Political announcements signal a greater role for the market in China

President Xi Jinping's comments at the conclusion of the third plenum of the party’s 18th Central Committee signalled greater interest in protecting the private sector - but many risks still remain.

A "deepening" role for the market was proclaimed by China’s ruling elite as it concluded the third plenum of the party’s 18th Central Committee. While the final statement predictably lacked specificity, it reinforced the reformist agenda of President Xi Jinping and signalled a gradual diminution of state control of all aspects of the economy in favour market influenced prices.

The importance of the plenum was always about the message it would send about momentum in the reform agenda and the ability of the new leadership to overcome resistance to reform. Beginning with an anti-corruption campaign that effectively discredited political opponents, most notably Bo Xilai, and generated popular support, the government has progressed reforms in foreign direct investment policy and interest rate deregulation. It has also had the confidence to permit an economic slowdown. The board pronouncements from the plenum indicate that this momentum will be sustained.

The report signals the development of a more balanced policy towards the public and private sectors; the maintenance of government to commitment to state owned enterprises combined with the development of "fair, open and transparent" market rules for the economy.

Exceeding expectations, the texts from the plenum show the government understands that systemic reform is a pre-requisite for making China’s economic system more sustainable. Judicial structural reform is called for along with changes to the Party’s internal oversight processes, thereby enhancing the role of central Party authorities. Enhancing the power of the judiciary’s at local levels could provide the government with a more effective mechanism to address corruption and force local implementation of policy directives, which would be positive for reform in the medium to long term.

Impediments posed by the two-tier land ownership system and the concept of equal land rights were also raised. At present, farmers moving to urban areas are unable to sell their land, in contrast to urban dwellers who are able to buy and sell property. It is anticipated that the distinction between urban and rural land will be abolished, a significant reform, that will take China a step further towards an economy driven by market forces.

While businesses can take many positives from pledges, albeit ambiguous, to protect the private economy, the crucial issues of interest rates, the floating of the renminbi or banking sector reform, were not publicly mentioned. This shouldn’t be interpreted as a sign that no action will be taken; rather that the government is leaving itself significant room for manoeuvre to implement policy reform in accordance with political and economic necessity.

While the pledge of greater protection for the private sector is a positive announcement from the leaders of the world’s second largest economy, many risks remain inherent in transacting business in country that lacks an independent judiciary and vibrant civil society.

Chinese President Xi Jinping in Beijing. Photograph: Getty Images.

JLT Head of Credit & Political Risk Advisory

Getty Images.
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PMQs review: Theresa May shows how her confidence has grown

After her Brexit speech, the PM declared of Jeremy Corbyn: "I've got a plan - he doesn't have a clue". 

The woman derided as “Theresa Maybe” believes she has neutralised that charge. Following her Brexit speech, Theresa May cut a far more confident figure at today's PMQs. Jeremy Corbyn inevitably devoted all six of his questions to Europe but failed to land a definitive blow.

He began by denouncing May for “sidelining parliament” at the very moment the UK was supposedly reclaiming sovereignty (though he yesterday praised her for guaranteeing MPs would get a vote). “It’s not so much the Iron Lady as the irony lady,” he quipped. But May, who has sometimes faltered against Corbyn, had a ready retort. The Labour leader, she noted, had denounced the government for planning to leave the single market while simultaneously seeking “access” to it. Yet “access”, she went on, was precisely what Corbyn had demanded (seemingly having confused it with full membership). "I've got a plan - he doesn't have a clue,” she declared.

When Corbyn recalled May’s economic warnings during the referendum (“Does she now disagree with herself?”), the PM was able to reply: “I said if we voted to leave the EU the sky would not fall in and look at what has happened to our economic situation since we voted to leave the EU”.

Corbyn’s subsequent question on whether May would pay for single market access was less wounding than it might have been because she has consistently refused to rule out budget contributions (though yesterday emphasised that the days of “vast” payments were over).

When the Labour leader ended by rightly hailing the contribution immigrants made to public services (“The real pressure on public services comes from a government that slashed billions”), May took full opportunity of the chance to have the last word, launching a full-frontal attack on his leadership and a defence of hers. “There is indeed a difference - when I look at the issue of Brexit or any other issues like the NHS or social care, I consider the issue, I set out my plan and I stick to it. It's called leadership, he should try it some time.”

For May, life will soon get harder. Once Article 50 is triggered, it is the EU 27, not the UK, that will take back control (the withdrawal agreement must be approved by at least 72 per cent of member states). With MPs now guaranteed a vote on the final outcome, parliament will also reassert itself. But for now, May can reflect with satisfaction on her strengthened position.

George Eaton is political editor of the New Statesman.