China reveals far-reaching Third Plenum reform details

View Comments

Well, some more headlines for the moment anyway but it’s more detail than we’ve had so far

They plan to:

  •  greatly reduce govt intervention in resource allocation
  •  improve property rights protection system
  • loosen family planning restrictions
  • transfer some state assets to national social security fund
  • raise dividends paid by SOES to 30% by 2020
  • abolish labour camp system
  • let local govts broaden financing channels
  • let local govts issue bonds
  • reduce capital punishment ” step by step”
  • scrap residence restrictions in small cities
  • lift restrictions on residence registration in orderly manner in mid-size cities
  • integrate urban and rural social security systems
  • push forward price reforms in resource sectors
  • accelerate capital account convertibility process
  • speed up interest rate reform
  • establish deposit insurance system
  • expand consumption tax to cover polluting products
  • speed up property tax reforms
  • quicken resource tax reform
  • push forward environmental tax
  • maintain balanced structure between local and central govt revenues
  • collective owned land to have same rights status as state land
  • encourage overseas investment by individuals and companies
  • remove barriers on private firms entering some specific sectors
  • encourage private firms to take part in SOE reform
  • standardize system of managing local and central govt debt
  • set up debt risk alert mechanism
  • establish exchange market for property rights transfers
  • select more cities to develop free trade zones

Plenty to consider here.. the reforms are far reaching, as they had previously indicated they would be, but we shall need to see the final detail, and they will need to be delivered still of course.

Chinese leaders have promised “decisive” results by 2020

I’ve highlighted some key headlines but they all have a significance in the bigger picture

Markets will be pleased to see this further release though for sure

Author: Mike Paterson

Mike Paterson has more than 30 years of experience trading FX including as a senior trader with UBS and Credit Suisse. He was also head of FX at the State Bank of Victoria. With sizeable daily trading volumes Mike carved out a name in the market combining professional integrity with a cynical grasp of seizing market opportunity. Since leaving the City, Mike has been working as an independent consultant and trading along with presenting seminars and writing for a number of publications. Mike lives in Kent and supports Southend United FC.

2 Comments

  1. Thank you Mike for the details.
    These measures might have some positive ipacts on Chinese stock markets. The averarage P/Es for Chinese stocks are only 10 or below comparing to 17-18 for US stocks. Chinese bank shares’ P/Es are even lower at around only 7-8. One of the reasons was because of fear of excessive local govt debts. So allowing local govt to broden financing channels and issue bonds would alleviate worries on Chinese bank shares. These measures might help the Chinese and Hong Kong stocks markets to catch up.
    Some selected sectors might also be benefited by the new measures.Ecouraging more overseas investments are good signs of opening investment markets further.
    To speed up the capital account convertibility signaled that they want to speed up RMB into the internaional markets.

  2. It is the major global financial event besides the appointing the Fed Chairwoman.

    China should concentrate on corruption (started), pollutions (water and air), production safety and quality (esp. food), regulations (all kinds including organization similar to our SEC)…

    They should learn from the West and avoid the mistakes of the West (such as overspending to buy votes). Learn to settle territorial disputes without using force. Be a good global citizen.

    They’ve fixed the basic human rights (food and shelter). Now they should improve the other human rights such as freedom. It is far better than 15 years ago but is still not up to par with us. To move to the next stage of a developed country, they should protect intelligence properties at least starting in Tier I cities.

    There are many important items not included in the reform. Taking out the restriction of selling farm land is a surprise to me.

    They have good track records on their previous reforms starting from Deng and most items in their five-year plans. Even with many problems, the centralized government is quite effective. It is easy to have large scale project such as high speed train. The problem when the decisions are passed to the local governments, they usually are changed or not followed 100% according to the benefits of the local governments.

    No one will give you a medal for improving or maintaining roads and dams, but building more roads and dams. They need to calculate the returns of major projects besides providing jobs to relieve social unrest.

    It is from my book Debunk the Myths in Investing (amazon).

Top

© Copyright 2014 ForexLive™  |  Advertise With Us  |  Login To Comment  |  Sitemap

HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.

ADVISORY WARNING: FOREXLIVE™ provides references and links to selected blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect's individual analysis and decision making. None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FOREXLIVE™ specifically advises clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FOREXLIVE™ expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.