China’s Top Leaders Pledge Bigger Role for Markets

(Bloomberg) -- China’s top leaders pledged a raft of measures to strengthen the role of the market in land use, capital markets and labor mobility to build a more efficient economy, a move aimed at injecting vitality into a country crippled by the coronavirus outbreak.

In a wide-ranging document issued on Thursday, Chinese authorities laid out measures to improve the “orderly flow” of the factors of production. Doing so can “energize social innovation and market vitality,” while pushing for changes in economic growth drivers, according to a government document dated March 30.

The coronavirus pandemic has pushed the Chinese economy into its most dire situation in decades. Output is poised to contract deeply in the first three months while only expanding moderately for the year. The prospect of a global recession will only add more uncertainty, risking a wave of bankruptcies and the loss of millions of jobs at home.

Still, policy makers have so far maintained a subdued pace of stimulus, refraining from a significant increase of easing measures that could bring about yet higher debt and financial instability.

“A comprehensive market reform on the factors of production can enhance the impetus for economic growth in the long term,” Hua Changchun, chief economist at Guotai Junan Securities Co, wrote in a note.

He said publishing the document when the economy desperately needs new growth drivers indicates the policy stance is still “leaning against the approach of strong stimulus.”

Here’s a list of key points from the document:

Land

  • More flexibility in land use, a nationwide system for land registration
  • Reform the land acquisition system in rural regions and allow more rural land to be sold for commercial purposes
  • Improve taxation on idle construction land

Labor

  • Remove or loosen household registration barriers in the country except in the mega-cities
  • Run a trial to allow household registration in the city of residence
  • Allocate education, employment and medical care resources to places in accordance with the resident population

Prices

  • Steadily push forward integration of benchmark lending and deposit rates with market rates
  • Reiterate increasing yuan exchange rate flexibility
  • Set up a mechanism to make civil servant salaries comparable with their equivalent in the private sector

Capital

  • Improve basic infrastructure for the stock market including listing, trading and delisting
  • Speed up the development of the bond market by expanding its size and types of products and push forward connect programs
  • Actively expand financial-sector opening in an orderly manner, including opening of the futures market
  • Gradually ease market entry requirements for foreign financial institutions
  • Steadily push forward integration of benchmark lending and deposit rates with market rates

Technology

  • Develop a market for exchanging data
  • Promote standardization in data collection in AI, wearable devices and Internet of Things
  • Promote global cooperation on antiviral drugs and vaccine development

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