China playing it safe with capital, researchers say, as SOEs get hefty payout
Researchers with Rhodium Group say capital in China is being diverted from more dynamic firms into legacy industries and state sectors
Too much new capital in China is being allocated to companies regarded as “safe” rather than those which could drive growth through innovation – a stated goal of Beijing’s industrial policy – research outfit Rhodium Group said on Wednesday.
“Beijing needs banks to lend to sectors and firms that can more efficiently fuel innovation and economic growth than the industries that were prioritised in the past,” read a report by the Washington-based firm.
“But decades of misallocation – with credit flowing mostly to legacy industries and state-owned enterprises (SOEs) – make changing patterns of lending difficult, particularly in a context of slower economic growth.”
Limited direct grants and bank credit is concentrated while private and venture capital is growing risk-averse, according to the report.
