China’s stock markets rallied in a bull- ish manner， recently buoyed by a detailed reform blueprint released on November 15. After signing off on a 60-point reform plan—the most sweeping changes to the country’s policies in almost three decades—the Third Plenary Session of the 18th Central Committee of the Communist Party of China （CPC） took a pledge to make “decisive” reform plans a reality by 2020.
　　The plenary session， held in Beijing from November 9-12， produced a 20，000-word document three days later， titled the Decision on Major Issues Concerning Comprehensively Deepening Reforms， explicitly listing 56 tasks in 15 key areas that are in dire need of reform （See articles on pages 26-27 and 28-29 for more）.
　　In fact， an initial communiqué on the reforms was released on November 12， upon the closure of the CPC Central Committee plenary session， but it only contains fundamental principles， while a more detailed and specific plan than initially thought has confirmed the Chinese leadership’s commitment to reforms and thereby greatly lifted market sentiment.
　　Dubbed as the “boldest reforms” since the late Chinese leader Deng Xiaoping set the country on a course of opening up to the world in the late 1970s， this year’s plenary session set the target of deepening reform in an all-round manner， suggesting changes will go far beyond the economic sector and cover areas such as the economy， politics， culture， society， ecological environment and Party building.
　　The detailed plan included giving a greater role to market forces， the transformation of government functions， more responsibilities for state-owned enterprises， further freeing up markets， offering farmers more property rights over the rural collectively owned land， lifting the restrictions on the sale of rural construction land and establishing a universal social security net.
　　China is on the move to turn reform plans into actions.
　　An executive meeting of the State Council on November 20， presided over by Premier Li Keqiang， disclosed new measures to further improve the market climate， such as exposing intellectual property rights violations to the public and building a unified property registration system.
　　The National Development and Reform Commission， China’s top economic planner， pledged to open some investment projects in the fields of finance， oil， electricity， railways， telecommunications， resource development and public services for private investment， with further details on related policies and measures to be introduced by the end of 2013. 　　More policies are expected to come out at the Central Economic Work Conference to be held at the year end.
　　Experts， however， warned that some of the reform plans require more time for implementation due to stiff resistance from interest groups. They said it will present a tough challenge for China’s leaders， who have already set their sights on a new China as they continue to work toward a balance between reform and social stability.
　　 Far-reaching goals
　　Analysts and commentators from home and abroad spoke highly of the proposed reforms. Yang Weimin， deputy head of the Office of the Central Leading Group on Finance and Economic Affairs， a key economic policymaking institution， said the reform plan approved by Party leaders is unprecedented. Yang participated in the drafting and amendment of the plan.
　　In the CPC Central Committee’s third plenary sessions of the previous three decades， Party leaders normally focused on just one aspect of reform， Yang said.
　　This time， the reform is comprehensive， covering many sectors. “When reforms have entered a crucial stage—the deep water—we have to push comprehensive changes in order to deepen reforms，” he said.
　　The focus， however， is still on economic changes. “Among the 15 areas that are in need of reforms， six of them are related to the economy. Economic reform is used as an engine for changes in other areas，” he said.
　　This round of comprehensive reforms is guaranteed by the proposal of a central leading reform team. The team will be in charge of designing reforms on a holistic basis—arranging， coordinating， and pushing forward reforms as a whole—as well as supervising the implementation of reform plans.
　　A more specific timeframe is also a guaran- tee for the implementation of the reform plan， said Yang， referring to the 2020 deadline.
　　Chen Fengying， Director of the Institute of World Economic Studies， China Institutes of Contemporary International Relations， told Beijing Review it’s a “miracle” that the CPC has managed to hammer out so many reform tasks within six months.
　　“Institutional change is of vital significance. Such a change is likely to result in more positive growth expectations for China，” said Chen.
　　Capital Economics， a London-based economic forecaster， said in its latest China Economics Update release that the detailed reform plan is clear， wide-ranging and does not shy away from areas of contention. “China’s reform package is beyond expectations，” the company said. 　　Wang Qinwei， an economist at Capital Economics， said the plan was ambitious， wellrounded and in-depth， and that it could offer a cushion for supporting the long-term sustainable growth of the economy.
　　Giving the market a greater role is viewed as the biggest highlight of the reforms， as China looks to market forces in search of new growth drivers amid prolonged slowdown， said analysts.
　　For some time right after the founding of the People’s Republic in 1949， the idea of a market had been associated with capitalism in China. Even after reform and opening up in late 1978， the country had struggled to define the market and some dogmatists still questioned whether socialism could accommodate a market economy. It was not until the 14th CPC National Congress was held in 1992， that a socialist market economy became a consensus. The Party agreed that the market， under state macroeconomic control， should be the “basic”means of allocating resources.
　　The Third Plenary Session of the 18th CPC Central Committee took market function to the next-higher level， saying it has a “decisive” role in the allocation of resources.
　　 Impending changes
　　Yang， deputy head of the Office of the Central Leading Group on Finance and Economic Affairs， said it’s not only a change of wording， but more importantly a change of the connotation of a socialist market economy.
　　The upgrading of the market’s role was the biggest highlight of the decision and is a significant theoretical innovation， Yang said.
　　He said such a change is even on par with the proposal to establish a socialist market economy back in 1992.
　　“The historic theoretical innovation in 1992 greatly pushed forward China’s reform and opening up and economic growth， and so will this innovation，” said Yang. “It will greatly unleash growth potential and give China another two decades of growth momentum. It will also help China break free from the middleincome trap.”
　　A new attitude toward the function of market forces has also signaled a pending change in the relationship between the market and the government.
　　China needs to transform government functions， enhance trust in the government and build a service-oriented government， according to the reform plan.
　　“Only by clearly defining government functions can the market play a ‘decisive’ role in distributing resources. The government should have five major functions—macro-control， market regulation， public service， social management and protection of the environment，”Yang said. 　　The new Central Government formed in March has been pushing forward an institutional reform to cut red tape and delegate power to lower levels. So far， it has abolished or transferred 221 administrative approval items to local governments.
　　Wang Feng， Vice Minister of the State Commission Office for Public Sector Reform， said the Chinese Government will continue to streamline governance and reduce government intervention in the market by abolishing more administrative approvals and transferring supervision to lower-level government bodies.
　　State-owned enterprises （SOEs） have long been criticized for inefficiency and corruption， making them a target in future reforms.
　　The detailed reform plan approved at the Third Plenary Session of the 18th CPC Central Committee said 30 percent of the gains of the country’s state-owned capital will have to be handed back to the government by 2020.
　　At present， the proportion ranges from zero to 15 percent.
　　According to data from the Ministry of Finance， China’s central SOEs raked in 1.1 trillion yuan （$180.5 billion） in profits in 2012， but only handed in 95.1 billion yuan （$15.6 billion） to the Central Government. Among the total 95.1 billion yuan， only 5 billion yuan （$820.5 million） was spent on improving people’s livelihood.
　　The increase in dividends that SOEs pay to the state will likely be channeled to aid in the expansion of the social security system， analysts said.
　　China will also develop mixed ownership to improve the basic economic system while maintaining the dominant role of public ownership. The state-owned economy will play a leading role in this process， encouraging， supporting and guiding the non-public sector， according to decisions made at the most recent plenary session.
　　Both public and non-public sectors of the economy are important components of the socialist market economy and significant bases for economic and social development， said the detailed reform blueprint.
　　The reform plan also highlighted reforms in the financial sector， including speeding up the opening of the capital account and currency regime and interest rate liberalization. An additional point promised to increase the number of free trade zones （FTZs） to help open up the economy and invigorate growth.
　　“On the basis of pushing forward development of the existing pilot FTZ， qualified regions will be selected to build free trade zones or ports，” the reform plan said. 　　Reforms also include plans to make rural land tradable in the land sale market—a move that is expected to give farmers more benefits from the continuous hiking of housing and land prices.
　　A universal social welfare system， from healthcare to education， has been promised to pave the way for the country’s urbanization， which is bound to see more rural-urban migrant workers.
　　 Resistance remains
　　Having a good plan was only part of the success， and making the ambitious agenda a reality would be the new leaders’ true challenge. Much will depend on how the relevant ministries and government agencies follow through on executing the reform blueprint， said analysts.
　　Jan von Gerich， fixed-income chief analyst with Nordea Bank in Helsinki， said China is moving in the right direction based on the document released after the plenary session.
　　“But one should not get too carried away， as this will be a long process.”
　　Market forecaster Capital Economics agreed， saying that any policy document， however weighty and well crafted， does not in itself change anything on the ground.
　　“Whether or not the plenary session ends up as a turning point in China’s development depends on how well reforms are implemented.”
　　Wu Jinglian， one of the most influential economists in China， said opposition against the proposed reforms will derive from two aspects.
　　“The first is people’s outdated mindset and the second is from vested interest groups. And the latter is more practical，” he said. “For interest groups， the Central Government should on the one hand break down their resistance and on the other lend them a helping hand to solve their practical problems.”
　　For instance， giving farmers property rights over their rural collectively owned land will greatly reduce the income of local governments， worsening the condition of the already heavily indebted local governments， said Wu. “How can they pay their hefty debt when their income has been cut？”
　　Wu said another thorny issue is the marketbased liberalization of deposit interest rates， which is bound to deal a heavy blow to the country’s major state-owned commercial banks because they can no longer enjoy the exorbitant profits from the gap between a high loan interest rate and a low deposit rate.
　　“It will be a tough test on the wisdom and courage of the current generation of Chinese leaders.”