Communist Party urged to speed up China's financial reforms
The party needs to speed up stalled reforms in capital markets and the financial industry to increase the role of free markets pledged by leaders, experts say.
In a policy blueprint delivered by President Xi Jinping at the end of a four-day party conclave in Beijing, the top leadership pledged to give market forces "a decisive role" in shaping the economy and allocating resources.
This is a marked departure from the previous policy direction. Market forces have been defined as "a basic component" in resource allocation in official language since 1992.
The party would "make great efforts to clear away market barriers and boost the efficiency and fairness of resource allocation," the statement said. It also declared that the state and private sectors were both important to the economy, although it stressed that the dominant role of public ownership would be maintained.
While it contains no specific policy initiatives, the statement gives hope that Beijing may further liberalise interest rates and exchange rates and ease controls on energy prices. "Allowing the market to decide on the price of resources means the government will reduce intervention in the market," said Liu Ligang, Greater China head at Australia & New Zealand Banking Group.
Other targets under the deepening of economic reform include an overhaul of the fiscal and tax system, easing investment entry barriers, building a unified market for rural and urban construction land, granting farmers more property rights and improving the financial market system.
"However, there seem to be no major breakthroughs in reforming the state-owned sectors," Liu said. "If reforms like this aren't tackled in a timely manner, the speed of China's economic growth may show great volatility and the sustainability of growth will be hurt."
China emerged as a powerhouse of global manufacturing and international trade since initial reform in the 1970s.
Aggressive investment supported by easy credit granted to state-owned enterprises helped push its economy, now the world's second-largest, to expand by about 10 per cent a year in the last decade. But growth slowed to 7.8 per cent last year.
Michael Ye, vice-president at Dalian-based private industrial park operator DLSP Company, said: "It's great news for the government to acknowledge that private enterprises are an important part of the national economy and may one day enjoy equal treatment with state-owned enterprises."
But he added: "No changes will happen overnight. The government has only outlined a broad direction. Any policies will be implemented step by step."