Xi Jinping appears poised to unveil sweeping economic changes

All indications are reforms presented to next month's plenum will loosen government's grip on economy while strengthening one-party rule

PUBLISHED : Monday, 28 October, 2013, 4:19am
UPDATED : Monday, 28 October, 2013, 10:53am

As the central leadership prepares to announce the date for its landmark meeting next month to consider a package of measures to expand economic reforms, speculation about the strength and scope of those measures is intensifying.

Over the weekend, Yu Zhengsheng, the No 4 member on the Politburo's Standing Committee - and therefore the country's entire political leadership - further piqued curiosity by promising that the Communist Party Central Committee's third plenary session would result in "unprecedented" social and economic reforms.

At the same time, the Research and Development Centre of the State Council, a leading government think tank, released a detailed roadmap of reform measures it has submitted to top leaders for discussion at the upcoming meeting.

The plan covered eight areas, ranging from a dramatic loosening of government approval procedures and a break up of state sector monopolies to making the yuan fully convertible within 10 years and more controversial land reforms.

The report has attracted widespread attention not only because of its comprehensive level of detail, but also its two principal authors: Li Wei, a former secretary to the former reformist premier Zhu Rongji, and Liu He, a current key economic adviser to President Xi Jinping.

According to several people who recently met Beijing's top policymakers, Xi has shown resolute determination to push for drastic economic reforms despite strong resistance from various special interests.

How many of the proposed measures would be adopted is unclear, as such plenums usually see intense horse-trading between the central government, local authorities and interest groups before a final list of measures is released.

But there seems to be consensus over a number of issues. One major priority will be reducing the government's role in the economy. Currently, the government maintains its stranglehold over business with the help of administrative approvals. Even today, the central government still holds final say over 1,500 types of projects; local authorities wield approvals over 17,000 more.

Xi is determined to see both the central government and local authorities sharply reduce the number of such approval rights in the coming years.

Another priority will be to break up the state sector monopolies in some strategic industries and open them to private competition. This will be accompanied by serious reforms of state-owned enterprises.

After years of empty talk, Xi's government is expected to release concrete measures to allow private investment in sectors such as banking, energy, infrastructure and telecommunications.

As part of the effort to separate government from business, the mainland leaders have decided to abolish the government rankings assigned to officials of the state-owned enterprises. That way, those firms can truly operate as businesses with more management freedom.

Despite 30 years of reforms, officials at SOEs continue to receive government rankings depending on their posts and the size of their firms. For instance, the chairmen of PetroChina or China Mobile enjoy a governmental status equivalent to that of a deputy minister.

That reality helps explain why many state-owned enterprises continue to function like arms of the government bureaucracy. The problem of executives behaving like bureaucrats has seriously crimped efforts to build state firms into modern enterprises.

The central leadership is similarly expected to abolish government rankings in the higher education sector. Instead, employees at state firms and universities would be accountable only to their respective boards of directors.

But Xi's changes will focus largely on economic issues. Anyone who expects a major political liberalisation is likely to be disappointed.

While Xi appears to have no qualms about shaking up state monopolies and streamlining government bureaucracy, talk in the corridors of power in Beijing is that he intends to strengthen control over ideological issues and the media to maintain one-party rule.