CPC key session to inspire new change in China

Discussion of China's reforms is surging worldwide ahead of a key session of the Communist Party of China (CPC), with many foreign experts expecting the upcoming session to inspire fresh reform vigor in China. [Special report]

The reason behind such strong attention to the Third Plenary Session of the 18th CPC Central Committee is China's economic reform has reached a crucial moment, and the country must inspire new efforts after its decades-long opening-up and reform if it wants to maintain sustainable and fast economic growth.

To inspire fresh vigor, first of all, the role of the government has to change, in particular the function demarcation of the government and the market have to be reset.

China's new leadership has already committed to the market-oriented reform path, streamlining administration and delegating powers to lower levels, and allowing the market to play a greater role as "the invisible hand" by reducing government intervention, which is crucial.

Toshiki Kanamori, managing director of Japan's Daiwa Institute of Research Ltd., said the Shanghai Free Trade Zone exemplified the mindset change of the Chinese government: with no old-style preferential policies and regulation from the government, the free trade zone will be adjusted by the market.

Also attracting notice overseas is fiscal and taxation system reform.

Prof. Athar Hussain, director of the Asia Research Center at the London School of Economics and Political Science, said the root cause of many of China's problems, especially those at grassroots levels, stemmed from the mismatch of local government spending and their tax revenues.

Steady tax revenues for local governments would help them curb overinvestment and stimulate consumption, said David Dollar, senior fellow with the John L. Thornton China Center at the Brookings Institution.

The Chinese leadership would most likely promote financial liberalization, fiscal reform, deregulation, urbanization, land use rights and pricing for natural resources, said an article headed "Pessimism about China's Third Plenum Unwarranted", which was published by the center.

The writers of the article, Li Cheng and Ryan Mcelveen, both senior researchers with the center, said the Chinese leadership had signaled comprehensive reforms, including economic, social, political, cultural and ecological reforms, instead of merely economic reform.

Anoop Singh, director of the Asia and Pacific Department of the International Monetary Fund (IMF), said in an article titled "Financial Reform Must Continue", that policymakers needed to strike a balance between supporting demand and ensuring financial stability while accelerating structural reforms.

Singh said further financial reform was needed to maintain financial stability, improve the allocation of credit and guide the economy to a more sustainable growth path.

Singh said in another article, "A Wish List for China's Third Plenum", that accelerating reform was crucial for containing risk and achieving a smooth transition to sustainable growth, adding the upcoming CPC session provided an opportunity for the new leadership to guide its plans to meet these challenges.

He said in the article shifting to a sustainable growth path required action on several fronts, such as the financial sector and fiscal reforms, as well as structural measures.

Further financial reforms were essential to contain a buildup of risk, enhance effiency of investment and boost household capital income, he said.

Reforming the household registration system would improve the labor market and achieve a more efficient matching of workers to vacancies, he said.