Reform hopes mount as third plenum nears

By Wang Jiamei Source:Global Times Published: 2013-10-29 21:08:01

Illustration: Chen Xia/GT

Illustration: Chen Xia/GT

The world's gaze will turn on China next month, when the country's top leaders are scheduled to convene from November 9 to 12 for the Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee. Experts and scholars believe that the upcoming session will mark a turning point for China, one that will have lasting ramifications for the country's economy over the coming decade.

With recent history showing that Party leaders usually fill in the details of the country's economic agenda at the third plenums, expectations are running high that November's meeting will produce a roadmap toward reforms leading to a more sustainable growth pattern for the nation's economy.

For example, the third plenum of the 11th CPC Central Committee in 1978 marked the beginning of the era of China's reform and opening-up. Since 1978, third plenary sessions have witnessed major milestones in China's development: including the formal establishment of the socialist market economy, the introduction of sweeping rural reforms, as well as the implementation of major industrial reforms in the country's northeastern region.

After 30 years of explosive growth and development, the world's second largest economy can no longer sustain its old growth model, one which has long been characterized by high investment input, high energy consumption and high levels of pollution. As structural cracks become more pronounced, China is in dire need of reforms which address financial liberalization, urbanization, State-owned enterprises, taxation and income distribution. Early reports have already hinted that the government will emphasize reforms which reduce government interference in the market.

Ahead of the session, Chinese media are now focusing on a reform plan - drafted by the Development Research Center, a think tank under the State Council - which they call the "three-eight-three reform plan." According to reports, at the center of the reforms will be improving the market economy system, transforming the government's function in the enterprise structure. Reforms to be discussed at the upcoming plenum will cover eight core areas, including administration, monopoly industries, land, financial and tax systems, management of State assets, innovation and opening-up policies. The roadmap plan also calls for the promotion of market competition by further relaxing controls over industry access to outside investment, the deepening of social welfare reform by setting up a "basic social security package for all citizens," and the furthering of land reform by allowing collectively owned rural land to enter the market.

Nonetheless, it should be noted that China's new leadership is unlikely to juice the economy with short-term "shock therapy" measures. The central government clearly sees the need to adjust, but dramatic solutions which may come at the expense of stability don't seem to be on the menu. In an article published by the Financial Times in September, Premier Li Keqiang wrote: "we must take a holistic approach in pursuing steady growth, structural readjustment and further reform." At a State Council meeting held in July, Li noted that GDP growth for the year could be around 7.5 percent, with a bottom line of 7 percent. These and other official remarks point to a gradual reform approach intended to break down resistance from vested interests and avoid drastic market fluctuations.

Although it's too early to speculate on policy specifics which may come out of discussions at the plenum, recent moves involving foreign access to the domestic market at least offer clues as to possible topics. The establishment of the China (Shanghai) Pilot Free Trade Zone (FTZ) underscores the central government's determination to spearhead reforms in this direction. The FTZ has been viewed as an important step forward in implementing opening-up policies, which will help China keep pace in global trends in trade, investment and financial services. It would not be surprising if reforms which complement this stance come out of next month's session.

China's transformation since the start of the reform and opening-up era has played out against equally monumental changes overseas. The country's progress up the industrial value chain is the result of a gradual process which has seen China's demographic dividend, once its main competitive feature, replaced by a quality dividend. To keep the momentum going, new policies are needed to elevate the country's status in the global arena. Lowering trade barriers, easing capital controls and upgrading domestic industries will all ultimately help China become more competitive in the international market over the next decade.

The author is a reporter with the Global Times.

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