All-round reform on the agenda

Some of the issues expected to be discussed

SOE reform

Reform of State-owned enterprises has always been seen as a key issue. Now, the clamor for greater reform is growing louder.

SOEs are granted a monopoly in some industries, such as energy, power and telecoms, and private enterprise is excluded. SOEs also receive government subsidies and have much easier access to credit than independent companies.

In May, Xinhua News Agency reported that a National Audit Office audit of 10 SOEs discovered a wide range of problems, including inaccurate accounting, incomplete financial statements and illegal practices.

Urbanization

While more than half of the Chinese population lives in cities, only about a quarter of city dwellers have obtained urban hukou, or household registration permits. The system, which dates back to the 1950s, is widely considered to have reduced migrant workers to "second-class citizen" status. Although the migrants workers live, work and pay taxes in the cities, they are unable to enjoy the same opportunities in terms of education and social welfare as residents who hold a city hukou.

Land

The law allows farmers to lease their land, but they have no say in how it is used or managed and they are strictly prohibited from selling it. However, the law does allow the government to acquire a farmer's land for public use, after paying compensation, and transfer it to real estate developers for a high profit. Land sales have become an increasingly important source of local government fiscal revenue, rising to 63.7 percent in 2011 from 9.19 percent in 1999.

Fiscal revenue

A tax-sharing system introduced in 1994 favored the central government. Under the tax overhaul, the central government enjoyed 75 percent of the revenue raised from value added tax - the single largest source of Chinese government revenue. A recent report by Tsinghua University estimated that local government debt has reached 19.41 trillion yuan.

Financial reform

Following the recent opening of the Shanghai Free Trade Zone, wider financial freedom is expected to boost the real economy.

Experts suggest China should develop small banks and financial institutions which specialize in providing financing for small and medium-sized enterprises.

Also, although China has allowed banks to decide their own lending rates since July, deposit rates are still set by the central bank.

Specific measures are also awaited to make the Shanghai FTZ a vanguard in the internationalization of the renminbi and open up the flow of capital.

Government reform

Since March, the central government has scrapped or devolved 334 administrative approval rights in an effort to further push forward administrative reform. Administrative examination and approval refers to the practice of administrative organs granting citizens, legal persons or other organizations the right to engage in specified activities in accordance with a legal review. After 1949, administrative approval became an important means of implementing China's planned economy. On Nov 1, Premier Li Keqiang urged local governments to press ahead with institutional reform and reduce government intervention in the market.