A man uses an ATM in Huaian, East China's Jiangsu Province in September 2016. Photo: VCG





China is facing a growing capital mismatch, as companies in need of money are struggling to find long-term reliable financing sources while investors don't know where to put their money, experts warned on Wednesday.



Such a mismatch could be tackled by launching policies such as preferential tax rates to stimulate long-term investment, analysts told the Global Times.



The mismatch comes amid falling risk appetite and rising caution as global trade protectionism is on the rise.



Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, said that China's overall money supply is sufficient.



Data from the People's Bank of China, the central bank, showed that China's M2, a broad measure of money supply, reached about 177 trillion yuan ($26.4 trillion) by the end of June, up by 8 percent on a yearly basis.



"But on the other hand, the majority of China's capital is still bogged down in two areas: real estate and heavy industries that are burdened with overcapacity," Dong told the Global Times on Wednesday.



According to Dong, what is lacking in China is legal investment channels with good returns. This means that although Chinese people have money, they don't know how to invest it.



A Shanghai-based resident surnamed Dai, who recently lost a lot of money on a peer-to-peer (P2P) platform that closed, said that she is now confused about how to invest her money.



"The P2P platforms are closing frequently. The stock market does not show any signs of rising. I can't find reliable investment options," she told the Global Times on Wednesday.



Dong also noted that Chinese investors like to engage in short-term investment, but what companies really need is longer-term investment.



According to Dong, one solution would be for the government to use preferential policies to encourage long-term investment such as pension investment.



China has already launched a pilot program offering tax deductions for commercial insurance endowment products. "Such policies should be strengthened," Dong said.



Yu Fenghui, a Beijing-based financial commentator, also noted that in China capital does not tilt toward those that are really in need of money, for example, small and medium-sized enterprises.



"One example is that IPOs help with fund-raising, but you can see that firms that get listed are already strong, well-established companies," Yu told the Global Times Wednesday.



Boosting consumption







Dong said that as the government continues to strengthen restrictions on real estate, the investment sector's contribution to the economy will slide, and exports will also be under pressure amid the ongoing trade dispute between the US and China.



"Boosting domestic consumption is key," Dong said.



"To stimulate domestic demand, the government should launch measures to protect consumers' rights, as well as increasing financial support for low-income groups and encouraging research and development," he noted.



Yu said that the government should not burden the financial market with too much regulation and should increase the risk tolerance level.