Full steam ahead(3)

Making breakthroughs

China's reform used to be led by the government, but the future reform will be a revolution imposed by the government on itself. This will be a painful process, which needs not only great determination, but also great political wisdom.

Yang said that in order to carry out the reform measures, six strategies should be employed.

Firstly, the introduction of easily implemented measures first, followed by difficult ones. Whether a measure is easy or difficult depends upon the public acceptance of it, not the scope involved. If society has reached agreement on a measure, it should be carried out in a timely manner. To the reforms on which society has not yet reached agreement, the government can reach consensus through discussions, research and pilot projects.

Secondly, accelerating the overall reform objective through smaller measures of an incremental nature. For example, in fiscal and tax reform, the focal point for this year is to extend trials for replacing business tax with value-added tax. This may seem to be a small measure, but it will help to pave the way toward reform of the whole local tax system, which is in turn pivotal to reform of the division of power between central and local governments.

Thirdly, grasping the core and key points in the reforms of various fields.

The fourth strategy is to control the tempo of reform. The government should be both bold and steady in advancing reform. For example, current reform must be carried out under the existing legal framework, though some breakthroughs can still be made. The government should not advance the reform blindly without first considering present limitations.

The fifth point is to make steady progress and strike sure blows. Based on full assessment and reaching agreement, reform measures must achieve real effects.

The final strategy is to focus on concrete results and measurable achievements. At present, some departments and localities are swift to action, but few of their measures have made any substantive progress.

According to Yang, when drafting Premier Li's work report, the State Council organized several discussions and collected opinions from insiders from various industries. An important principle to decide this year's reform measures is to ensure stable economic growth and avoid unnecessary risks. Therefore the reform measures must facilitate economic growth.

The Chinese Government has determined that the process of comprehensively deepening the reform will be completed in seven years, and 2014 marks the first year. As it stands, directions of many reforms have been made clear and the measures have been readied for implementation. However, it is of vital importance that reform measures must be issued at the proper time and tempo, Yang concluded.

Reform Tasks for 2014

Deepening reform of the administrative system. This year, China will cancel or delegate to lower-level governments an additional 200-plus items requiring government review and approval; introduce a system to list all items over which government review and approval are required and release that list to the public.

Basically completing the reform of government bodies at the provincial, municipal and county levels, and continuing to reform public institutions. China will reform the business registration system nationwide and carry out registration of subscribed capital. Issuing an operating permit before a license, which was the practice in the past, will be replaced with the practice of license first, operating permit second. Annual inspections of businesses will be replaced by annual reporting.

Exercising stronger oversight over delegated matters when they are being handled and after they have been handled. A blacklisting system will be introduced to make those who lose credibility pay the price and smooth the way for those who have credibility.

Giving high priority to reforming the fiscal and tax systems. China will ensure transparency of public finance and make it easy for people to understand and oversee it. The reform of the tax system will be advanced, including extending trials for replacing business tax with VAT to the railway transport, postal and telecommunications services industries, abolishing fees and replacing them with taxes, reforming the excise tax and resource tax, and moving ahead with legislation on a property tax and environmental protection tax. China will grant additional tax breaks to micro-businesses with low profits and reduce the burden on businesses. A standard financing mechanism for local governments to issue bonds will be set up to guard against and defuse debt risks.

Deepening reform of the financial sector. China will continue to liberalize interest rates, establish a deposit insurance system and promote the healthy development of Internet banking.

Enhancing the vitality of economic entities under all forms of ownership. China will improve the distribution and structure of the state-owned sector of the economy, accelerate the development of mixed-ownership economic entities, formulate measures for non-state capital to participate in investment projects of central government enterprises and formulate specific measures to permit non-public enterprise participation in franchising. The property rights system will be improved to ensure that property rights are inviolable in both the public and non-public sectors.