Full steam ahead

STRONG DETERMINATION: The Second Session of the 12th National People's Congress concludes on March 13, passing Premier Li Keqiang's Report on the Work of the Government designed to further deepen (WANG XIANG)

The Second Session of the 12th National People's Congress (NPC) passed on March 13 the Report on the Work of the Government by Premier Li Keqiang. The report, delivered on March 5, the opening day of this year's annual NPC session, mentions the word "reform" 77 times and the measures proposed by the report encompass the sectors of the economy, politics, people's well-being, rule of law and ecological progress.

This is the first report on the work of the government by Premier Li. All of the 60 detailed reform tasks proposed by the Decision of the Central Committee of the Communist Party of China (CPC) on Some Major Issues Concerning Comprehensively Deepening the Reform adopted last year are included in this report. Moreover, on issues of taxation, finance, pollution control, urbanization, medical reform and education, the report puts forward even more detailed guidelines.

Zhao Xijun, Vice Dean of the School of Finance of Renmin University of China, said the report indicates that the Chinese Government is implementing the blueprint of reform formulated by the Third Plenary Session of the 18th CPC Central Committee last November, and it has enough determination and confidence to effectively implement the blueprint.

China's measures of comprehensive reform are also good news for the world economy. Because the fortunes of the Chinese economy are so indelibly linked with those of the global economy, sound economic and social development in China will bring opportunities to the wider world.

High expectations

Zhao said that according to the Report on the Work of the Government, reform measures among the nine key aspects of government work can be divided into three categories. Those pertaining to the economy include streamlining administration and delegating power to lower levels, tax reform, financial reform and accelerating economic transformation. Those relating to social development and management include advancing urbanization, improving people's well-being and reforming the household registration system. Finally reform in ecological progress comprises measures advancing the transformation of energy production and consumption.

Reform is the primary theme of the government's work this year, with economic reform in particular being the paramount task. In contrast to bygone years, this year's reforms will mainly tackle the difficulties that, up to now, have not been addressed. For example, last year, the government reduced the number of items subject to government review and approval, and this year the government may work on some more contentious items.

According to the report, the government will introduce a system to list all items over which government review and approval are required, and only those items not listed will be subject to government review and approval. China will also refashion its business registration system nationwide and carry out registration of subscribed capital. In addition, annual inspections of businesses will be replaced by annual reporting. For the government, this is a self-imposed revolution with the aim of incentivizing potential market participants.

Another area of difficulty is fiscal and tax reform. Zhao said reform of the fiscal and tax system basically involves how much the government will take, how much the market will reserve and how much residents can get. With regards to government itself, it also involves how much fiscal revenue is allocated to the Central Government and how much goes to local governments. It is a reform of the fiscal and tax system, but in fact it involves relationships between interests in the government, the market and among the common people. It also involves the relationship between interests within the Central Government and various local governments. Therefore, navigating through this jungle of conflicting interests and attitudes in order to forge a path to clear solutions will be a very challenging job.

Zhao said that the commitments to financial reform made by the report are likely to be honored. Owing to factors such as shadow banking and local government debt risks, the academic circle has questioned the overall health of the Chinese financial industry. The report vows to deepen reform of the financial sector, including measures such as continuing to liberalize interest rates. Zhao believed issuance of large-denomination negotiable certificates of time deposit, or CDs, is considered a key step toward interest rate liberalization. He estimated that this year, financial institutions will be enabled to engage in activities such as regularly issuing negotiable certificate of deposit (NCD) and directly issuing CDs to individuals and enterprises, setting up an interest rate corridor for open market operations, formulating regulations regarding the bankruptcy of financial institutions and deposit insurance system, regulating Internet-based financing and establishing private banks.