The new measures that have been adopted to liberalize the Chinese economy have been adopted, no precise schedule has been announced regarding the implemetation of the measures but they are a strong signal sent to foreign investors in China. This is indeed a big change occuring and confidence in the Chinese economy. Let’s have a look on the measures.
- Freedom of circulation
There is a reform of the “Hukou” going on. This is a kind of “circulation permit” whose purpose is tob limit the movement of population inside mainland China. This is a sign that the Chinese government wants to encourage the interior market in China. Millions of citizens are encouraged to move to the Chinese large cities to develop the services and large cities market. The first measures implemented will benefit villages and small towns and later on the middle-sized cities. This is a proof that the central power is still not worried by the real estate market.
- Opening of the capital of public companies
Public groups will be allowed to have private capital, together with more sectors open to foreign investment. This process is currently being tested in the Shanghai free trade zone. There is going to be an invesrion of logic. Currenltly, any foreign investment that is not expressely allowed is forbidden, in the future, only a list of specific sectors will be restricted from foreign investment, all the othe sectors will be able to receive foreign investment.
- Less privileges for state owned goups
There are confortable monopolies over whole economic sectors for public groups. The structures will be updated to better distinguish state managment and public control inside the companies. There will have to reverse a larger part of their benefits to the state: currently from 5% to 15% it will be 30% around 2020.
- Convertible yuan
Party leaders have engaged themselves to ease the conversion of the yuan, you soon (?) will be able to freely buy and sell the Chinese currency. A first step of this could be tested in the Shanghai free trade zone.
- Liberalization of interest rates
There will be an accelaration of the liberalization of interest rates. Currently the rates are stricly regulated, this should change soon.
- Private banking
IPOs will be facilitated, private banks should be allowed to exist. Local governements will be allowed to issue bonds, a way to diversify their debt (some pronvincial debt levels are worrisome).
- Possibility to transfer land rights for money
Land will remain property of the state. But the agricultural companies will have the possibility to have more income via the transfer of the rights they have on land. Criticism on these reforms come from the fact that everything actually comes from the state. This is an authoritarian liberalization.
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