China elevated the role of markets in the nation’s economic strategy after President Xi Jinping oversaw a gathering of Communist Party leaders while stopping short for now of unveiling detailed policy shifts.
China will give markets a “decisive” role in allocating resources, the official Xinhua News Agency reported today, citing a communique from the third full meeting, or plenum, of the party’s 18th Central Committee. The document didn’t discuss specific issues including local-government debt, interest rates or the one-child policy while referring generally to giving farmers more property rights.
Today’s statement leaves investors waiting for concrete steps after leaders pledged in March to reduce the state’s role in the economy to fuel growth. Swelling local-government debt and a residence-registration system that limits labor mobility highlight hurdles for plans to urbanize hundreds of millions of people and sustain 7 percent annual expansion this decade.
“China clearly seems to be heading towards a much greater role for markets in the economy, which points to more deregulation and opening up of financial markets,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees more than $125 billion.
“The plenum was only ever going to set the broad direction, which it looks to have done, but with the details to follow,” Oliver said. “So this runs the risk of disappointing some who were hoping for more details straight away.”
China had previously defined markets as having a “basic” role in allocating resources since the country decided to build a “socialist market economy” in 1992, Xinhua reported. That wording had been repeated as recently as last month, when Xi said in a speech that China would “let the market play its basic role in allocating resources to a greater degree and in a wider scope.”
“Economic reform is key, and the core solution is the proper relationship between the government and the market,” Xinhua said today, citing the communique.
The communique also said land in cities and the countryside, which can be used for construction, will be pooled in one market, and the party will “create fair open and transparent” market rules, according to Xinhua.
China is targeting “decisive” results on reforms in key sectors by 2020, Xinhua reported, citing the statement.
When Li took office in March, he pledged to open the economy to market forces and strip power from the government, saying at the time that the process would be “very painful and even feel like cutting one’s wrist.”
Gross domestic product expanded 7.8 percent in July-to-September from a year earlier, from a 7.5 percent gain in the previous period, bolstering Li’s chances of meeting the government’s 7.5 percent full-year growth target.
State media had heralded the meeting as a “watershed” for reform, putting it in the same category as 1978’s third plenum. That’s when former paramount leader Deng Xiaoping broke with three decades of Maoism and introduced pro-market policies that paved the way for growth averaging 10 percent a year.
“What we have seen from the plenary’s communique is broad principles,” said Ramin Toloui, Pacific Investment Management Co.’s co-head of emerging-markets portfolio management in Singapore. “The devil will be in the implementation -- how those principles are translated into specifics and a timetable for action.”
The report came after the close of Chinese markets. The benchmark Shanghai Composite Index (SHCOMP) rose 0.8 percent today, the biggest gain this month, while the yuan was little changed at 6.0919 per dollar.
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