Reform roadmap

Economic and social progress will dominate discussions at Party's key meeting in Beijing, Fu Jing reports

Ahead of the Communist Party's much awaited plenum that begins on Nov 9, expectations are high that the meeting will provide the future reform agenda for China and clear the decks for sustainable, balanced development. As the 200 members and 170 alternate members of the Party's Central Committee get ready to meet in Beijing to discuss among other things China's economic blueprint, experts agree that reforms will undoubtedly be the main point of discussions.

Historically, third plenums have been the springboard for key reforms in China, particularly on economic matters. While some experts feel the meeting may call for more bold, drastic reforms, others feel it will be a case of gradual, incremental changes.

Yu Zhengsheng, China's top political adviser, in a recent interview with Xinhua News Agency, indicated that the meeting will "principally explore the issue of deep and comprehensive reforms".

The reforms this time "will be broad and will be unprecedented", he said, adding: "They will strongly push forward profound transformation in the economy, society and other spheres."

The Political Bureau of the Communist Party of China Central Committee said in a statement on Oct 29 that the realization of the Chinese dream of national rejuvenation, a concept that has been promoted by the new Party leadership, requires deepening reforms comprehensively.

The Party will speed up development of the socialist market economy, democracy, cultural development, social harmony and environmental protection, it said.

Reforms aside, the meeting is also expected to concentrate on the fact that despite the uncertain external environment, China needs to assume more global responsibilities and champion world economic revival with swift and timely measures. Experts feel international attention on the meeting is sharper this time, because the development agenda will have a profound impact on the rest of the world.

New model

"One of the key reform objectives for China is to move toward a new model of sustainable and equitable development, one in which there is more balance between ecological sustainability and growth and provides better sustenance opportunities for all," says Gregory Chin, associate professor of political science at York University in Toronto.

It is logical to expect that more measures in this regard will be announced at the political gathering because the Party has already pursued "ecological civilization" as one of the five pillars of its vision, although much still needs to be done on environmental aspects, he says.

In this regard, Chin says, policymakers need to take more steps to ensure ecological sustainability, pay more attention to the biosphere (and human life within it), rethink how much economic growth is needed and how it can be achieved in more efficient and sustainable ways.

At the same time, growing disparities in wealth and opportunities need to be reduced, while measures are needed to ensure clean, ethical and fair governance.

Glyn Ford, a former member of the European Parliament, says China should opt for an incremental, rather than radical, reform agenda.

He says continuation of balanced development in urban and rural areas and coastal and inland regions is needed while the country tackles other pressing issues such as corruption, rule of law and the need to stabilize population movements. "I think the imbalance between the rural and urban, coastal and inland regions and rule of law are the biggest challenges that China faces," Ford says.

Fresh challenges

Chin of York University says the two main domestic challenges for China are ensuring further advances in clean, ethical and fair governance and in environmental management and sustainable development, with social tensions appearing to have been on the rise in these two areas.

Measures are needed to strengthen and improve corruption prevention to achieve the first goal, he says. For sustainable development, a fundamental shift in the mindset and priorities of all stakeholders and within society are necessary.

Chin says breakthroughs must be made in the way problems are viewed and tackled, such as rethinking GDP in terms of "green GDP" and changes in the performance assessment and promotion/demotion criteria for leaders at all levels.

Alex Kirby, a retired BBC journalist who has tracked China's development for several years, lists ending corruption as the greatest challenge. He feels that it is important to tackle corruption with a "one stone kills several birds" approach.

"Once corruption stops, China will be able to maintain the growth it needs to end poverty and to protect the environment (its own and the world's)," Kirby says.

Martin Schoenhals, a professor at Columbia University in New York, expects the meeting to provide breakthroughs in achieving social equality in China. "What is worrisome is the growing inequality," he says.

Schoenhals says farmers are the key to the growth puzzle. "They account for more than 70 percent of the population, even though some of them no longer hold any land. Historically also, China had a revolution that sought to provide land to farmers. If farmers lose land, or access to land, it will result in mass migration to cities and urban poverty.

"What worries me is whether these hundreds of millions of farmers can move to the cities and all find and keep jobs."

China's new leadership has already provided enough indications that it plans to chart a roadmap for urbanization. While this has long been in the works, experts feel that the plenum will provide the much-needed impetus by including it in the reform agenda.

However, Schoenhals feels the reform agenda should have steps to limit urbanization and outline steps to help farmers remain in the countryside if they so wish.

Pragmatic approach

For some observers, the plenum is important as the new leadership comprising economists, lawyers and humanists provides a more pragmatic approach toward reforms.

Michal Krol, research associate at the European Center for the International Political Economy in Brussels, says the present leaders are mostly individuals who have spent most of their working life with government organizations. "They have an appetite for reforms, not least to meet the ongoing social, economic and environmental challenges," he says.

Krol adds that while there is no doubt China has set stiff targets, its eventual success depends on how much leeway policymakers allow - and how they plan to streamline market liberalization.

"State-owned and State-controlled enterprises dominate the sectors with the highest potential for service productivity and employment growth. Liberalization of transport, finance, telecommunication, healthcare and business sectors by allowing more firms is the most effective way to foster reforms," Krol says.

Echoing Krol's views is David Fouquet, director of the Europe-Asia Research Network in Brussels. "This implies a reconciling of the roles of large State-owned enterprises and what might be termed the true fundamental economy, as well as the provision of social and life services to the majority of the population."

Many observers feel China's reform should be gradual as it has been in the past decades. Duncan Freeman, senior researcher at the Brussels International Institute of Contemporary China Studies, says President Xi Jinping and Premier Li Keqiang have been part of China's leadership for years and says they subscribe to the basic policy consensus that has long existed.

"In this sense, any new policy initiatives will be based on the same principles of gradualism that have been the basis of reform for the last 30 years," Freeman says. "However, they have spoken of the need for greater political courage in tackling reform, so I would hope to see a package of reforms that take significant steps toward addressing fundamental issues faced by China today."

The basic reform goal for China should be to continue to push ahead with the welfare of the Chinese people, which would involve not just GDP and income growth but also issues such as healthcare, education, welfare, the environment and social and political development, Freeman says.

The domestic challenges are many. They are a complex of interrelated problems that cannot be solved individually. The risks in areas such as the financial sector, investment, the environment and others are many and threaten the sustainability of what has been achieved so far.

Freeman says: "A key area is investment, and how it is allocated, because this has an impact not only directly on issues like overcapacity, but also to other areas such as risk in the financial system, the environment and energy and the economic welfare of the ordinary Chinese people because they are losers in a system where overinvestment is prevalent."

Another key area is institutional reform and capacity building, because this is central to reform.

Maria Jesus Herrerias, senior research fellow of contemporary Chinese Studies at the University of Nottingham in the United Kingdom, says China needs to promote further economic reforms to avoid the middle-income trap, which can be addressed at domestic and international levels.

At home, China needs to improve the efficiency of banks. Small and medium-sized enterprises need to get access to credit to finance their investment projects and convertibility of the yuan to facilitate international transactions. Meanwhile, China also needs to generate more incentives to boost domestic consumption, at the expense of traditional savings, to offset the predominance of foreign demand as a source of economic growth.

"The continuous dependence on external demand exposes China to international shocks such as the current economic crisis," Herrerias says.

Opening up

China's reforms at home and opening-up outward have mostly gone in tandem, with external opening-up providing the much-needed impetus for domestic reform. China's entry to the World Trade Organization a decade ago paved the way for more reforms and the country's economic achievements, experts say.

Recent reform efforts have come amid major shifts in the global economic balance and international power. Chin of York University says most of the changes the world is dealing with today, including global governance, were not foreseen 20 years ago, let alone 35 years ago, when China first set out on the road of reform and opening-up.

"The world today is less safe than 35 years ago, in that we are dealing with a number of fissures that threaten global security, including the rise of religious extremism and ethnic or even civilization conflicts, rather than focusing on one major line of geopolitical tension," Chin says.

Ford, a former European Parliament member, says China is now a global economic power even if some factors still have to come to terms with this new world order. "Yet in a sense it is more isolated - and perceives itself threatened - than two generations ago."

At the same time, Chin says the world is now seeing the re-emergence of many regions and economies of the South - and the rise of a group of major emerging or re-emerging economies. "China is now at the heart of many of these global shifts," Chin says. "It will be essential for China to play a constructive role and a more robust role, in helping to ensure that the world evolves toward a more sustainable, fair, stable and safe global environment."

Chin hopes China will continue to pursue necessary reforms to the international monetary, financial, and trade systems and promote reforms of the Bretton Woods system (that is the IMF, World Bank and WTO reforms).

"The 2008 global financial crisis showed that such reforms are much needed. The ongoing challenges of European sovereign debt and of the European banks and the fragile recovery of the US economy suggest that more changes are needed," Chin says.

China should help strengthen the role and capabilities of the UN system, especially by giving greater support to the UN in championing global development and ecological sustainability, he says.

Ford says that China should open up more economically, especially in sectors such as telecoms, banking and finance, make the yuan one of the three global reserve currencies, exert its rightful weight in the international forums and build bilateral trading relations with key global players.

Chin says China should host the G20 summit in 2016 and encourage G20 leaders to focus on strengthening financial stability arrangements and provide global leadership on ensuring delivery of the Bretton Woods reforms.

The new leadership has taken measures in the bilateral and multilateral spheres. It has decided to develop a new type of foreign relations, especially with the US. It has advocated launching a new Silk Road in central Asia and a coastal Silk Road with southern neighbors. It has started to engage in bilateral trade and investment pacts while pursuing multilateral efforts.

Former BBC journalist Kirby says China has a huge contribution to make to global systems. On climate change, it is already providing an example by doing what is in its own interest (decarbonizing its economy). "This makes it harder for other countries to resist adopting similar policies - and that benefits the whole planet," Kirby says.

He goes one step further and adds that since China is such a large and important country, doing what is in its own interests is certain to be of interest to others also. China should also open up to some of the global economic and trade regulatory systems, he says.

However, Schoenhals feels that China should not follow the path trod by other powers such as the US because it would lead to aging infrastructure and lack of sufficient social services for people, because most of the money ends up being used for military purposes. "I know China is proud of being a peaceful nation ... I hope China will not follow America's lead and will instead find a way to disarm, rather than arm."

Zhang Chunyan in London contributed to the story.