(Reuters) - China’s top leaders hold a closed-door meeting from Saturday to set the country’s economic agenda for the next decade.
The Central Committee of China’s ruling Communist Party gathers for four days in what is known as the third party plenum.
President Xi Jinping has said the meeting would produce a comprehensive set of reforms. Experts say it is expected to produce broad outlines for policies, rather than specific details on how China will transform its economy away from a reliance on investment and exports and towards consumption and services.
Below is a list of possible reform areas to be discussed:
Experts do not expect the plenum to produce detailed plans for state-owned enterprise (SOE) reform, because of expected resistance from vested interests. Privatization will not be on the agenda.
The country’s top state asset regulator has said it is still working on a plan to reform SOEs and may unveil steps after the meeting.
SOEs are more likely to be indirectly affected by any reforms adopted in related areas, such as energy and resource pricing or lower entrance barriers for private sector involvement in industries such as finance, healthcare and infrastructure.
The leadership is expected to push reforms that let markets play a greater role in setting interest rates. They might introduce negotiable certificates of deposits and a bank deposit insurance scheme, and to further relax state controls on the interest rates banks can set on deposits.
Reforms may include more private-sector participation in banking and measures to boost direct financing to the real economy by deepening capital markets and expanding a pilot program for securitizing credit assets.
The government may reiterate its commitment to easing restrictions on capital movements in and out of the country and yuan liberalization.
The chances of an immediate overhaul of the existing fiscal and tax system, or of any major change in the distribution of revenue between central and local governments is quite low.
The meeting is likely to launch changes in coal resource tax so that the tax is levied on the value of sales, rather than sales volumes. This would bring it into line with the way similar taxes are applied to crude oil and natural gas.
Other measures likely to be discussed are:
- Introducing a consumption tax on goods that cause severe environmental pollution and over-exploitation of resources as well as on some luxury goods.
- Expansion of a pilot property tax to cities beyond Shanghai and Chongqing. The tax is currently levied annually on owners of spacious and expensive homes in the two pilot cities.
- Expanding a value-added tax pilot program nationwide to include more sectors in coming years. The tax is currently applied in transportation and some modern services, such as information technology, logistics and broadcasting and film sectors.
The central government might absorb some local government costs on social security, healthcare, food and drug quality supervision, and other public services.
Beijing is expected to gradually expand municipal bond issuance to clean up a chaotic system of local government financing.
The plenum will likely push forward a process of registration and confirmation of land use rights to pave the way for land transfers. But land reform, a critical plank in encouraging more people to move to urban areas, is controversial and complex, so a major breakthrough is unlikely.
HOUSEHOLD REGISTRATION (“HUKOU”) SYSTEM REFORM
Reform of the household registration system, which ties access to social services such as healthcare and education to the location where you are registered, will continue to follow the existing strategy; further relaxing the system in small and medium cities. Relaxing the system in large cities is unlikely.
The leadership is expected to discuss further simplifying administration and decentralizing government power to revitalize the economy and give markets a bigger role.
The plenum might discuss expanding state pension coverage to migrants and self-employed people and to more rural areas. It may also discuss extending serious illness insurance coverage to more people, increasing the government’s contribution to basic rural healthcare insurance and encouraging private firms to enter the healthcare sector.
Reporting by Aileen Wang and Xiaoyi Shao; Editing by Jonathan Standing