A key focus of the swathe of reforms involved numerous measures to support a national drive for “new quality productive forces”. - AFP
BEIJING/SINGAPORE: China has released a major political document outlining some 300 reform measures to be implemented over the next five years, as it transitions towards a more sustainable and innovation-driven growth model amid pressing economic and geopolitical headwinds.
The document, a result of the third plenary meeting of the Communist Party’s central committee held from July 15 to 18, outlined economic, social and political reform measures in broad strokes – as is typical of such documents – with policies and implementation to be rolled out later.
A key focus of the swathe of reforms involved numerous measures to support a national drive for “new quality productive forces” – a buzzword coined by President Xi Jinping in 2023 that describes growth driven by industrial upgrading and science and technology innovation.
The over 22,000-word document, released on July 21, called for education system reforms to better nurture talent in strategic industries, improvements in the scheme to attract overseas talent, and a stronger nexus between universities and industries – which would help focus research efforts and commercialise such efforts more seamlessly.
It also outlined roles for both state-owned firms and companies in the private sector in the innovation drive.
State-owned enterprises would have “improved institutional arrangements” to promote original innovation, the document said, while “capable private enterprises” would be supported to take the lead in undertaking major national technological tasks and enjoy more access to national scientific research infrastructure.
In remarks explaining the reforms, Xi said these are needed as China’s innovation capacity currently falls short of that required for high-quality development.
“The industrial system, while large in size and extensive in scope, is not yet strong or sophisticated enough; the over-reliance on key and core technologies controlled by others has not been fundamentally changed,” state news agency Xinhua quoted him as saying.
Technology innovation – particularly that which strengthens self-reliance in core technologies – is the key to Xi’s long-term vision, said Qiu Mingda, a senior analyst for China and North-east Asia at Eurasia Group.
It serves not just as a sustainable economic growth driver in the long run, but also as an opportunity for China to assume global leadership in frontier technology. Better self-reliance in core technologies would also provide Beijing with a buffer against external competition or decoupling, he told The Straits Times.
The document also outlined more support for entrepreneurs and private businesses – whose confidence in recent years have dampened amid a spate of regulatory crackdowns.
There would be a better environment for entrepreneurship and improved access to credit for private firms, it said.
China would encourage financing means such as private equity and venture capital, make it more convenient for foreign investors to carry out such investments in the country, and develop “patient capital” – a term referring to investments with a longer horizon, which is typically government-led.
It would also promote foreign investments, including by protecting foreign businesses’ rights and interests, and providing them with a level playing field in areas such as access, licences and government procurement.
Another key piece to the document was the deepening of fiscal and tax reforms.
This, in part, would help address financial difficulties faced by local governments, which are responsible for the bulk of public spending but have in recent years had their budgets squeezed by the twin problems of runaway debt and decreased revenues from land sales.
The document outlined measures to expand localities’ sources of tax revenues, including from consumption taxes, increase the proportion of central government spending, and establish a mechanism to monitor local debt.
Professor Bert Hofman from the National University of Singapore’s East Asian Institute expects to see a package of detailed reforms in the fiscal system rolled out in the near future.
“The paragraph in the (document) on fiscal is quite long and detailed, and covers tax system, transfer system, and budget management. The basic fiscal system has not changed much since 1994, and it needs a major revamp to meet the goals of China’s society today and in future,” said the former World Bank country director for China.
In addition, reforms to support social welfare, from improving social security for gig workers to promoting employment support, were mentioned.
The document also pledged to improve the system of income distribution such that the lower-income group made more, the middle-income group grew, and “overly high incomes” were “reasonably regulated”.
Salaries of executives at state-owned firms would be “reasonably determined and strictly regulated”, it added.
The document called for a “two-way flow of urban and rural factors”, as well as “narrowing the gap” between urban and rural areas and “deepening reform of the land system”, phrasings that Nanyang Technological University economist Tan Kong Yam interpreted as a hint of reforms for the hukou or household registration system.
“This (would be a) major reform that could improve domestic demand and consumer spending to stimulate growth,” he said.
China would also provide more public housing and allow local governments more autonomy to manage the property market, and “improve the property tax system”, the document said, without giving details.
Besides economic reforms, the document also elaborated on reforms to enhance national security and the military.
“National security is the important bedrock for stable and sustained Chinese-style modernisation,” documents from the Third Plenum reiterated.
Associate Professor Alfred Wu from the Lee Kuan Yew School of Public Policy said: “Although the Chinese leadership said security is needed for economic development, what it is actually doing is to make economic development, specifically technology advancement, serve its security purposes.”
China aims to boost the technological capabilities of its national security sector with reforms to make cyber security more robust and to use artificial intelligence for security surveillance.
The country shall speed up its development of “strategic deterrence forces”, a term commonly used to describe nuclear weapons, and develop new fighting capabilities. It will also deepen reforms in its defence-industrial sector.
Prof Tan noted that amid rising concerns that security considerations have increasingly undermined economic development objectives, the Third Plenum crucially hinted that China’s leaders want to strike a more nuanced balance between security and growth.
China must “achieve a healthy interaction between high-quality development and a high level of security,” the document said.
During the Third Plenum, Xi explained that the economic plans are meant to buffer China against hostile foreign powers that are out to “suppress and contain” China.
“To win the strategic initiative in the increasingly fierce international competition, we need to deepen reforms comprehensively, to prevent and defuse the risks and effectively meet challenges with a perfect system and to cultivate new opportunities in the midst of crises,” he said.
The reform document was drafted by a team that Xi led, with Politburo Standing Committee members Wang Huning, Cai Qi and Ding Xuexiang as his deputies.
Prof Hofman noted that curiously, Premier Li Qiang, who is responsible for the economy, was not named by Xi as a member of the drafting team in his remarks. - The Straits Times/ANN
