China's leaders meets on economic reform

China's leaders meets on economic reform

China's new leadership holds a key meeting this weekend that state media are trumpeting as a likely "watershed" for economic reform, but analysts caution details of its decisions are likely to be vague and implementation gradual.

The four-day session of the full 376-strong Communist Party Central Committee begins Saturday at a closely guarded private hotel in Beijing.

Known as the Third Plenum, it traditionally sets the economic tone for a government's five-year term.

In the past, such meetings have been used to signal far-reaching changes in how China does business, and state-run media say that anticipation has been building.

The official Xinhua news agency proclaimed that the plenum "is expected to be a watershed as drastic economic policies will be unveiled".

Other reports have singled out land reform as a key issue, while a government think-tank called for dismantling the residency registration system known as hukou, which restricts access to medical insurance and other benefits for migrants.

Cai Hongbin, a professor at Peking University's Guanghua School of Management, said key issues such as urbanisation, the social safety net, taxation and financial reforms would be discussed.

"Historically, China has implemented ground-breaking reforms when the economy has faced some serious challenges," Nomura International economists in Hong Kong wrote in a report.

"However, we believe that pressures are not yet sufficient to demand such rapid implementation, while the reforms are more complex than they have been in the past."

Xinhua quoted experts including professors at the party's central school as saying any political reform would aim at "strengthening, not weakening" the organisation's leadership.

Cai said that, ultimately, economic reform cannot truly succeed without changes to how the government acts, such as reducing local authorities' interference in business.

"You can talk about all sorts of economic policy changes, in the end whether these policy changes will make a serious impact on the Chinese economy really depends on whether we will have serious government reforms," he said.

China's leadership says the economy, the world's second largest, needs to move away from reliance on state-financed investment projects and unleash the power of consumers and other private actors to propel growth.

Yao Wei, economist in Hong Kong, said: "The real test of Beijing's reform resolution will be the action taken in the following three to six months."