Market reforms to reduce role for Beijing, says Vice-Premier Zhang Gaoli

Government will need to use its powers more effectively as it frees up market forces

PUBLISHED : Monday, 24 March, 2014, 4:45am
UPDATED : Monday, 24 March, 2014, 6:09am

Reforms aimed at freeing up market forces on the mainland will result in a reduced role for government, Vice-Premier Zhang Gaoli said yesterday.

Fair and open market rules would be introduced as steps towards a modern economic system built on deeper reforms, Zhang told the annual China Development Forum in Beijing, in remarks aimed at stressing Beijing's commitment to reform.

These reforms would adhere to the principle of equality before the law, he said, noting that regulation would supplant government power as the major economic management tool.

To allow market forces to play a bigger role, the government should reduce its intervention
Finance Minister Lou Jiwei

Market forces, depicted as an "invisible hand", would play a bigger role, while the government, viewed as the "visible hand", would use its powers more effectively, Zhang said.

He said the government would also set up a transparent budget system to address risks posed by local government debts.

Premier Li Keqiang said this month that local government debts would come under Beijing's budget management in an effort to tighten scrutiny.

International Monetary Fund managing director Christine Lagarde said at the forum that reforms in China would benefit the global economy.

Zhang said the government's priority would be fiscal and tax reforms, while urbanisation would also be a big issue.

Finance Minister Lou Jiwei told the forum that cutting red tape and delegating power would be crucial towards ensuring effective fiscal reforms.

"To allow market forces to play a bigger role, the government should reduce its intervention," Lou said. "Defining the responsibilities of local governments at different levels is also an important issue under the process of delegating power."

He also said the central government should seek a balance between delegating power and supervision.

Urbanisation is also a key issue after a blueprint issued on March 16 set a target to move about 100 million rural residents to cities by 2020. Lou said reforms to increase local tax revenues would be needed under the urbanisation process, while a property tax would be a priority.

"The Finance Ministry will work closely with the National People's Congress in drafting rules for a property tax," he said.

In line with the government' aim of a greater role for market forces, Beijing is stepping up efforts to liberalise interest rates and the yuan.

Yi Gang, vice-governor of the People's Bank of China, said on Saturday the central bank would prioritise reforms on deposit rates this year and next.

The yuan would see more flexibility as the exchange rate would be based more on market demand and supply, he said.