The plenum speech Xi Jinping ought to deliver (but won't)

Ahead of a key Communist Party meeting, our columnist fantasises about the reforms the president should announce to the gathering

PUBLISHED : Wednesday, 30 October, 2013, 2:32am
UPDATED : Wednesday, 30 October, 2013, 2:46am

Ladies, gentlemen, and friends! Comrades!

I want to thank you for all your hard work. Your dedication and perseverance are a tremendous encouragement to the central leadership in our efforts to actualise the Chinese dream of the great rejuvenation of the Chinese nation: to make the country's economy strong, the nation prosperous, and the people happy.

Comrades! The Chinese economy is like a tree. Three decades ago, the central leadership planted a tiny seedling when it adopted the policy of opening up and reform.

Like any seedling, China's young tree had to be protected. It had to be supported, so it would grow tall and straight. It had to be shielded from chill winds and the cruel storms that blow in from foreign shores, so it could become strong.

Today, our tree is indeed growing both tall and strong. Today, China is the world's second-largest economy and its greatest trading nation. Today, the Chinese people are well on the way to realising their goal of moderate prosperity.

Yet when you grow any tree, there comes a time when you have to take away the props that supported it as a sapling, and remove the shields that protected it when it was young and vulnerable.

It is time to remove these economic supports so that our young tree can blossom

If you leave those supports in place, they will start to constrict the healthy development of the tree. If you fail to take away the shields, the tree grows pale and weak, and cannot stand by itself.

For 30 years we have protected our growing sapling with five supports. We have nurtured our young economic enterprises with cheap capital, a cheap currency, cheap labour, cheap land and cheap energy.

Thanks to these supports, we have grown fast and grown tall.

Comrades! It is now time to remove these shields, so our young tree can grow strong, blossom and fulfil its promise by bearing fruit.

First, we must end our capital subsidies. Cheap loans have let our industries invest and expand. But the risk now is that underpriced capital will just encourage waste, mis-investment and overcapacity.

As a result, we must remove all remaining administrative controls on interest rates, allowing the market to determine all deposit and lending rates in line with supply and demand and according to credit risk. Only by paying market rates for capital will our financial institutions and industrial corporations learn to compete in the wider world.

Second, our exporters have long benefited from the support of a cheap currency. However, holding down the yuan's exchange rate reduces the buying power of the Chinese people's income.

To further the nation's prosperity, we will now allow the yuan to float freely, and will dismantle our remaining restrictions on the cross-border flows of capital.

Third, because of the hukou system of household registration our enterprises have long enjoyed a plentiful supply of cut-price migrant labour. That has boosted industrial growth, but it has also created an underclass of migrant workers with limited rights and meagre incomes.

To raise the incomes of China's poorest, we must now abolish the hukou system, ensuring that the families of all workers, wherever they were born, are given access to health care, housing, education and pension benefits in their place of work, allowing all the people of China to participate in the Chinese dream.

Fourth, the state has long nurtured China's industries with grants of cheap land. However, too often transfers of land have disadvantaged the farmers, small enterprises and householders who previously occupied that land.

To redress the balance, from now on all holders of land-use rights will be granted full freehold ownership over their property, with the right to sell or mortgage it at market prices.

Fifth, in recent years the state has assisted Chinese industry with generous energy subsidies. Those subsidies have allowed China's companies to grow rapidly, but they have also encouraged great waste. And by failing to price the true cost of pollution, they have severely exacerbated China's environmental problems.

To promote efficiency, and to protect the environment, we shall end all national and local energy subsidies, moving to a full market-pricing system.

Ladies, gentlemen, and friends! Comrades! These five supports and protections have served their purpose admirably. But our tree is no longer a seedling. If it is to continue to grow strongly, we must now dismantle the subsidies which have protected it. Only then will our tree continue to grow, our economy continue to flourish, and our people truly be able to realise the Chinese dream.

Thank you.