I have been discussing with a number of mainland scholars what the major economic themes will be for next year.
I believe reform of state-owned enterprises will be one of them.
The latest Central Economic Work Conference, during which Chinese leaders and senior officials gathered to map out policy priorities for 2017, and the politburo meeting held recently have put emphasis on SOE reform, indicating that the consolidation of SOEs and initiatives like mixed-ownership will move further.
Five major issues – overcapacity, inventory, deleveraging, costs and weakness — were the keywords at this year’s politburo meeting.
I believe China will press ahead with structural reform next year based on those five points.
However, the authorities will balance the need for reform with stabilizing growth and preventing systemic risks.
Meanwhile, the central government is expected to adopt a prudent monetary policy but a relatively accommodating fiscal policy, with a growth target of between 6 percent and 7 percent.
The cost of money has been creeping up, with the US expected to hike rates three more times next year. China may partially reverse its loose monetary stance.
Also, the authorities are likely to establish a long-term mechanism for curbing the housing sector and push ahead with land reform and changes to household registration and taxation.
Also, debt restructuring and capital market reform are likely to be speeded up.
To ensure continued economic growth, which has been a key focus of the Central Economic Work Conference, the authorities highlighted Belt and Road, free-trade zones, the internet economy and financial regulation as policy targets.
So far, China has approved 11 free trade zones, and I expect the development of these zones to accelerate next year.
The authorities will unveil the fourth and fifth batch of free trade zones soon.
E-commerce has already become China’s new growth engine. Unofficial data shows that China has nearly 100,000 online sellers and 10,000 online financial institutions.
Leveraging the internet to stimulate the traditional manufacturing sector was a key topic at the Central Economic Work Conference.
This article appeared in the Hong Kong Economic Journal on Dec. 19
Translation by Julie Zhu
[Chinese version 中文版]
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