'383 plan' calls for reform across the board

Updated: 2013-10-31 07:14

By Li Yang (China Daily USA)

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Chinese leaders will hold a high-level meeting from Nov 9 to 12 in Beijing to map out the next round of reform. It will cover many important parts of the economy. The following is an introduction, written by China Daily business reporter Li Yang, of a plan that is used as a blueprint for the meeting's final document

The meeting is the Third Plenary Session of the Communist Party of China's 18th Central Committee, also known as the 2013 Third Plenum.

Ahead of the Third Plenum's communique's adoption and release, a reform plan from a major government think tank was released to the public.

Writing the plan was a group of experts led by Li Wei, director of the Development Research Center of the State Council, and Liu He, vice-minister of the National Development and Reform Commission, according to the China Securities Journal. The document is known as the "383 plan" in the Chinese press.

One outstanding feature is the plan's proposal for urgent, broad-based reform of the economic system.

"To accomplish the task of building a comparatively well-off society in 2020, as it was set by the Communist Party of China 18th National Congress (in 2012), China is to take a number of major efforts in transforming its growth model and mending its systematic drawbacks in a limited period of time."

This is the opening statement of the "383 plan", a reform proposal that is rare in its breadth and scope.

The "383 plan" is named for its content: a "trinity reform" of market, government and enterprise, which will be spread across eight key areas, with three major breakthroughs to be made.

That the plan focuses not only on reform targets but also on how to attain them, despite the difficulty in doing so, has been a major talking point following its release.

The new reform's goal, according to the plan, is to establish an energetic, innovative, inclusive, orderly and rule-by-law socialist market economy in three steps - from 2013 to 2014, 2015 to 2017 and 2018 to 2020.

The three main reforms of the "trinity" are: improving the market system, transforming government functions and creating new business structures.

First, the government should adjust its production factors - land, labor and capital - and allow the market to allocate resources with more autonomy on a wider scope.

Second, the government should streamline its administrative approvals, clarify its duties, increase transparency, and deepen fiscal and tax reform to serve the people and protect social justice.

Third, the government should open up the marketplace to different players and ensure that competition among enterprises for production factors and innovation incentives is fair, in order to boost innovation and advanced management.

The eight key areas for reform are as follows.

First, trim the number of required administrative approvals.

Second, reform basic industries, such as railway, oil/gas and power, by lowering entry barriers, promoting market competition and achieving more effective supervision.

Third, launch land reform to give both rural and urban landowners equal rights, establish a unified land market and let landowners share equitably in the rise of land values.

Fourth, reform the financial sector by lowering entry barriers and liberalizing deposit interest rates and exchange rates.

Fifth, reform the fiscal revenue and tax distribution system to match governments' incomes with their responsibilities and set up a basic social security package, paid by the central and provincial governments, for all citizens.

Sixth, reform State-owned enterprises by redefining their responsibilities and separating the administration and management of State-owned assets.

Seventh, promote innovative and green development.

And eighth, further open up the service sector.

The three major breakthroughs to be sought are: lowering market entry barriers in order to attract investors and to foster competition; setting up a basic social security package for citizens; and allowing collective land to be traded on a unified market.

Obviously, the government is central to almost all of the reforms, and the administrative approval is the most common means of taking profits and interfering with the market.

The central government has about 1,500 different administrative approvals, and local governments have about 17,000.

Premier Li Keqiang has vowed to cut the number of administrative approvals by one-third during the present administration's term in office.

According to the reform plan, the government should learn to improve macro-control through currency, fiscal and tax adjustments and avoid direct interference with the

market via loan, land or industry controls.

The government should improve the transparency of administrative approvals, with strict accountability for those in charge of the approval process, according to the plan.

Zhu Lijia, a public administration expert with the Chinese Academy of Governance, said: "Cutting administrative approvals is easier said than done, because government reform has not reached its critical point. Only with the collaboration from all departments of the government can the approvals be cut down effectively. "

The reform plan also noted that the government should reform the civil servant salary system to curb corruption and payoffs.

For example, the government can deposit a certain proportion of a civil servant's salary and award the lump-sum deposit to the official after retirement as an "honesty annuity" if the employee has a clean career record. The honesty annuity system would start with public administration departments, senior executives of State-owned enterprises and newly promoted civil servants.

But Mao Zhaohui, a researcher into government corruption at Beijing-based Renmin University of China, said: "Even if it is called an honesty annuity, simply having a clean record is not enough. To win the award, civil servants should also fulfill their duties in an exemplary fashion."

Some believe that only when judicial and auditing authorities are independent can they perform the duties of verifying whether a civil servant's career record is clean. Otherwise, the honesty annuity may become just another bonus for State employees who already are envied for their power and "gray," or extralegal, income.

The reform plan calls for the judicial authority to allow citizens, organizations and others to sue local governments to fulfill their responsibilities: "Public interest litigations should be encouraged, and class lawsuits should be permitted."

Ying Songnian, a professor of law with the China University of Political Science and Law, said in an interview with Southern Metropolis Daily: "Although not new, the reform plan on administrative litigation and public interest lawsuits would be of great significance in reducing people's appeals and complaints, and in easing social tensions."

Jiang Ming, a legal researcher at Peking University, noted: "The Administrative Procedural Law will be amended soon for the first time since it was enacted about 20 years ago, to include some new administrative actions as targets for people's litigations and give the plaintiffs the rights to file suites with higher-level judicial authorities.

"It is easy for a county government to influence the judgment of a county court," he added.

The reform plan also offers new ways of linking governments' revenues to their functions, so that the central government would be responsible for the pension insurance and judicial systems, as well as for food and drug safety, border defense, and trans-regional and sea area administrations through more transparent transfer payments. These functions have been shouldered by local governments along with the central government.

Zhou Tianyong, a political science expert at the Party School of the Central Committee of the CPC, said data show that local governments provide 75 percent of the public services with 45 percent of the financial resources. The reform plan "clarifies the duties and expenditures of governments of various levels".

"The social security network and the other unified public services for the huge migrant population should be provided by the central authority," he said.

One noteworthy aspect of the plan is the call for setting up an accounting system to regulate local governments' financing platforms and expand their rights to issue bonds.

With bond issues for municipal administration earnings, securitization of assets and investments for the insurance and pension system, local governments can have more leeway in raising funds, although the second amendment draft of the Budget Law does not mention granting them legal rights to issue bonds.

Yang Zhiyong, a researcher of fiscal science with the Chinese Academy of Social Sciences, stressed to China Business News: "Raising debts cannot solve the root causes of local government debt. The local governments should secure the property tax, consumption tax, resource tax and environmental tax as important contributors for revenue."

The "383 plan" is widely expected to serve as a blueprint for the final document of the leaders' 2013 Third Plenum next month.

It also sends out a clear message that China's reform is no longer "crossing the river by feeling the stones", as described by the late leader Deng Xiaoping, but is to begin a new chapter of seeking key targets according to well-planned priorities.

The plan will be published next month by the CITIC Press in Beijing.

Contact the writer at liyang@chinadaily.com.cn

(China Daily USA 10/31/2013 page13)