China outlines reforms at the Plenum
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Barun Mitra
Nov 20, 2013, 12:37:41 AM11/20/13
to Citizens-Initiative
The Third Plenum of China's 18th Central committee proposed expansion
of property rights in rural areas, fair and transparent market
regulation, and prices set by the market. At the same time, China's
new leaders are tightening political control. This was the model
pioneered by Deng Xiaoping, and the new party chief Xi Jinping seems
to want to travel on that same path.
In Deng Xiaoping's footsteps
Wall Street Journal - editorial
Nov 18, 2013
On Monday we wrote that China's new one-child and prison reform
proposals were much less than met the headline. That doesn't seem to
be true of Friday's impressive 60-point reform document, which
promises a "decisive role" for the market. On Monday Hong Kong's Hang
Seng Index was up 2.7% and the Shanghai Composite Index rose 2.9% on
the news.
The reform outline from the 18th Central Committee's Third Plenum
includes expanded property rights, fair and transparent market
regulation, and prices set by the market. At the same time, China's
new leaders are tightening political repression. This is the model
pioneered by Deng Xiaoping, and new party chief Xi Jinping is showing
that he intends to follow in Deng's footsteps.
The most impressive promises concern the capital markets. The push to
make the yuan convertible combined with the relaxation of controls on
interest rates mean that financial institutions, including the
state-owned banks, will be forced to compete for deposits and lend on
the basis of risk-adjusted returns. That should drive credit toward
the most productive enterprises and over time reduce the Communist
Party's control over the business elite.
The prospect of companies being allowed to list their shares freely is
revolutionary. China's stock markets have largely been a tool for
state-owned enterprises to raise cheap capital. Soon they will have to
compete for investors' favor against entrepreneurs who are currently
forced to look abroad to list their shares.
In other ways, however, the plenum decision let state-owned
enterprises off lightly. They will be asked to pay more of their
profits to the state over the next seven years, and they will face
greater supervision. But the reform document retained some of the old
boilerplate about upholding the dominant role of public ownership.
Reformers within the Party had to give ground and be content with
allowing market forces to discipline state companies rather than
eliminating their favored treatment. This will mean slower overall
growth.
The plenum also promised to give rural residents property rights over
their land and relax the household registration system. But it is
silent on how this can be accomplished. Rural officials depend on
revenue from selling land they seize from farmers, and city officials
don't want to pay for health, education and other benefits for migrant
workers. China's leaders may have calculated that now is not the time
to confront these vested interests. But the result may be a chaotic
implementation of the promise if the changes are implemented at all.
Perhaps the most significant result is that Xi Jinping consolidated
power and has emerged stronger than any leader since Deng. Mr. Xi
created a new "leading small group" to push reform under his
direction, bypassing other Party groups. This could enable faster
change, but it also risks the creation of a new cult of personality.
Wu Jinglian, the country's leading free-market economist and a drafter
of past reforms, told Caixin magazine that this plenum is most
significant for its endorsement of the idea that market forces
allocate resources more efficiently than government. This in turn
justifies the need to construct open, competitive and orderly markets.
That seems right and could make this plenum another watershed moment
in China's emergence from its Maoist lost decades.
Chinese reformers are less likely to discuss the next logical step—the
idea that government's role should be limited by law. If Mr. Xi and
his colleagues are determined to follow Deng's example and forestall
political reform, the next few years will test the proposition that
economic freedom can expand without a political opening.
http://online.wsj.com/news/articles/SB10001424052702303985504579205461454963626
of property rights in rural areas, fair and transparent market
regulation, and prices set by the market. At the same time, China's
new leaders are tightening political control. This was the model
pioneered by Deng Xiaoping, and the new party chief Xi Jinping seems
to want to travel on that same path.
In Deng Xiaoping's footsteps
Wall Street Journal - editorial
Nov 18, 2013
On Monday we wrote that China's new one-child and prison reform
proposals were much less than met the headline. That doesn't seem to
be true of Friday's impressive 60-point reform document, which
promises a "decisive role" for the market. On Monday Hong Kong's Hang
Seng Index was up 2.7% and the Shanghai Composite Index rose 2.9% on
the news.
The reform outline from the 18th Central Committee's Third Plenum
includes expanded property rights, fair and transparent market
regulation, and prices set by the market. At the same time, China's
new leaders are tightening political repression. This is the model
pioneered by Deng Xiaoping, and new party chief Xi Jinping is showing
that he intends to follow in Deng's footsteps.
The most impressive promises concern the capital markets. The push to
make the yuan convertible combined with the relaxation of controls on
interest rates mean that financial institutions, including the
state-owned banks, will be forced to compete for deposits and lend on
the basis of risk-adjusted returns. That should drive credit toward
the most productive enterprises and over time reduce the Communist
Party's control over the business elite.
The prospect of companies being allowed to list their shares freely is
revolutionary. China's stock markets have largely been a tool for
state-owned enterprises to raise cheap capital. Soon they will have to
compete for investors' favor against entrepreneurs who are currently
forced to look abroad to list their shares.
In other ways, however, the plenum decision let state-owned
enterprises off lightly. They will be asked to pay more of their
profits to the state over the next seven years, and they will face
greater supervision. But the reform document retained some of the old
boilerplate about upholding the dominant role of public ownership.
Reformers within the Party had to give ground and be content with
allowing market forces to discipline state companies rather than
eliminating their favored treatment. This will mean slower overall
growth.
The plenum also promised to give rural residents property rights over
their land and relax the household registration system. But it is
silent on how this can be accomplished. Rural officials depend on
revenue from selling land they seize from farmers, and city officials
don't want to pay for health, education and other benefits for migrant
workers. China's leaders may have calculated that now is not the time
to confront these vested interests. But the result may be a chaotic
implementation of the promise if the changes are implemented at all.
Perhaps the most significant result is that Xi Jinping consolidated
power and has emerged stronger than any leader since Deng. Mr. Xi
created a new "leading small group" to push reform under his
direction, bypassing other Party groups. This could enable faster
change, but it also risks the creation of a new cult of personality.
Wu Jinglian, the country's leading free-market economist and a drafter
of past reforms, told Caixin magazine that this plenum is most
significant for its endorsement of the idea that market forces
allocate resources more efficiently than government. This in turn
justifies the need to construct open, competitive and orderly markets.
That seems right and could make this plenum another watershed moment
in China's emergence from its Maoist lost decades.
Chinese reformers are less likely to discuss the next logical step—the
idea that government's role should be limited by law. If Mr. Xi and
his colleagues are determined to follow Deng's example and forestall
political reform, the next few years will test the proposition that
economic freedom can expand without a political opening.
http://online.wsj.com/news/articles/SB10001424052702303985504579205461454963626
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