China cabinet seeks ambitious economic reform agenda - advisers
Baku, October 22 (AZERTAC). 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 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 finalised 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 Nov. 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.
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 liberalise 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.
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.
China's annual economic growth slowed to 7.4 percent in the third quarter from 7.6 percent in the second - the seventh consecutive quarter of slower expansion, but government officials have flagged signs of a modest rebound in September.
Industrial production, retail sales and investment data were all slightly ahead of forecasts in September and quarter-on-quarter GDP growth was strong, suggesting the worst may be over and the world's No.2 economy will pick up in the final quarter.
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