China vows bigger market role as party closes policy summit

Meaningful Progress

Chang Jian, a Hong Kong-based economist at Barclays Plc, said the statement indicated limited prospects for SOE reform. She saw the likelihood of “meaningful progress” in areas such as the fiscal relationship between central and local government; social security; and the legal system. “Some initial progress” may occur in land reform, she said.

The statement said China will establish “a leading group on deepening reform” that will be responsible for broader planning and coordination of policies and supervising implementation. Green said such a move is “very positive” and Kuijs said that group may help China shift away from consensus- driven policy making and overcome resistance from interest groups opposed to change.

More details on decisions from the plenum will probably be released within a week after the meeting, Macquarie Capital Securities Ltd. said in a report yesterday.

Market Reaction

The report came after the close of Chinese markets. The benchmark Shanghai Composite Index rose 0.8% today, the biggest gain this month, while the yuan was little changed at 6.0919 per dollar.

Hao Hong, a Hong Kong-based strategist at Bocom International Holdings Co., said the meeting “underwhelms in details” and market reaction “will be tepid in Shanghai and likely challenging in Hong Kong.” By comparison, Cai Feng, a strategist at Guoyuan Securities Co. in Shanghai, said the promise of continuing economic reforms will cheer investors and “boost the blue-chip stocks.”

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.”

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