This request for reform comes just as a new regime is expected to
take over and may be wishful thinking.
What China needs now is staged privatization of the SOEs over a
likely twenty years combined with urban private ownership on newly
built structures and the underlying land. This can shove vast
amounts of real property into the hands of the nascent middle class.
All this will also create creditable lending to individuals and the
private sector can be expected to shoulder a greater share of the
national economy.
Dealing with the SOEs has been put off for thirty years and many
today are fairly robust and can attract buyers. In fact this plan
calls for the sale of say five percent a year and that of been the
the best run and marketable. That easily puts the balance of SOSs on
notice and focuses their minds on tightening up operations in order
to participate in a future Beauty contest.
China cabinet seeks
ambitious economic reform agenda: advisers
October 21, 2012|Kevin
Yao | Reuters
BEIJING (Reuters) -
China's top leaders have asked policy think-tanks to draw up their
most ambitious economic reform proposals in decades that could curb
the power of state firms and give more freedom to the setting of
interest rates and the yuan currency.
But after almost 10
years of delay to painful structural reforms by the outgoing
leadership, some of the authors of the proposals told Reuters they
fear a nascent rebound in economic growth could derail the
recommended agenda.
"China is
approaching a stage when the government must embrace more fundamental
reforms," said Shi Xiaomin, vice president of the China Society
of Economic Reform, a think-tank under the National Development and
Reform Commission, the top economic planning body.
China's
once-in-a-decade leadership change will be finalized next month at
the ruling Communist Party's 18th congress. Vice President Xi Jinping
is set to take over from Hu Jintao as president and Li Keqiang will
replace Wen Jiabao as premier at the meeting, which opens on November
8.
The congress convenes
as the economy heads for its weakest annual growth rate in at least
13 years after three decades of near 10 percent annual expansion in
the wake of sweeping reforms launched by former leader Deng Xiaoping.
Reuters interviewed
five policy advisers involved in drawing up the reform proposals.
They said the order for the agenda came from members of the State
Council, or cabinet, although they declined to give specifics for
fear of repercussions.
Significantly,
planning sources said cabinet members had signaled an interest in
seeing proposals from policy advisers outside Beijing, in the
provincial hinterland, implying that a nationwide consensus is being
sought on the content and timetable for painful structural reform.
High on the list drawn
up by the advisers is how to contain the government's meddling in
the economy and clip the wings of more than 100,000 state-owned
enterprises (SOEs) which enjoy enormous privileges, including
preferential access to bank lending and government contracts.
Other reforms include
allowing the market to set the cost of bank credit, land and various
natural resources.
Credit is currently
basically allocated by the central government. It tells state-backed
banks how much to lend and when - mainly to other big
state-controlled businesses and projects. Meanwhile all land and
basic resources are owned by the state, with private ownership
limited to temporary leased rights to usage.
Analysts say reform of
these two areas would bring fundamental change to China's economic
structure, even more so than making the yuan currency more
convertible - also on the table as part of a package of proposals to
liberalize capital markets and boost the yuan's use in global trade
settlement.
Reform to China's
complex tax structures, under which the central government commands
the lion's share of receipts while local governments do most of the
spending, is needed if serious progress is to be made cleaning up
local government debt that stood at 10.7 trillion yuan ($1.7
trillion) at the end of 2010.
"I think a
consensus on reforms has been formed at the central level, even
though people may have different considerations on when and how to
implement reforms," said Wang Jun, senior economist at the China
Centre for International Economic Exchanges, a top government
think-tank in Beijing.
UNFINISHED BUSINESS
Experts say Chinese
leaders must unlock fresh growth potential and put the economy on a
more sustainable path to avoid the "middle-income trap",
where wealth creation stagnates as market share is lost to lower cost
competitors and the attainment of high-income country status stays
out of reach.
The World Bank says
China's GDP per capita was $5,500 last year, versus $22,400 in South
Korea, $34,500 in Hong Kong and $46,200 in Singapore, which all
avoided the middle-income trap.
There has been soul
searching among Chinese academics about the 4 trillion yuan ($640
billion) stimulus package unveiled in late 2008, which led to
excessive investment in white elephant projects, created mountains of
local government debt and sent house prices rocketing in big cities.
The stimulus helped
state-owned firms stage a comeback at the cost of private businesses.
SOEs have repeatedly
fought off Beijing's plans to get them to pay higher dividends to
state coffers and have sought to delay reforms on income distribution
systems, which could imply capping hefty wages in monopoly sectors,
government sources say.
The reforms aim to
require SOEs to pay more dividends to the government to meet a
funding shortfall in social welfare.
"We could see
serious problems if we don't reform," said Zuo Xuejin, head of
the Institute of Economics at the Shanghai Academy of Social
Sciences, which advises the local government in China's financial
hub.
Still, some government
advisers fear signs of a recovery in the economy could ease the
pressure to act.
No comments:
Post a Comment