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China: Market’s ‘decisive’ role to boost economic efficiency

, November 14, 2013, 0 Comments

China cpc central committee & reformsChina’s pledge to give the market a “decisive” role has attracted international attention as Beijing aims to find new growth momentum for the world’s second largest economy.

“Economic reform is key and the core solution is the proper relationship between the government and the market,” said a communique released by the Communist Party of China after the latest plenary session of the party’s central committee.

The document, widely received as a reform agenda for the next decade, also vows to “give market a decisive role in resource allocation and give better play to the role of government.”

The change of the market’s role from “basic” to “decisive” in the economy is an important highlight of the communique, analysts said.

It will help China shift from an investment-led economic model to one that is driven more by efficiency, and inject new momentum into China’s long-term economic growth, analysts said.

In particular, the shift of language from “basic” to “decisive” is very significant, said Stephen Roach, a senior fellow at Yale University’s Institute of Global Affairs and former chairman of Morgan Stanley Asia.

“I think the statement to set up a central leading team for deepening reform is indicative of a strong commitment,” he recently told Xinhua, referring to a proposal in the communique.

According to the Financial Times, Beijing’s pledge to give a “decisive” role to the market signals an “end to state-mandated prices in the world’s second-larget economy.”

Former World Bank chief economist Justin Yifu Lin said on Wednesday that China is at the stage of development where it is necessary to get rid of distortions and bottlenecks in the mechanism for resources allocation.

“It’s time to remove these kinds of distortions and the Chinese leadership certainly understand this issue very well,” Lin said.

Luis Oliveros, a Venezuelan economist, said China’s stress on the market will unleash new growth potential and enhance the vitality of the economy.

In some industries, such as e-commerce, where government control is relatively low, Chinese enterprises will exhibit stunning vitality and efficiency, he said.

Brazil’s Folha de Sao Paulo newspaper published a commentary on the meeting on Wednesday, saying China’s announcement indicates the country will further open up its economy, especially in heavily-controlled areas such as finance, energy and telecommunication. The move could bring more opportunities to foreign companies, it noted.

Many multinationals have reaped enviable gains in China’s vast market of 1.3 billion people, creating jobs in economies hard hit by the international financial crisis of 2008.

Meanwhile, China’s emphasis on a “better” role played by the government,rather than a stronger role, may signal less government intervention in the economy, more scientific macroeconomic policies and more effective governance, analysts said.

This article appeared in the People’s Daily Online Digital  edition as China’s emphasis on market’s ‘decisive’ role to boost economic efficiency