Free markets to play 'decisive' role in China

BEIJING - China's ruling elite have pledged to let free markets play a "decisive" role in the state-dominated economy, a sign that further liberalisation is on the cards in the next decade as the leadership aims for better-quality growth.

In a report wrapping up a four-day, closed-door policy summit, the ruling Chinese Communist Party (CCP) also set a target for "decisive results" in reforms by 2020. It gave no specific details.

Another highlight of the meeting, known as the Third Plenum of the Central Committee, was the announcement of the setting up of a "state security committee" to consolidate policymaking decisions relating to China's domestic and foreign security challenges.

Chief among the reform pledges was a vow to "give markets a decisive role in resource allocation and give better play to the role of government" in the world's second-largest economy.

Unlike previous policy statements that referred to the "basic" role of the market in allocating resources, the communique called for a "decisive" role this time, according to the Xinhua news agency.

Analysts say the difference in the choice of words is a sign that further economic liberalisation may be on the cards.

Government think-tank researcher Yuan Gangming said the change is "what we have long been waiting for".

"The wording erases past doubts that China is unwilling to embrace a more marketised economy," he told The Straits Times.

But such change will not come quickly nor easily, say scholars, pointing to stiff resistance from China's powerful state-owned enterprises (SOEs).

They have long enjoyed cheap funding and market access while many private enterprises have been left in the cold.

Indeed, the communique also stressed the need to maintain the dominance of the public sector.

This may reflect an internal tussle on how much to scale back the government's control over key sectors from banking to oil.

"The emphasis that SOEs are still the bedrock of the economy was disappointing but we had expected that," said Mr Andrew Polk, economist at business research association Conference Board. "It's quite clear that they haven't really decided where the line should be drawn between the state and the economy... It's an ongoing discussion."

After three decades of rapid growth which has produced problems like inefficiency and environmental pollution, China is trying to shift its economy from one led by investment and labour-intensive industries onto a path fuelled by domestic consumption and innovation.

The communique also made pledges on a number of fronts, such as overhauling the judiciary system to better protect the legal rights of the people.

The CCP also promised freer investment flows and the setting up of more free trade zones in the mould of the Shanghai Free Trade Zone launched in September as a test bed for the new leadership's economic restructuring efforts.

Observers say the picture will become clearer when the CCP and government give more details via President Xi Jinping's work report at the plenum and a reform-implementation proposal.

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