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China tries carrots as local governments resist reforms

BEIJING (Reuters) - China will offer preferential treatment, including subsidies, to regions that outperform in areas such as fixed asset investment growth and entrepreneurship, the State Council said on Thursday.

China will direct more projects and funds to local governments that show clear progress in developing new industries, promoting job growth and with high participation by private investors in joint investment projects, the notice said.

Central government officials have cited weak implementation of reforms and new policies at the local level as a reason for weaker economic performance, including record low private sector investment growth this year.

Factors hindering policy implementation include an ongoing corruption campaign that has made many officials nervous about standing out from the crowd, including by taking the lead on new economic reforms, as well as local protectionism.

The carrots offered to local governments also cover steel and coal capacity reduction targets, controlling financial risks, improvements to the business environment and upgrades to the industrial sector.

Government departments must deliver specific details of rewards and incentives to the State Council, China's Cabinet, by Nov. 30, and the new policy will go into effect in 2017.

(Reporting by Elias Glenn; Editing by Jacqueline Wong)