Leaders of the Communist Party of China (CPC) on Tuesday concluded a key meeting on economic reforms with an agreement to give the market a more prominent role in driving growth in the world’s second-largest economy.
A communiqué issued after the four-day, behind-closed-doors meeting said the market would be given “a decisive role in allocating resources.” This will reflect, analysts said, a more prominent role for the market, which was officially designated as playing only “a basic role” when the country launched economic reforms in 1992.
While no specific details have, as yet, been outlined regarding areas where further market reforms will be implemented, policy measures are expected to be announced in coming weeks.
The communiqué called for “decisive results” in “key sectors,” to ensure that a “procedure-based and effective framework” for growth was in place by 2020. To this end, the document said the CPC would set up “a central leading team for comprehensively deepening reform,” which would be placed in charge of “coordinating reform” and “supervising the implementation of reform plans.”
Slowing economy
At the four-day meeting, which took place amid tight security in a military-run hotel in west Beijing, the 376 members of the CPC’s Central Committee approved a blueprint for reforms to lay the foundation for growth in the next decade, even as the government grapples with a slowing economy and the challenge to transform the three decades-old, State investment-driven, growth model.
The weekend meeting was the third sitting, or plenum, of the new Central Committee which took over in November of last year, following a once-in-ten-year leadership change. Historically, third plenary meetings have been used to introduce economic reforms, most famously in 1978 when the plenum under the then leader Deng Xiaoping gave the push for China to launch market reforms and close the chapter on Maoism.
China’s new leaders had, in recent weeks, raised expectations for bold moves by drawing parallels with the 1978 meeting, and declaring that the session would herald “unprecedented” reforms.
Property rights
Two areas where there had been particular attention were reforming property rights in rural areas to give farmers the right to sell their land, and to reform the influential and wealthy State-owned Enterprises (SOEs).
The communiqué said the property rights protection system “will be improved,” and a unified land market for urban and rural areas will be set up, suggesting restrictions on selling farmland may be loosened.
While China’s urban property market has boomed since the 1990s after the government opened up the market, the continuing collective ownership of rural land, which can only be leased by farmers, has been seen as slowing down urbanisation and widening the urban-rural income gap. Local governments, which derive most of their revenues from land sales, have opposed giving titles to farmers.
“Farmers currently cannot trade land in the market, so lots of land is lying idle,” Oliver Meng Rui, Professor of Finance at the China Europe International Business School in Shanghai, told The Hindu .
He said there were “two motivations” behind land reform. “One is to let farmers, once they trade land, to get financial benefits. The other is to increase supply of land and cool down the real estate market.”
On the reform of SOEs, the communiqué only said State-run companies would be made to “adhere to modern corporate practices” — a possible indication, Mr. Rui said, of getting more State-run firms to publicly list on the stock market in the future.
In China, SOEs control monopolies in vital sectors, holding total assets worth $ 7.35 trillion. Reforming SOEs has been seen by many economists here as a key step in the government’s objective of transforming the State investment-driven model and boosting innovation industries.
Murky ties
Officials acknowledge that many State-run enterprises have emerged as hotbeds of corruption, holding murky ties with elite Party families and other interest groups. According to a survey conducted this week by the Party-run Global Times, 30 per cent of respondents viewed “vested interest groups” as posing the biggest obstacle to reforms. Another 45.4 per cent blamed local governments for blocking Central policies.
Beyond economic reforms, the document highlighted the leadership’s focus on maintaining social stability, announcing the setting up of a State Security Committee to “safeguard state security” and “effectively prevent and end social disputes” although it did not detail what specific role the newly set up body would play.
Judicial reforms
The document also acknowledged the need for judicial reforms “to ensure independence and fairness in prosecuting bodies and courts,” amid growing calls to overhaul the Party-controlled courts system to address rising unrest at the grassroots, often triggered by land disputes involving local governments.
