Markets will play a decisive role in allocating resources as China deepens the process to reform and open up its economy, the ruling Communist Party of China (CPC) said on Tuesday at the end of a four-day closed door summit.
A communique released later gave broad outlines about the expected reform agenda for China, the world’s second largest economy and expected to overtake the US, the largest, in the second 10 years.
The communique would be the first economic reform-related document to be released by the CPC after Xi Jinping occupied the two top posts in the government and the Party; a more detailed statement on the specifics of the reform agenda is expected later.
The reform agenda was expected to touch on how to reduce the wide income gap, boost rapid urbanisation and give room to private companies to better compete in state-controlled industries.
“China will deepen its economic reform to ensure that the market will play a ‘decisive’ role in allocating resources,” state-run Xinhua quoted the communique issued after the third plenary session of the 18th CPC Central Committee.
“The core issue is to straighten out the relationship between government and the market, allowing the market to play a decisive role in allocating resources and improving the government’s role,” the statement said.
State media added that the ruling party had earlier described the market’s role as “basic”. With the term “decisive” being prominently used to describe the market’s role from now on clearly indicates an elevation in the role of the market.
“Market had been often defined as a “basic” role in allocating resources since the country decided to build a socialist market economy in 1992,” the Xinhua report said.
Development in the non-public sector will be encouraged which will in turn stimulate vitality and creativity in the whole economy, the document said, while maintaining the dominance of the public sector.
Coomenting on the reforms, Wen Fude, Professor of economics at the Institute of South Asian Studies, Sichuan University said, “After these reforms, China’s economy will emerge stronger. Not only the state owned enterprises, but also the private sector will gradually become stronger. Compared to China, it can be very difficult to carry out economic reforms in India. For example, to introduce reforms in the public sector is difficult because of strong trade unions. India should learn from China about how to strengthen the manufacturing sector.”