Beijing cuts through with action on financial reforms

Beijing has unveiled the clearest guidelines so far on financial sector reform and ways to boost private investment, as the economy faces the risk of slowing further under the weight of heavy regulation and state monopoly.

The State Council meeting chaired by Premier Li Keqiang on Monday outlined the specifics of Beijing's goals by laying down that clear timetables have to be set for reforms, in a move that analysts say should bode well for investors in the long run.

Among the most concrete of its pronouncements, the government said it would this year "steadily" reform interest rates and exchange rates, come up with "operational proposals" on yuan convertibility under the capital account, establish a mechanism for individuals to invest abroad, set plans to overhaul railway investment and financing and open certain railway and subway projects to private capital, study new urbanisation plans, and reform the household registration system.

HSBC's China economists Qu Hongbin and Sun Junwei said in a research note: "Beijing [has] opened the curtain for speeding up reforms … Beijing is turning words into deeds and implementation is expected to pick up speed."

The cabinet suggested it would act to ease financial risks including establishing more transparent budgets for local governments. It also pledged to "regulate and develop" bond, trust and equity investment and financing, although it gave no details.

Li Zuojun, a senior researcher with the Development Research Centre under the cabinet, said the top leaders had reached a consensus that reform was the only way to solve deep-rooted political and economic problems.