Focus on Asia – Chinese Party Congress starts to set out market reforms

The 18th Party Congress of the Communist Party of China is starting to identify and announce the market reforms it intends to enact in coming years, says East Capital’s Asa economist Kristina Sandklef, who is monitoring the event.

General secretary and president Hu Jintao said China will double its per capita income in 2020, an annual average growth of around 7 %.

Sandklef said the main expected reforms will be the liberalization of state owned enterprises outside the strategic sectors; the hukou or household registration system (which divides Chinese into being rural peasants or urban citizens) and the land expropriation system.

East Capital also expects a major income distribution reform, more social security being offered to the people, a larger anti-corruption campaign as well as fiscal reforms for local government;

Decreasing income gaps will help China to get a more consumption driven economy, something East Capital sees as a long term trend benefitting several of their portfolio companies.

The manager believes the exact personalities of the new Politburo Standing Committee (PBSC) members will be less important than the process as the new leaders will have to reform the economy and the legal system no matter which faction they belong to.

Sandklef suggests that even if there is talk about pushing intra-party democracy choosing between 30 candidates for 25 seats in the Politburo, expectations for any larger political reforms or democratization in China are low.

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