* China's unveils boldest reform plan in decades
* Document provides detail missing from initial outline
* Scope of proposed changes show Xi's firm grip on power
* Much stress on social reforms alongside economic overhaul
By Kevin Yao and Ben Blanchard
BEIJING, Nov 15 China unwrapped its boldest set
of economic and social reforms in nearly three decades on
Friday, relaxing its one-child policy and further freeing up
markets in order to put the world's second-largest economy on a
more stable footing.
The sweeping changes helped dispel doubts about the
leadership's zest for the reforms needed to give the economy
fresh momentum as three decades of breakneck expansion shows
signs of faltering. However, the reforms may take years.
A document released by the Communist Party following a
four-day conclave of its senior leaders promised land and
residence registration reforms needed to boost China's urban
population and allow its transition to a western-style services-
and consumption-driven economy.
Pricing of fuels, electricity and other key resources - now
a source of major distortions - would be mainly decided by
markets, while Beijing also pledged to speed up the opening of
its capital account and further financial liberalisation.
"The reforms are unprecedented," said Xu Hongcai, senior
economist at the China Centre for International Economic
Exchanges, a well-connected Beijing think tank. "Reforms in
1990s were limited to some areas, now reforms are all-round."
Analysts suggested the plans are the most significant since
Deng Xiaoping led a series of reforms in the late 1970s and the
early 1980s. Those changes eventually opened up the country to
the outside world and set it on course to become the champion
economy of emerging markets.
President Xi Jinping and Premier Li Keqiang, appointed in
March, announced several breakthroughs in social policy,
pledging to unify rural and urban social security systems and to
abolish controversial labour camps.
The 60-point plan, more comprehensive and specific than
initially thought, also eased concerns that Xi would need months
if not years to take full charge of China's vast party and
China-watchers took the establishment of a working group to
lead economic reform and a new State Security Council as further
signs of how effectively Xi had managed to consolidate power
just eight months after he officially took over.
"This is much more of a top-down, systemic leadership
compared to the 1980s and 1990s. Compared to previous
generations, this is a remarkably robust leadership," said Dali
Yang, a political science professor at the University of
Still, Xi and his team gave themselves until 2020 to achieve
"decisive" results - a tacit acknowledgement of the risks
involved in Beijing's balancing act between letting market
forces eventually take over and preserving financial and social
stability and the Communist Party's political monopoly.
The experience of the past decade is also a reason why many
economists and international observers view Beijing's bold
reform plans with guarded optimism.
Just like Xi and Li, the previous leadership promised to
overhaul China's economy and kick its addiction to rapid,
investment and credit-fuelled growth, but left it saddled with
more debt, industrial overcapacity, pollution and financial
U.S. Treasury Secretary Jack Lew echoed that caution during
a stopover in Beijing on his Asian tour, describing the plans as
"ambitious" and noting that key was how soon they would become
"The direction is significant, but the character and the
pace of change matters," Lew told reporters.
The initial brief reform outline published on Tuesday
triggered a stock market sell-off, with investors taking its
scant details as a sign of a lack of commitment on Xi's part or
his failure to overcome resistance of vested interests, such as
powerful state-owned companies.
But a raft of specific policy plans ranging from interest
rate and currency regime liberalisation to residence
registration and land reforms and the pledge to allow more
competition seemed to put such concerns to rest.
According to the document, the government had decided to
work toward an independent judiciary - courts would be
"appropriately" separated from local governments.
Under government reform, it relaxed the need for government
approval on projects and said the performance of local officials
would be rated on measures other than just economic growth, such
as in environmental protection.
The commitment to abolish re-education through labour camps
was also remarkable, given that several political sources had
told Reuters this was an area where Xi was facing much
Few commentators had also expected any significant attempts
to take on powerful state monopolies, even though many
economists argue that loosening the stranglehold of big
state-owned firms' on markets from banking to energy was key to
success of other reforms.
The initial outline of the plans on Tuesday had affirmed
those firms' strategic role in the economy. But the longer
report on Friday raised state firm dividend payments, allowed
private firms to enter some of the protected sectors and
encouraged them to take part in reforming the state-owned firms.
All in all, the proposed reforms are part of China's grand
transformation design: retooling the economy towards greater
reliance on consumption, services and moving up the
manufacturing value chain, while tackling deepening inequality
and discontent, a source of great anxiety for a leadership that
prizes stability over everything else.
Chinese leaders are acutely aware of what is at stake as
years of rapid growth come to an end. Having been the factory to
the world, they want to avoid the so-called middle-income trap,
where wealth creation stagnates as market share is lost to
The World Bank says China's per capita GDP was $6,188 last
year, compared with $22,590 in South Korea, $36,796 in Hong Kong
and $51,709 in Singapore - Asian peers that have succeeded in
making such a transition.
What appeared to be a leak of the document on Chinese social
media earlier on Friday set off a rally in Chinese stock markets
hours before its official release, with investors
cheering its relatively detailed language on reforms.
Still, economists said that having a good plan was only part
of the success and making the ambitious agenda a reality would
be the new leaders' true challenge.
"Based on the headlines ... they are moving in a positive
direction," said Jan von Gerich, fixed income chief analyst with
Nordea Bank in Helsinki. "But one should not get too carried
away as this will be a long process."