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China Targets Urbanization, Reforms in Central Economic Work Conference

12-17 13:07 Caijing
Urbanization is the main engine to boost domestic demand

China's new top leaders have vowed to front load urban growth as one key structural growth driver while continuing reforms and sustaining proactive fiscal policies and prudent monetary policies the government has exerted this year in weekend's economic meeting.

The Central Economic Work Conference (CEWC), held on December 15-16, set the tone for economic policies for the year ahead. Xi Jinping, the new Secretary General of the Communist Party and Li Keqiang, the premier-in-waiting, delivered speeches of the meeting.

Key tasks as listed by Xinhua:

-To improve macro economic control to promote sustainable and healthy development. Beijing will boost consumer spending - the foundation for growth- by creating a series of hot spots for consumption and allow investment to play a key role in growth. It will increase and guide private investment and expand public spending on infrastructure projects.

-To maintain proactive fiscal policy and prudent monetary policy. Fiscal policies will focus on tax reforms and structural tax reduction, as well as stricter control of administrative fiscal spending. Prudent monetary policy needs more flexibity. Property controls will be kept unchanged.

-To boost agricultural development and ensure supply of agricultural products.

-To speed up industrial structural adjustments and lift the quality of production in industrial sectors. The focus lies in the reduction of excess capacity, and enhancement of enterprises' innovation capability.

-To actively and steadily promote urbanization and increase its quality. The conference statement emphasizes on quality and healthy development of urban area. Urbanization will release the full potential of domestic demand.

-To improve people's livelihood security and lift their living standards.

-To deepen economic reforms in an all-around way.It will subsequently announce the reform plans, roadmaps and time table.

Commentaries

ANZ: A faster implementation of fiscal programmes centering the urbanization process will propel growth while the monetary policy will tend to be prudent in view of the prevailing uncertainties in the global financial system. We believe that the growth momentum seen in Q4 2012 will extend, helping China to expand by another 8.1% in 2013.

The new Politburo will continue to embrace market-based reforms and liberalization. This direction was symbolized by a recent Shenzhen visit by Xi Jinping, widely regarded as a replication of Deng Xiaoping's visit in 1992. We expect to see many more pilot schemes ranging from capital account liberalization to special financial zones from 2013 onward and these domestic-driven schemes will likely gain acceptance by the central government.

HSBC:The absence of the phrase "promote stead and relatively fast growth" and the emphasis of the phrase "promote sustainable and healthy development". This reflects that the new leaders have put more emphasis on the quality of growth and long-term sustainability.

The emphasis on deepening economic reforms with greater political courage and the commitment on producing plans and time table for key reforms implies the speeding up of reforms.

New leaders will not only facilitate the pace of urbanization but also boost the quality of urbanization. It calls for reforms in the Hukou system and other social security areas, which should also it help to boost domestic demand and growth sustainability in the long run.

CICC chief economist Peng Wensheng: efficiency and quality are part of a consensus in boosting growth. The Conference has also upgraded the status of restructuring and reforms in its statement of development goal, which is to ""promote sustainable and healthy development".

Peng also predicted that the new government is likely to take some concrete measures in reducing industries monopolies, developing non-public businesses, as well as equalizing public service brought with new-style urbanization, and reforming fiscal and tax regimes.

 

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