Did the US play a role in China’s long-term market reform plans? Wait for the policy details
Victoria Ruan says a clearer picture of China’s long-term economic reform blueprint, which may have been formulated in anticipation of tough US trade action, will emerge only when leaders lay out annual policy in December
Starting next year, China will also adopt a unified negative-list system for the whole country, meaning foreign investors – in theory – would enjoy equal treatment with domestic players, except in fields restricted by the list.
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And, the government has pledged to reform the pricing mechanism for items ranging from natural gas to agricultural products and utility fees by 2020. Echoing these plans, Vice-Premier Wang Yang wrote a lengthy commentary in the People’s Daily, calling for “forming a new pattern of comprehensive opening up of the market”. Wang emphasised that this opening up “isn’t a tactic of expediency” but a long-term strategy.
But despite all the pledges, some details are lacking, such as which areas will face restrictions in the unified negative list.
Meanwhile, Beijing has said it will improve the review system on national security interests, suggesting sensitive foreign deals will be subject to even stricter scrutiny, such as those believed likely to threaten national cybersecurity.
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However, the overall impact of the latest reforms look positive for investors, as they appear more concrete and have clearer timetables. Judging from the timing, Beijing’s generous purchase of US products and the reform plans will help it negotiate with the US on its planned action on investment and trade.
A bill was introduced in Congress this month on tightening the review of foreign investment for potential threats to national security, with China deals expected to take the hardest hits.
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However, it would be wrong to think the Chinese reforms were merely motivated by external relations. China’s macroeconomic policies, especially those with a long-term vision, usually reflect a consensus among the top leadership about its domestic priorities.
Now that Xi has gained greater authority, he will find it easier to push his own agenda without having to worry much about opposition.
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The party congress unanimously endorsed writing Xi’s name into the Communist Party’s constitution, granting him the same status as Mao Zedong, the founding father of the People’s Republic.
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If Beijing hopes to convince the world of its sincerity to push forward reform, it needs to address some persisting puzzles.
For example, how will a more assertive and centralised leadership, refusing to copy any Western models, embrace market liberalisation, and how will China’s market reform be designed differently from that in the West? Also, how can a government allocate the best resources to its state sector in order to make it stronger and bigger, while simultaneously encouraging competition from the private sector?
To get a better idea about Beijing’s policy road map, it may be necessary to wait until the central economic work conference next month. Hopefully, we will hear more details from central and provincial economic leaders when they lay out the monetary and fiscal policy tone for the coming year.
Victoria Ruan formerly covered China’s economic policy at the Post and now works for a strategic consulting firm in Washington, DC. The views expressed here are purely her own