Domestic Reforms Unleash Development Dividend
Clear-cut Reform Measures
Li Keqiang emphasizes in his report that the government will deepen reform of the administrative system, further streamlining administration and delegating more power to lower-level governments, while deepening reform of the investment approval system, as well as establishing a system to list all items over which government review and approval are required. Reform of the business registration system, featuring easier registration and stricter management, is introduced nationwide as a key part of the country’s administrative approval system reform and the transformation of government functions. The registration of subscribed capital is carried out nationwide. Issuing operating permits before licenses, which was the practice in the past, will be replaced with the practice of license first, operating permit second. Annual inspections of businesses will be replaced by annual reporting. All these will further activate market players.
High priority will be given to reform of fiscal and tax systems. As an integral part of reform of the country’s economic system, reform in this field will be critical, whether from the perspective of transforming government functions or from that of changing the government’s work mode. Premier Li Keqiang indicates that the government will institute a comprehensive, well-regulated, open and transparent budget system. He emphasizes that all public spending on official overseas visits, official vehicles and official hospitality should be made public, to ensure transparency, making it easier for people to understand and oversee public finances.
In addition, China will increase the proportion of general transfer payments, and cut the number of special transfer payments by one third this year and continue cutting in the coming years, in a bid to further promote equalization of basic public services and coordinated regional development. While advancing reform of the tax system, trials for replacing the business tax with VAT (Value Added Tax) will be extended to railway transport, postal and telecommunications industries. This will promote the adjustment of economic structure and improve the tax system. This year will also see the advancement of reform of excise and resource taxes, and progress in legislation on real estate and environmental protection taxes. All these will serve as support for the country’s sound and stable economic development.
As one of the sally ports for China’s reform of the economic system, reform of financial sectors will be advanced. China will continue to liberalize interest rates by granting financial institutions more power to set them. Globally, China will keep the Renminbi exchange rate basically stable at appropriate, balanced levels, while expanding its floating range and moving toward Renminbi convertibility under capital accounts. Domestically China will steadily promote the establishment of small and medium-sized banks and other financial institutions by private capital, and guide private capital to invest in or hold shares in financial institutions and intermediary financing services, so as to promote beneficial competition in the financial field.
As for emerging Internet finance, Premier Li proposes that China will promote the healthy development of Internet banking and improve the mechanisms for coordinating financial oversight. To guarantee the country’s financial security, China will keep a close watch on the cross-border flow of capital, and ensure that no systemic or regional financial risks ensue. In addition, the Premier also explains the objective: “We will ensure that financial services play an active role in meeting the needs of the real economy, including small and micro businesses, agriculture, rural areas, and farmers.”
As a pillar of China’s economy, the state-owned sector has been suitably addressed in Premier Li’s report. China will improve the distribution and structure of the state-owned sector of the economy, establish a sound modern corporate structure and corporate governance, improve the system for managing state-owned assets, clearly define the functions of different SOEs, and carry out trials for investing state capital in corporate operations. Moreover, China will improve budgeting of state capital operations and raise the percentage of earnings from state capital turned over to public finance by central government-owned enterprises.
Meanwhile, China will accelerate its pace in developing a mixed ownership economy to spark economic vitality. A spate of projects in such areas as banking, oil, electricity, railways, telecommunications, resources development and public utilities will be introduced, open to participation by non-state capital. China will formulate specific measures to permit non-public enterprise participation in franchising. Moreover, China will improve the property rights system to ensure that property rights are inviolable in both the public and non-public sectors.
