BEIJING, (Reuters) – China’s leaders pledged to let markets play a “decisive” role in the eco-nomy as they unveiled a reform agenda for the next decade yesterday, looking to secure new drivers of future growth.
China aims to achieve “decisive results” in its reform push by 2020, with economic changes in focus, the ruling Communist Party said in a communique released by state media at the end of a four-day conclave of its 205-member Central Committee.
The self-imposed deadline for progress – rare for Beijing to lay out in such clear terms – together with the creation of a top-level working group and an emphasis on “top-level design”, suggest a more decisive reform push by the administration of President Xi Jinping and Premier Li Keqiang than under the previous leadership.
They must unleash new sources of growth as the economy, after three decades of breakneck expansion, begins to sputter, burdened by industrial overcapacity, piles of debt and eroding competitiveness.
“You should look back in history. When Deng Xiaoping started the reform and opening movement, he actually did something very similar in nature, creating a very powerful working group,” said Steve Wang, China chief economist with The Reorient Group in Hong Kong.
“These guys report direct into the power centre of the Communist Party. This is definitely not something to be looked at as another layer of bureaucracy, this is something to speed things up, to make things more efficient.”
The leaders also set up a state committee to improve security as Beijing seeks to tackle growing social unrest and unify the powers of a disparate security apparatus in the face of growing challenges at home and abroad.
While the statement was short on details, which prompted disappointment on social media, it is expected to kick off specific measures by state agencies over the coming years to gradually reduce the role of the state in the economy.
Historically, such third plenary sessions of a newly installed Central Committee have acted as a springboard for key economic reforms, and the follow-up to this meeting will serve as a first test of the new leadership’s commitment to reform.
CAUTIOUS ON STATE – OWNED ENTERPRISES
While the party effectively upgraded the importance of markets in its philosophy – previous policy statements often described markets as playing only a “basic” role in allocating resources – it also made clear that it had no plans to radically reduce the role of the state in the economy.
State-owned enterprises, which now control large swathes of the economy, will continue to play a leading role, even while the government creates more room for private enterprise by opening up more industries to private capital, it said.
Among the issues singled out for change, the party said it would work to deepen fiscal and tax reform, establish a unified land market in cities and the countryside, give farmers more property rights, and develop a sustainable social security system – all seen as necessary for putting the world’s second-largest economy on a more stable footing.
Today, expanding the urban population to help transform the economy to one that is led more by consumption is being thwarted in part by a rigid residence registration system. The system ties entitlement to public services, such as pension, healthcare insurance and free public schooling, to home villages and towns.
That makes it hard for the migrant workers that Beijing wants to encourage to move and work in cities to become full-fledged urban dwellers and consumers.
Restrictions on farmers from selling their land also impede this process, leaving many caught between the city and village.
HUNGRY FOR DETAILS
Out of a long list of areas the meeting had been expected to tackle, most analysts singled out a push towards a greater role for markets in the financial sector and reforms to public finances as those most likely to get immediate attention.
As part of that, Beijing is expected to push forward with freeing up the movement of capital in and out of China. The 2020 target date for making significant strides on reform could fuel expectations the government will be looking to achieve breakthroughs in freeing up the closely managed yuan by then.
