China plans to deepen economic reform

The State Council has announced a detailed plan on deepening economic reforms. The plan aims to fulfill the pledge to cut the central government's intervention, which hinders more robust growth in the country.

Premier Li Keqiang hosted an executive meeting of the State Council on Monday, vowing to take a pragmatic approach in pushing reforms.

Reform is like rowing upstream, failing to advance means falling behind.

That's what Premier Li Keqiang has stated in the past. And now, the central government has outlined a plan which focuses on pushing targeted reforms.

A statement issued by the State Council underlined the need for stabilizing growth, controlling inflation, mitigating risks and striving to foster an 'upgraded version' of the country's economy.

One of the highlights was that China plans to cut government economic intervention. The plan said 62 items will no longer require the central government administrative's approval, or will be delegated to the lower governmental levels. Last month, a similar move was taken by the central government with 71 items.

Tao Ran, is an expert on economics. He said the economic reforms are significant because China's economy is now at a turning point.

Professor Tao Ran, School of Economics, Renmin University of China, said, "In the past decade, China's economy has been growing about 10 percent every year. But now the growth is slowing down. Since 2009 after the world financial crisis, the government has installed a huge stimulus package to sustain the growth. But lots of investment from that time to now is not very efficient. There is housing bubble in the Chinese economy and the export growth also slow now. So China do need some reform to find new growth sources."

The plan also highlights measures to curb local governments' debts, and make budget systems more transparent and standardized.

The central government has reiterated its determination to introduce more market-oriented reforms on foreign exchange and interest rates.

Although Tao Ran said market-oriented reform is necessary, he also believes financial risks should be taken into consideration while taking the reform.

Professor Tao Ran said, "One potential risk is that bank loans will become non-performing loans after the financial liberalization because interest rates will increase. So I would suggest the Chinese government to be very cautious in taking steps in financial reform. I think some real estate sector reform need to be proceeding before the financial reform. Otherwise, if the reform sequence is wrong, you are inviting financial crisis to come to China earlier."

The Chinese government has strengthened its efforts to accelerate the transformation, growth and stabilization of the economy. The country's new leadership is urging administrative powers to be cut to allow markets to play a bigger role. It's believed that reform will pay off for China and its benefits will reach the entire population.