Following the secretive Third Plenum of the 18th Central Committee of the Chinese Communist Party in Beijing – a major meeting of the country’s top policymakers – China has launched “the most radical reform blitz in more than 30 years, unveiling a raft of measures to ease social controls and pave the way towards a free-market consumer economy”, says Ambrose Evans-Pritchard in The Daily Telegraph. The relaxation of the one-child policy has sparked most interest in the West, but it will have “little economic impact”. Fertility rates are already collapsing in the Far East and China’s demographic crisis is already in full swing; these changes will have no impact on the labour supply for 20 years.
Other reforms are likely to have a bigger effect. The 20-page master plan pledged to break the stranglehold of giant state-owned companies, “sweep away” price controls, move towards convertibility of the renminbi, and phase out interest rate caps, all in the name of a ‘mixed ownership economy’. The reforms aim to create a “property market in the countryside” and local governments will lose control over the courts, “a first step towards an independent judiciary”. Labour camps are to be abolished. The idea is to shift towards a modern consumer society, with a bigger role for agile, creative, private companies.
The big question is whether any of these reforms will actually take place, says Jonathan Fenby in The Guardian. The need for change is evident as the “old cheap-labour, cheap-capital, export-driven model runs into the sands”. But delivering change within the Chinese system is difficult and has forestalled many previous efforts. The priority for Xi Jinping, the most powerful Chinese figure since Deng Xiaoping, is political power. This “highly accomplished pragmatist” has nine more years at the helm and this gives him time to “move at his own pace”, balancing political and economic needs. The communiqué released at the end of the plenum was vague as to when reforms would start.
This is unduly negative, says Simon Rabinovitch in the FT. Details may be lacking and implementation will certainly be tricky, but many see the proposals as a sign that Xi’s administration is “ready to gets its hands dirty on long-delayed economic policies, from enforcing a property tax to control soaring house prices to opening state-controlled sectors to private capital”. Analysts are in an “almost universally positive mood about China’s long-term growth prospects” and their sense of optimism has spread to investors, with the Shanghai Composite, China’s main index, rallying strongly this week.