Planning A New Economic Horizon for China

China’s Communist party leaders began a four-day meeting on Saturday Nov. 9 that is expected to pave the way for the world’s second largest economy. The gathering is called the 3rd plenary session of the 18th Central Committee of the Communist party of China. Some of the expected changes to be announced include a tax overhaul, land policy, family planning policies, better control of local government debt, and a new structure proposition for China’s state-owned enterprises. Foreign investors expect an announcement regarding looser controls on foreign investment which have been notoriously undermined by red tape.

Among the main challenges that China faces are the fast growing urbanization, industrial development, reform of the financial sector, and efficiency of market infrastructure.
The recent slowdown of the Chinese economy has been an alarming factor for the past three years, but there is now evidence to suggest that the country is moving in the opposite direction.
The key solution to most of these problems is maintaining a reasonably steady growth rate while implementing reforms in all the problematic areas mentioned.

Such reforms may be urgently needed in the “hukou” system (residence registration) – preserving the economic and social rights of the new migrant workers that arrive in the cities. Another key problem is improving business environment, and facilitating regulation and pre-requisites for new foreign investors that the Chinese government wishes to lure. In some urban areas the real estate “bubble” is causing real concerns, so a tighter control over prices may be expected as one of the gathering’s outcomes. Nobody wants this issue to burst.

The 3rd plenary session will be considered a success if it results in further reforms, and mark a clear direction with concrete milestones for the next five to ten years. A more lenient investment regulation, re-defining of the relationship between government and the private sector, will result in safer economical growth and a calmer business atmosphere for both Chinese and foreign investments.