Bid to boost market efficiency

China's central leadership approved the Decisions on Major Issues Concerning Comprehensively Deepening Reforms at the close of the Third Plenary Session of the 18th Communist Party of China Central Committee on Nov 12 in Beijing. The full text of the decisions, which was issued on Friday, heralds the most sweeping reform of the economy in more than 10 years, with policy breakthroughs achieved in areas of widespread concern, including investment access, a further opening-up drive, the financial sector, the public finance regime, the pension system and the family planning policy.

China will adopt a "negative list", and build a unified market access system with all market players able to enter equally and legitimately into areas that are not on the list. Corporate investment projects, except those related to national security, will no longer need government approval. This is testimony to the policymakers being well aware of the role the private sector can play in unleashing growth potential and preventing China from falling into the middle-income trap, a situation where a country moves from the low to middle-income level but thereafter gets stuck. In the medium term, private businesses will probably gain full access to about 80 to 90 percent of the areas currently under restriction and sustain rapid growth in the next decade.

There is a pledge to promote reform through further opening-up and cultivate competitive advantages in international cooperation. With investment access relaxed, the accelerated building of a pilot free trade zone in the country and further opening-up along border areas, China will probably consider participating in the Trans-Pacific Partnership negotiations. A projection based on quantitative calculation indicates that, with due reduction in tariff use among member states, China will record an average annual GDP growth rate 0.5 percentage points higher than that under the baseline scenario of China not joining the trade bloc.