Milestone blueprint sets tone for reform

Updated: 2013-11-22 10:34

By Tang Yue, He Na and Cui Jia (China Daily Europe)

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Strong resolve needed to deal with resistance from interest groups, experts say

Experts are attempting to evaluate the potential impact of China's blueprint for reform one week after a key Party meeting to discuss the nation's future.

The reform details were announced on Nov 15 after being adopted at the four-day Third Plenum of the Communist Party of China's 18th Central Committee, which closed on Nov 12.

Many experts and pundits view the comprehensive blueprint as a milestone in addressing the problems that China faces.

Some have hailed the document as being as important as that adopted 35 years ago at the Third Plenum of the CPC's 11th Central Committee, which unveiled the reform and opening-up policy and paved the way for China to become the world's second-largest economy.

However, the experts warn that unlike in 1978, the changes could meet considerable resistance, and the government will need great determination to carry them out.

While the 1978 plenum shifted the focus of the Party and the country from class struggle to economic construction, the meeting that ended last week came at a time that has seen slowing economic growth, an ever-widening wealth gap and growing public dissatisfaction and social conflict.

"The latest reform plan is extremely important because it needs to solve a number of problems, such as the widening income gap caused by more than 35 years of development," says Zhao Zhenhua, director of the economics department of the Central Party School.

"The central government has no choice but to act now to find solutions to the problems that have begun to affect social stability and prompted public disgruntlement at the Party," he says.

When Party Chief Xi Jinping explained the finer points of the plan, he acknowledged the serious challenges facing China, from unsustainable and unbalanced economic growth to overwhelming bureaucracy and official corruption.

Milestone blueprint sets tone for reform

In 2008, the working group was headed by Hui Liangyu, a vice-premier, but this time around Xi presided over the work himself. Work on the document started in April and involved more than 60 experts and officials who dealt with 2,564 suggestions from 114 organizations and departments.

Market role reiterated

"It's the most significant reform plan since China kicked off comprehensive reform 35 years ago," says Xie Gaomin, director of the Institute of Economic System and Management under the National Development and Reform Commission.

"The document clearly states that the market and not the government should be the foundation of economic development. Also, because reform of China's modern system of governance and the economy are closely linked, the work must be synchronized or the economy will not develop as wished," he says.

In addition to acknowledging the market's all-important role in resource allocation - as signaled by its upgrading from "basic" to "decisive" - and picking out many economic and financial reforms, the Nov 9 to 12 plenum introduced a raft of reforms, from the abolition of the laojiao system, otherwise known as "re-education through labor", to increasing judicial independence.

"China has developed so quickly, and it's hard to avoid some problems. It (the new reform plan) can be seen as a remedy for reforms that were not attempted in the past or as recognition that not enough attention was paid to certain issues. It lays the groundwork for further and broader reforms," says Zhen Xiaoying, former vice-president of the Central Institute of Socialism.

"For a long time, the international community acknowledged our economic growth, but they had doubts over the so-called China model. I think this plenum marks a movement toward a system the outside world will better understand," she says. "Hopefully, it will be a more comprehensive and mature system by 2020, the timeline set for the reforms to take effect."

Hu Xingdou, a political analyst with the Beijing Institute of Technology, says he was pleased that the plenum document signaled the reform of many sensitive issues China has faced during the past three decades.

"The majority of the decisions made at the plenum have lived up to my expectations, especially the abolition of the laojiao system," he says.

Hu argues that many problems were rooted in a failure of the rule of law.

"In my opinion, its abolition (re-education through labor) is a line of demarcation. The crossing of that line means the government is serious about China becoming a society that operates through the rule of law. While the 1978 meeting opened a new era for development through the adoption of a market economy, the latest plenum opened a new era of reform with dual goals; that of establishing an economy based on both the market and the rule of law," he says.

Resistance to change

At first glance, pushing through the reforms may seem an easier task than it was 35 years ago when the economy was in dire straits. In 2012, China's gross domestic product reached $8.54 trillion, 142 times higher than in 1978.

However, some experts say that groups with vested interests may resist the changes, making it difficult for the government to fully implement its reform blueprint, and therefore greater resolve will be required to put the plan into practice.

"China was faced with a dead-end situation in 1978. The economy was on the verge of collapse and so it was easy to reach the consensus to focus on economic construction. Today, all the easy reforms have been achieved and we have come to the 'deep water zone' of reform, which is much harder," says Zhen.

As part of the reform package, many government reviews and approval procedures for investors will be removed to reduce official intervention in the market.

"It might be easier for people to give up those vested interests that produce few benefits, but it will be harder for them to abandon those that generate substantial profits. And that's without even beginning to mention the property tax, which will touch on the interests of the public," Zhen says.

The plenum decided that state-owned enterprises should hand 30 percent of their profits to the government by 2020. Restrictions on private enterprise investment in restricted sectors - those companies require a license to enter - will also be relaxed, according to the reform document.

However, the Party is in no hurry to break up the monopolies that dominate many sectors of the economy, according to Xinhua News Agency.

The government has previously tried to open up some of the sectors currently monopolized by SOEs - oil and gas, banking, telecommunications, electricity and transportation - to private investors, but with little success, Xinhua reported.

"Unlike the 1978 reform plan, which was welcomed by all parties because it would benefit different people with different interests once China opened up, the new plan is likely to be difficult to push forward among the groups or departments that might lose control of their vested interests. The solution to that is in the hands of the market and the law," says Zhao from the Central Party School.

Liu Qinglong, a professor of public policy at Tsinghua University, says a new body, the Central Reform Leading Group, which experts expect to become a higher authority than the country's economic planner, the National Development and Reform Commission, will play a key role in overcoming the difficulties as the program of reform unfolds.

"The concentration of power will be an easy way to reduce resistance to reform. I think every province and city will follow suit and establish their own reform leading groups soon," he says.

In an interview with the news portal iFeng prior to the plenum, Cai Xia, an expert at the Central Party School, said full implementation of the plan is crucial, no matter how bold it appears to be.

"If that doesn't happen, the public will lose trust in the government and the Party. That would make further reform even harder, because it always requires mutual trust and cooperation between the people and the government."

Contact the writers at tangyue@chinadaily.com.cn, hena@chinadaily.com.cn and cuijia@chinadaily.com.cn

 Milestone blueprint sets tone for reform

The farmers of Xiaogang village in Fengyang county, Anhui province, were pioneers of rural land reform. Eighteen farmers signed a secret agreement to divide the land of the local people's commune into family plots. The black and white photo (inset) was taken 35 years ago at one of the plots. Xinhua Photos

 Milestone blueprint sets tone for reform

A worker checks machinery in a textile factory in Huaibei, Anhui province, in February. The black and white file photo (inset) shows a textile worker in the 1950s. Xie Zhengyi / for China Daily

(China Daily European Weekly 11/22/2013 page4)