MNI INTERVIEW: China Seen Easing Regulation For Private Firms

By Iris Ouyang

     BEIJING (MNI) - The Chinese government is likely to scale back regulatory

and environmental restrictions faced by private businesses as the economy slows,

Huang Yiping, a former member of the People's Bank of China's Monetary Policy

Committee, told MNI.

     Non-state-owned companies have borne the brunt of official campaigns

tackling problems ranging from excessive borrowing and shadow banking to air

pollution, said Huang, now a scholar at Peking University and a member of think

tank China Finance 40 Forum (CF40).

     Private businesses have been prime targets for environmental regulations,

including orders that have shut steelmakers and construction operators in winter

months when air pollution spikes. While the policies had good intentions, they

were applied too rigorously and too fast, Huang said.

     "We should not conduct policies so sweepingly as we used to," Huang said in

an interview on the sidelines of a conference in Beijing.

     Huang's comments came as stock market drops have allowed cash-rich

state-owned enterprises (SOEs) to snap up stakes in private companies, prompting

concern among pro-reform officials about the relative difficulty private sector

firms have in accessing capital. This has become more acute over the past two

years as regulations aimed at limiting systemic financial risks have tightened

financing conditions, leading to a rise in bond defaults by private borrowers.

     Huang said SOEs benefitted from public subsidies and easier access to bank

finance due to implicit government guarantees. While these distortions at times

fed faster economic growth, they amplified structural imbalances and the

inefficient use of resources, he said.

     Authorities should help private companies improve risk controls and develop

innovative financing methods, Huang said.

     About 62% of the 259 bond defaults reported this year were by private

sector borrowers, according to MNI's calculations, based on data from Wind

Information on Monday.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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