September 1, 2015 / 11:38 AM / 2 years ago

China cabinet to relax requirements for fixed-asset investment

BEIJING (Reuters) - China’s cabinet will relax requirements for fixed-asset investments, including lowering minimum capital requirements, a statement published on its website said on Tuesday, as the economy showed further signs of weakness.

China would also establish a 60-billion-yuan ($9.4-billion) national small- and medium-enterprise development fund, it said.

The move comes as China’s economy sputters after decades of double-digit growth and stock markets remain volatile after routs this summer.

Also on Tuesday, weak August factory data added to investors’ fears that the world’s second-largest economy may be lurching towards a hard landing.

China will cut minimum capital ratio requirements for airports, ports, and coastal and water transport from to 25 percent from 30 percent, the cabinet said. Requirements for railways, highways and urban rail will drop to 20 percent from 25 percent. Corn deep processing requirements will fall to 20 percent from 30 percent.

Industries with excess capacity, such as steel, cement, electrolytic aluminum and coke, will continue to stick to existing requirements of 30 percent to 40 percent, it said.

Despite Beijing’s efforts to encourage a shift towards a consumption-driven economy, the country still depends on investment to spur growth, and this has been faltering.

An official at China’s top economic planner on Tuesday conceded that financing for some deals had not materialized and that the government was trying to tackle the problems, when asked if an anti-graft campaign had slowed some investment projects.

The new SME fund could help counter reluctance from China’s commercial banks to lend to those companies, whose financing difficulties directly affect employment.

($1=6.36 yuan)

Reporting by Nicholas Heath, Paul Carsten and Koh Gui Qing; Editing by Nick Macfie and Clarence Fernandez

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