China Allows Bigger Private Stakes in Huge State-Driven Projects

For qualified projects, private companies can now hold stakes exceeding 10%. Photographer: Tomohiro Ohsumi/Bloomberg Photo by Tomohiro Ohsumi /Bloomberg

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(Bloomberg) — China will allow private investors to hold stakes of more than 10% in some railway and energy projects that were mostly funded by government money, effectively setting no limit to non-state participation in the ventures. 

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China’s cabinet — the State Council — unveiled a package of 13 measures late Monday to promote private investment, in an effort to revive a sector struggling from sluggish demand at home and rising tensions over foreign trade. 

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The body called for carrying out feasibility studies of private sector participation in railways and energy projects that need national government approval, provided they offer a reasonable return on investment. 

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For the first time, the government made clear that private companies can now hold stakes exceeding 10% in qualified projects in the sectors, which also include nuclear and hydro power generation, cross-region electricity transmission and oil pipelines. 

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“The policy puts forward clear requirements on encouraging and supporting the participation of private capital in key areas and projects,” Guan Peng, an official with the National Development and Reform Commission, said at a briefing on Tuesday about the package. “It sends a signal of promoting the development of private investment.”

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Under the document, private capital is encouraged to help build and operate new local urban infrastructure projects that are relatively small in scale and have the potential to become profitable.

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The package marks one of the most concrete steps yet taken by Beijing to support private businesses that, until now, faced stricter limits for investing than state-owned firms. It follows a years-long pullback in spending by international companies, with inbound new foreign direct investment down more than 10% in the first nine months of the year.

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Previously, private participation was “relatively low” in industries such as those mentioned in the new measures, the Economic Information Daily reported Tuesday, citing Wu Youhong, a researcher with the NDRC, the country’s top economic-planning agency. It was only in August 2024 that the government for the first time allowed private firms to raise their stakes in five nuclear power projects to 10% from 2%, according to Wu.

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Xu Xin, an official with the National Energy Administration, said at the briefing that the ratio has climbed to as high as 20% in new nuclear power projects approved this year and reached more than 10% in some oil pipelines and natural gas storage programs.

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Private companies have been more reluctant to commit money as their earnings outlook dimmed during the longest deflationary streak in decades and as foreign governments erected barriers against Chinese goods. 

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Weakness in the non-state sector has profound implications for the economy, considering it contributes to more than 50% of tax income, 60% of national gross domestic product and 80% of urban employment.