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.
The nation will make markets “decisive” in allocating resources, according to the communique from the third full meeting, or plenum, of the party’s 18th Central Committee. At the same time, the state will remain “dominant” in the economy, indicating limits on rolling back government involvement.
China’s leaders are under pressure to revamp the nation’s finances as swelling local-government debt highlights the risk of a buildup of bad loans and state businesses’ access to bank funding crowds out small firms. Today’s document didn’t discuss specific issues such as regional borrowing, interest rates or the one-child policy, while referring generally to giving farmers more property rights.
“It’s going in the right direction is the most you can say,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. “Even though some of the phrasing is new, the ideas are not so new.”
The communique, published by the official Xinhua News Agency, reiterated the role of state ownership while saying development of the non-public sector will be “encouraged.” That emphasis “probably precludes drastic state-owned enterprise-related reforms,” said Kuijs, who previously worked for the World Bank in China.
The 5,000-character statement referred to “reform” 59 times, “development” 37 times and “socialism” 28 times. It used the word “finance” just once.
“Curb Your Enthusiasm” was the heading of a note from Bank of America Corp.’s Hong Kong-based economist Lu Ting, who said investors may be disappointed by omissions from the communique and the stance on SOEs.
Last year’s combined revenue of about 120 companies under the State-owned Assets Supervision and Administration Commission was equivalent to 43% of gross domestic product. Companies overseen by the commission include China National Petroleum Corp., the country’s largest oil producer, and China Mobile Communications Corp., parent of the world’s largest phone company by users.
Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong, said that the reference to a “decisive” market role “may sound small, but it should provide critical air-cover to detailed reforms which support the market.”