Third Plenum reform program is bound to win plaudits - and criticism

Whenever there is economic reform, you can guarantee that it will be swiftly followed by sentiment ranging from doubt, fear and regret to outright condemnation.

You won't often hear such sentiment in the office or on the trading floor, but it is everywhere to be found on the Internet. Indeed, some corners of the Internet in China teem with truculent views.

But the very word reform implies progress made despite doubts, fears, regrets and condemnation. President Xi Jinping has said the forthcoming CPC Central Committee Third Plenum, over four days from Nov 9, will demonstrate "great political wisdom and courage" in charting the country's next round of reform.

Early last month, as Shanghai began to launch a free trade zone to experiment with more liberal policies in service industries - with the approval of the central government - there were critics on the Internet in China who described it as a move to turn Shanghai into a new colonial concession.

At the other extreme, there were those who called the free trade zone an attempt at reform by diktat, implying that it runs counter to the logic of market-driven creativity.

Only several weeks ago, when Chinese media reported that a draft reform plan consisting of proposals for more flexible schemes for land ownership transfers was being drawn up by high level policy advisers headed by economist Liu He, vice-minister of the National Development and Reform Commission, there was talk of "vicious motives" aimed at ruining China.

At the same time, of course, there were others saying the reform plan was not comprehensive enough.

You can argue about which, if any, of these views is right, and the debate will continue as change unfolds.

However, the important thing is that the leaders cannot afford to wait, or to cast a listening ear while doing nothing. They need to muster up courage to lead the change, which, after all, is what leadership is all about.

Only by putting an end to a system that is not working properly and is unsustainable can people start to work seriously on an alternative, even though there will undoubtedly be imperfections and hiccups at the start.

Last month the State Council, or cabinet, decided to abolish the requirement of registered capital for anyone setting up a business, in practice a bank account demonstrating the availability of startup funds, even if that money can be borrowed from someone else.

After the decision was announced, there were warnings that once the capital requirement floodgate is raised, the country will be unable effectively to protect itself from being inundated by fake companies - set up with no capital, or indeed legitimate business, their sole aim being to engage in shady and illegal activities.

But those who raised the alarm must surely know that there are already many companies not doing exactly what they claim to do. And part of the explanation why there are so many lies precisely in the system of capital registration, which does not guarantee real financial backup to any company in the first place. It certainly does not prevent any company, even if it has sufficient financial backing, from conduct that is unethical, if not downright illegal.

Indeed, a company system like this can only lead to the entrenchment of discrimination against companies run by people with less registered capital, for example private inventors who do not have recourse to the easy credit the banks dish out to large State-owned enterprises.

What is needed is a system that treats all companies equally according to the law.

The only possible replacement for the requirement for registered capital is to have a society-wide system that tracks companies' and corporate investors' credit standing and records that show they have good legal standing - which is exactly what the State Council has decided to establish.

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn.

(China Daily European Weekly 11/01/2013 page13)