China maintained the state's role in the economic strategy of the country, but had recognized the larger role markets play in finding balance and new sources of growth for the mainland. This is the way that the Communist party sees as the way to continue its grip on power.
According to the communique released by the Third Plenum of the Communist Party, the Chinese nation will make markets 'decisive' in allocation of resources. The statement, however, had stopped short of unveiling details of the policy shifts to be undertaken, The political party added that the state will retain its dominance in the economy, indicating there may be limits to be done in the reduction of governmental involvement in the economy.
This statement from the session led by President Xi Jinping suggested a freer rein in pricing interest rates as well as farmland and energy. There would no major changes to the central role of state owned enterprises. This was confirmed by the Bank of America Corp.
The party said in its statement that it would also set up a team to coordinate and supervise policies as well as coordinate updated principles and more specific measures that would follow in the coming weeks or months.
According to Daiwa Capital Markets economist Kevin Lai, "It remains to be seen whether actions are as loud as words. There will be reforms but they will not go far enough to break many old state-owned entity interests."
China's leaders are being pressured to revamp the nation's financial policies as the increasing volume of local government debt could highlight the risk of accumulation of bad loans. Another reason why policy changes needed to be done was due to small firms getting crowded out by state businesses for necessary funding needed for growth.
According to Royal Bank of Scotland Group Plc Hong Kong Chief China Economist Louis Kujis, "It's going in the right direction is the most you can say, Even though some of the phrasing is new, the ideas are not so new."
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