China's continued reform a boon to the world

More than three decades of sound economic growth have lifted hundreds of millions of Chinese out of poverty, but challenges and obstacles still await the world's second largest economy.

The policy of reform and opening up has set the country on a path to steady development and produced rich "reform dividends" shared within China's borders and across the world.

Stressing China's resolution to further the policy, Vice Premier Li Keqiang recently reiterated the importance of reform at the first major meeting he hosted since his reelection as a member of the standing committee of the politburo of the Communist Party of China (CPC).

"We have benefited from reform in the past 30 years...we must and can only move forward as there is no way back," Li told a State Council working conference on Nov. 21.

"Reform remains the biggest dividend for China," he said.

IMPROVED MARKET ECONOMY WELCOMES MORE GLOBAL INVESTMENT

Thanks to late Chinese leader Deng Xiaoping's decision to carry out reform and opening up via a method called "crossing the river by feeling the stones," China has over the 30-plus years integrated itself into the global economy and shifted towards a more market-oriented economic system.

However, current reforms have entered a "fortified zone" and a "deep-water zone," so "we have to face the challenges and break all the systematic obstacles that block scientific development," Li told a group of officials at the meeting.

The 18th CPC party congress, held last month, showed China's resolve to eliminate any scruples among party members, especially government officials, over the reform and opening-up policy by adding to the CPC Constitution that "only reform and opening up can enable China, socialism and Marxism to develop themselves."

In his agenda-setting report at the congress, President Hu Jintao said that to deepen economic structural reform, China has to strike a balance between the role of the government and that of the market, follow more closely the rules of the market and give better play to the role of the government.

"The most urgent part of China's reform is to establish the socialist market economy and give enterprises full power to manage their own businesses," said Professor Li Yining of China's Peking University.

In its next-step policies, China will reform its tax system to support the development of small and medium-sized enterprises,foster competition and curb corruption.

It will also give the market a bigger role in setting the costs of land, natural resources and capital, liberalize the financial markets and make the yuan currency more convertible.

These measures will together promote a more market-driven system to cut inefficiencies and uncover new engines of growth.

An improved market economy in China will offer foreign investors a more transparent, freer and more efficient business environment, allowing the Chinese economy to integrate into the global value chain more smoothly.

Over the past three decades, the establishment and improvement of China's market economy has greatly elevated the country's productivity. China is offering the world a sufficient supply of manufactured goods, which plays a vital role in curbing inflation in a world of excess liquidity, said Chinese financial commentator Sun Hao.

STRUCTURAL REFORM TO SUSTAIN AND STABILIZE GLOBAL ECONOMY

Giving the market a bigger role in the economy is essential for China's effort to shift its growth model and stimulate productivity and efficiency.

Chinese leaders have pledged to revolutionize the current growth model, which relies too heavily on selling low-priced manufactured goods to other countries and spending billions on infrastructure.

"We should speed up the creation of a new growth model and ensure that development is based on improved quality and performance," Hu said in his report, adding China would seek to become an innovative technology giant as low-cost manufacturing relocates elsewhere.

The new growth model aiming to allow China to move up the value chain and make domestic consumption a pillar of its economy will provide a strong impetus to China's already slowing economy amid global economic slowdown.

With China being a key driver of global growth, its successful economic reform could have a significant impact on the rest of the world.

"This is actually good for more developed economies like Germany or the United States who are shipping more complicated, advanced machineries to Chinese factories," said Andy Rothman, China economist for CLSA Asia-Pacific Markets in Shanghai.

In addition to its growing appetite for hi-tech, which provides new cooperation opportunities at the international level, China's vast domestic market is a huge potential stabilizer of the global economy.

"The most significant impact of China's structural reform on world economy is that China will transform from a so-called 'world factory' and 'major exporter' to perhaps the world's largest consumer market," said renowned Chinese economist Wu Jinglian. "It will become an important force in maintaining stability and steady development of the global economy."

Morgan Stanley China has projected a golden decade for China's consumption. By 2020, the country's total retail sales will be equivalent to two-thirds of that of the United States and will account for 12 percent of the world's aggregate, it said.

China's steady urbanization, in particular, would narrow the rural-urban income gap and unleash the pent-up demand of people too socially vulnerable to spend freely.

The urban population on the Chinese mainland, which exceeded rural population only at the end of 2011, is expected to hit 70 percent by 2040, experts projected.

A steady stream of urbanites would become purchasers of house appliances, cars, insurance and entertainment products. City authorities would need to provide public services such as mass transit systems, power grids and telecom equipment.

Jeffrey Bader, a senior fellow at the Brookings Institution and former senior director for East Asian affairs on the U.S. National Security Council, said countries and enterprises gained enormous benefits from trading with China, which has become an important player in the global trade system.

China's reforms have enabled the country to achieve an economic miracle, with an average annual growth of 10.7 percent from 2003 to 2011, much higher than the world average of 3.9 percent over the same period. China's contribution to the world's economic growth exceeded 20 percent.

Meanwhile, its development experience, overseas investment and relatively affordable technology have greatly assisted the development in countries at earlier stages of industrialization.

Its reform drive will take the country further toward more balanced, coordinated and sustainable development and give it a bigger role in spurring global economic growth.