China's deepened reform will help stabilize global economy, experts say

China's deepened reform will lead to a more sustainable growth and help stabilize the global economy, experts said.

A comprehensive reform package was rolled out at the four-day Third Plenum of the Communist Party of China's 18th Central Committee, which ended in Beijing on Tuesday.

The Party pledged to let markets play a decisive role in allocating resources as it unveiled a reform agenda for the next decade.

A specialized high-level group is to be commissioned to design and coordinate China's "great revolution" of reform and opening-up.

The reform package shows the government's decision to advance ongoing market-based reform to achieve quality growth, said Wang Haifeng, a researcher at the Institute for International Economic Research of the National Development and Reform Commission.

"Slower but steady growth in China means more for the global economy, compared with highly fluctuating growth," Wang said.

Analysts at Standard & Poor's said the implementation of reforms that support the decisive role of market forces in resource allocation could support China's long-term sovereign credit ratings.

"An increasingly market-driven economy plus a government with better governance could help the country sustain per-capita real GDP growth at above-average rates," S&P credit analyst Kim Eng Tan said.

"At the same time, it would reduce the country's reliance on credit-driven investment spending as a source of economic growth, which could also assimilate the financial risks that have built up over recent years."

The more decisive market role will involve areas such as interest rate liberalization, moves to remove administrative barriers to private capital, and other forms of financial liberalization.

It was also emphasized, for the first time, that both private and State-owned enterprises are the foundations of China's economic development.

Liu Ligang, chief economist at ANZ Banking Group, said, "This is ... to instill some confidence in China's private entrepreneurs who have complained about a worsening operating environment after the global financial crisis, with the State advancing and the private sector receding."

Xu Xiang, a private entrepreneur managing a leather export company in Zhejiang province, said a bigger role for the market will benefit the company. "For us, the less government intervention, the better."

He said he hopes the entry threshold for some industries can be lowered further and that interest rate and foreign exchange rate liberalization can be introduced as soon as possible.

Susan Shirk, former deputy assistant secretary of state during the Clinton administration in the United States, said, "China has been dependent on foreign investment, because it has a very under-developed domestic capital market.

"So a more developed domestic capital market with fair access to different types of firms inside China, as well as international firms, will be viewed very positively."

Wang Zhengxu, a lecturer at the School of Contemporary Chinese Studies at the University of Nottingham in Britain, said the reform plans will make the Chinese economy more dynamic, more efficient, more innovation-driven, consumption-driven and service-oriented.

"Foreign companies with the technologies and know-how in helping China to achieve these goals will enjoy a wide range of opportunities in China," he said.

"In the areas of high value-added manufacturing in electronics and machinery, pharmaceuticals and clean energy - among others - foreign firms have a lot to harness."

Liu said the comprehensive reform package is likely to weigh down China's economic growth in the next one to two years.

"We maintain our view that the Chinese authorities could lower the growth target for the next year to 7 percent," Liu said. The growth target for 2013 is 7.5 percent.

Although China's growth rate is expected to slow, it will not undermine the country's influence on the global economy, Liu added.

The urbanization drive means that demand for housing, infrastructure, energy and agricultural products will grow.

Contact the writers at huyuanyuan@chinadaily.com.cn and zhangchunyan@chinadaily.com.cn

Zhang Yuwei in New York contributed to this story.

(China Daily USA 11/14/2013 page3)