told heads of state-owned firms that the party would continue to play a leadership role in reforming the state sector.

He described state-owned enterprises as “the most dependable support for the party and the state” and an important force behind party efforts to “win many more historical victories”, according to an account of the meeting SASAC published.

$1 = 6.7350 yuan Reporting by David Stanway; Editing by Richard Borsuk

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