China’s new leadership, headed by Xi Jinping, will probably unveil new market-oriented changes in late 2013, according to Li Jiange, head of the country’s biggest investment bank.
Li, chairman of China International Capital Corp. and a vice chairman of state-owned Central Huijin Investment Co., which holds stakes in the nation’s biggest lenders, said the focus will probably be on reducing government intervention in the economy and breaking up state monopolies. Li spoke at Caixin Media’s annual conference in Beijing yesterday.
China last week completed the most important phase of a once-a-decade power transition with Xi taking over as head of the ruling Communist Party and Li Keqiang, set to become premier in March, made No. 2 in the party hierarchy. They inherit an economy burdened by slower growth, an aging population, widening income disparity and environmental degradation that’s fueling social unrest.
“Expectations are high” for the new leadership to make changes as government intervention, ranging from excessive regulation to rigid price controls, has become “unbearable” over the last couple of years, said Li, who previously worked for the Development Research Center, an organization that advises the State Council, China’s cabinet.
“When inflation was high, many Chinese stores, merchants and even producers received phone calls from regulators telling them not to increase prices,” Li said. “But how can a supermarket not change the price of pork if hog prices are rising,” he said.
At a separate conference in Beijing yesterday, central bank Governor Zhou Xiaochuan said it was “hard to reach consensus” on detailed reforms as China is a big and unbalanced country.
The new government will continue to value changes initiated at local level although it will also still attach great importance to overall planning, he said. China must allow trial reforms so that it can test what could go wrong, he said.
Zhou, 64, wasn’t named to the new central committee of the Communist Party during last week’s leadership transition that saw Xi take over from Hu Jintao as head of the party, heightening speculation that he will retire from the People’s Bank of China.
Xi, set to succeed Hu as president in March, may face economic growth of 7 percent in 2013, the slowest in 23 years, according to Pacific Investment Management Co., which runs the world’s largest bond fund. Standard Chartered Plc sees a risk of annual expansion slumping to between 3 percent and 4 percent within 10 to 15 years without market-driven change to introduce more competition for state enterprises.
Growth this year may slide to 7.7 percent, according to the median estimate of economists surveyed by Bloomberg News from Oct. 18-22. That would be the slowest pace since 1999 and down from an annual average pace of 10.6 percent in the decade through 2011.
Li Jiange added his voice to calls by economist Wu Jinglian, billionaire entrepreneur Liang Wengen and liberals including the son of late party chief Hu Yaobang for the government to allow a bigger role for market forces, roll back the dominance of state-owned enterprises and give equal treatment to private companies.
Speaking on the first day of the Caixin conference on Nov. 16, Wu, a senior research fellow at the center, said China needs to draft a plan for economic and political change that will push forward the development of a competitive market economy. Wu, who was named “Man of the Year” in 2001 by the official Shanghai Securities News, is known for describing the nation’s stock market as being worse than a casino.
The Development Research Center collaborated with the World Bank to produce a report titled China 2030 published in February this year. It outlined policies to help the nation sustain its growth while avoiding the so-called middle-income trap, where expansion slows because of a failure to implement reforms needed to create a wealthy middle class.
The report highlighted the need to overhaul state-owned companies, banks, land, labor and financial markets, promote competition and reduce the role of government.
The 448-page document was endorsed by Li Keqiang, according to Ding Shuang, senior economist for China at Citigroup Inc. in Hong Kong who previously worked for China’s central bank.
The party central committee, made up of 205 officials including the government’s top leaders, generals of the People’s Liberation Army and heads of the biggest state-owned enterprises, will hold a plenary session late next year, Li said. That should lead to the unveiling of “a new reform blueprint to guide China’s reforms,” he said.
Opponents of market-oriented changes gained a louder voice during the global financial crisis when the government’s intervention in the economy increased and intensified, said Li, who became vice chairman of Central Huijin in 2008. “We need to review what the Chinese Communist Party decided 20 years ago: that is to let market forces play a fundamental role in allocating resources,” he said.
Central Huijin was set up in 2003 by the government and holds stakes in the nation’s biggest state-owned banks and financial institutions including Industrial & Commercial Bank of China Ltd. and CICC.
Li, a member of the Chinese People’s Political Consultative Committee, an advisory body to the nation’s legislature, said the organization met recently with managers of Chinese private businesses.
“They told us they don’t have the willingness or the guts to compete against state players in certain sectors because they have repeatedly had their fingers burned,” Li said. “We must give private business equal treatment.”
Liang Wengen, who heads the nation’s biggest machinery maker, has also called on the new leadership to create a level playing field for private companies.
Private entrepreneurs “hope the new generation of leaders will continue to reform and open the market, which means fine-tuning the relationship between the government and the market, deepening reforms so the market’s ability to allocate resources will be stronger, and provide more space for private enterprises to develop,” Liang said at a Nov. 11 briefing during the party congress that anointed the new leadership.
Hu Deping, the son of late party General Secretary Hu Yaobang whose death helped trigger the Tiananmen Square protests, called on the nation’s new leaders to pursue political and economic changes, in a commentary published Nov. 3.
China’s problems threaten the nation’s healthy development, violate people’s rights and undermine the party’s ability to govern, Hu wrote in the Economic Observer newspaper.