China’s Leaders Promise “Decisive Role” For Markets
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China’s Communist Party ended its Third Plenum on Tuesday by promising a “decisive role” for markets in the economy, as they push for reforms to deliver results by 2020.
In a communiqué released by state news agency Xinhua, the Chinese leaders pledged to promote market forces for allocating resources; though state-owned companies would still remain the “leading” factor in the economy.
China’s Communist Party ended its Third Plenum on Tuesday by promising a “decisive role” for markets in the economy, as they push for reforms to deliver results by 2020.
In a communiqué released by state news agency Xinhua, the Chinese leaders pledged to promote market forces for allocating resources; though state-owned companies would still remain the “leading” factor in the economy.
“The core issue is to straighten out the relationship between government and the market, allowing the market to play a decisive role in allocating resources and improving the government’s role,” the party said. In past statements, market forces were defined to only have a “basic” role.
The party also pledged to improve the protection of property rights, ensure that state-owned enterprises follow modern corporate practices, and promote the development of the private sector. Additionally, it would also introduce reforms to make markets more transparent and remove barriers to trade; however no specifics were given.
President Xi Jinping is expected to lead a central team to design and supervise the implementation of the reform plans.
The announcement was met with mixed reactions by observers.
World Bank President Jim Yong Kim claimed that the key message behind the Chinese Communist Party’s communiqué was “extremely positive”; and lauded President Xi for implementing more reforms even though growth would inevitably slow down.
“The language coming out of the party congress is extremely positive,” Kim told a briefing at the World Bank headquarters.
[quote]”They’re saying that they’re going to reply much more heavily on the private sector and that the distribution of resources is going to be determined much more by market forces…. We expect them to perhaps grow at a slower rate, but the quality of growth we think will be better,” he added.[/quote]Related: China Needs 7.2 Percent GDP Growth To Sustain Job Market: Premier
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But U.S. Treasury Secretary Jack Lew bemoaned the lack of details and said he hoped to gather more information about specific policies in discussions with China.
“Frankly, there are a lot of questions still to be answered,” he said during a visit to Singapore, as cited by Reuters. “The communiqué coming out of the plenum was at a very general level.”
Wang Qinwei, China economist at Capital Economics in London, suggested that the communiqué’s vagueness may be due to some residual disagreements among interest groups.
“It’s (The communiqué is) more conservative than market expectations,” Wang told AFP. “It’s very broad on the market role.”
[quote]”It mentioned some reforms, for example, fiscal reform, urban-rural land use, but the tone is very broad, giving people the feeling that concrete agreement may not have been reached,” he said.[/quote]The Third Plenum comes a year after China embarked on a once-a-decade leadership change, with Xi taking over as party chief in November and then state president in March this year. In the past, China has used the event to signal major changes in policy, most notably in 1978 when it embarked on the landmark transformation from a Communist-style command economy into a key driver of global growth, trade and investment.
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According to the Wall Street Journal, the final conclusions from the meetings comes after months of work by ministries, think tanks and academics to put together a plan to remake the Chinese economy under the direction of President Xi.
[quote]“The new leaders appear very determined to move forward but actually implementing changes will be much more difficult,” told Gary Liu of the China Europe International Business School to the Financial Times. “Our system is very complex,” he added.[/quote]
