Bold steps urged to kick-start reforms

Influential government researchers have urged Beijing to launch a handful of landmark reforms next year to make a statement of intent about economic restructuring and kick-start a process that has stalled in recent years, allowing imbalances to swell.

The leadership's commitment to reforms, after a key Communist Party meeting last month, was encouraging, but more needs to be done to convince the market of its determination to tackle deep-rooted problems, they told a forum hosted by Caixin magazine in Beijing yesterday.

Qian Yingyi, dean of Tsinghua University's school of economics and management, urged the central government to take high-profile actions in three main areas next year: financial reform, particularly on liberalising interest rates and improving the exchange rate's elasticity and formation mechanism; fiscal reform, with the priority on reclassifying the responsibilities of central and local governments; and transformation of the functions of the government.

His call for financial reform echoes remarks made by People's Bank of China governor Zhou Xiaochuan in an interview published in the latest edition of Caijing magazine this week.

Zhou said economic conditions were good for the mainland to consider relaxing controls on deposit interest rates, the last barrier hindering the formation of a entirely market-based pricing system, despite risks that cancelling the limits may push up corporate borrowing costs and also hurt banks' interest rate margins. While the central bank still caps interest rates of savings deposits, banks have got around the limit by offering customers wealth management products with attractive returns.

Launching a few landmark reforms, as the party did in 1994, would "demonstrate the credibility of the reformists, establish the impetus and the trend of reforms, and play a crucial role in the success of overall reforms", Qian said.