On Monday, the CCP Central Committee and the State Council jointly released a document on overhauling the country’s economic management system.
Some context: The document was approved by China’s most important policymaking body, the Central Committee for Comprehensively Deepening Reform (CCCDR) back in February (see February 17 Tip Sheet).
More context: Xi’s top economic advisor, Liu He, looks to be the driving force behind this document.
The big message: We need to give markets a bigger role.
Here’s what the leadership hopes to achieve (Gov.cn):
- “[E]ffective incentives for property rights, the free flow of production factors, flexible prices that respond [to the market], fair and orderly competition, and the survival of the fittest enterprises.”
This means a reduced role for government (Gov.cn 2):
- “The guideline stressed minimizing the government's direct allocation of market resources and direct intervention in microeconomic activities.”
But don’t get too excited – it’s not like the CCP has gone all laissez-faire.
The document is HUGE and wide-ranging in terms of the "what," but pretty vague on the "how."
- That's par for the course in high-level docs like this.
Here are a few things that caught our eye.
We could be moving towards a more flexible labor market:
- Residents from a given city cluster can change their household registration (hukou) freely within the cluster.
- Cities will get public service resources based on their population instead of their administrative rank.
And the doc gives some serious time to creating a better business environment. It promotes:
- A regular review mechanism for market access policies
- A review mechanism to weed out policies that impede fair competition
- A class action system to protect consumer rights
- A national evaluation of local business environments But foreign companies should beware. Foreign investments will be subject to:
- A national security review
- Anti-monopoly review
- Technology security management review
- An unreliable entity list
- Oil and gas
- Postal services
- SeeGet smart: These initiatives are still in the planning stages. They will be translated into policy over the coming months
Certain state-owned enterprises are in for some changes. The following industries will be subject to more competition: