Experts say rule of law will unlock economic potential

Experts say rule of law will unlock economic potential

CHINA - Promoting the rule of law, a main theme of the key meeting of the Party, also known as the Fourth Plenum, will further unleash the potential of the economy and help ensure sustainable and relatively fast growth, experts said on Monday.

The four-day meeting, which opened on Monday in Beijing, came as top policymakers seek a balance between maintaining growth and launching reforms, amid concerns that the Chinese economy will substantially slow down in the coming years.

It is also being widely watched because it is the first time the Party has made the rule of law the central theme of a plenary session of its central committee.

While the meeting will mainly focus on judicial reform and institutional reform within the Party, it will hold positive implications for China's economic development as well, in particular for the service sector and the emerging middle class, experts said.

"To meet the aspirations of a property-owning urban middle class, which we are seeing emerge as the key economic actor in China, the government has to supply a more rules-based market and better investment opportunities for this group," said Kerry Brown, executive director of the China Studies Center at the University of Sydney.

"In this area, therefore, the law is as necessary for the perfecting of the internal market in China as anything else, in order to achieve fast sustainable growth," he said.

Some analysts said that enhancing the rule of law will create a more transparent and fairer business environment for the private sector and foreign investors. It will also set a boundary between government and markets which will help increase market efficiency and reduce operating costs of doing business in China, others said.

"We think the measures to be approved will help promote law and order in China and reduce administrative and local government interferences," Chang Jian, chief economist of Barclays Plc in Hong Kong, said in a research note.

"Strict and standardized law enforcement and an efficient judicial system and professional judges and procurators will help promote social fairness and justice. These will help to improve market efficiency," Chang said.

The Fourth Plenum is expected to finalize the objectives and implementation for a more independent and empowered judiciary and legislative branches of the government, which will create huge business opportunities, Japanese investment bank Nomura Holdings Inc predicted.

"Implementing the rule of law properly over 1.36 billion people is likely to present huge business opportunities for a full suite of enabling technology products and services, and will create a correspondingly large number of white-collar service-sector jobs that should help expand middle-class consumption," it said in a research note.

It also anticipated a more centralized legal system in China that will reduce local government intervention and ensure a more unified law enforcement system that exerts judicial and prosecution power in an independent and fair manner.

In addition to initiatives related to the rule of law, the meeting is also likely to lay out a clearer direction in rural land reform, especially in the area of an integrated rural-urban land market, Nomura said.

But it warned that the challenge for Chinese leaders will be to strictly implement the initiatives as more reforms will likely mean slower growth in the short term.

"Reforms are never easy and China's approach will likely be gradual in our opinion, taking a 'two-step forward, one-step back' approach, given the property market correction and structural problems in the economy," it said.

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