Tags: China | economy | business | reform

China Details Reforms to Ease Grip on Economy

Friday, 15 Nov 2013 07:27 AM

China pledged more reforms to loosen the Communist authorities' grip on the world's second-largest economy, as leaders chart the way forward for the next decade.

The ruling party issued a document detailing economic reforms following a key meeting, known as the Third Plenum, which ended earlier this week.

The plans include requiring state firms to pay larger dividends to the government, and allowing private companies a bigger role in the economy, according to the document issued by the official Xinhua news agency.

The government will require 30 percent of earnings from "state capital" to be paid back to the public coffers and used for social security by 2020, it said.

China's 113 major state-owned enterprises directly under the central government typically pay 5 to 20 percent of their profits to the government in dividends, the part of a company's earnings distributed to shareholders.

"This will have an effect on facilitating a better competitive environment," ANZ Banking Group economist Liu Ligang said, adding it would make cash-rich SOEs allocate funds more rationally.

China moved to shut down or merge loss-making state firms in the late 1990s, leaving a smaller number, but with immense power over large sectors of the economy.

Further reforms have been made difficult by opposition from the state sector, which has been enriched by close ties to the government and lack of competition.

In acknowledgement of private firms, China will allow private capital to take equity stakes in state-funded projects, Xinhua said, but gave no proportion.

China will also allow the set up of smaller banks and financial institutions using private funds, the document said. The country currently has just a handful of private banks.

In the financial sphere, China will push forward liberalization of its interest rates and free convertibility of its yuan currency, the document said.

China currently sets deposit rates by administrative order, but the central bank began allowing banks to decide their own lending rates in July in a long-awaited move.

Beijing has repeatedly said it would push forward convertibility of the yuan, allowing the currency to be freely bought and sold, and with it the movement of funds into and out of China.

The government keeps a tight grip on the capital account, investment and financial transactions, rather than those related to trade, over worries that unpredictable inflows or outflows could harm the economy and reduce the party's control over it.

© AFP 2017

 
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China pledged more reforms to loosen the Communist authorities' grip on the world's second-largest economy, as leaders chart the way forward for the next decade.
China,economy,business,reform
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2013-27-15
Friday, 15 Nov 2013 07:27 AM
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