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‘Pre-emptive fine-tuning’: Li Keqiang 李克强 thus described plans to stall the slowdown during a visit to Inner Mongolia at the end of the month. The message to provincial and local governments was clear: a 2009-style stimulus is still off the table. But the Third Plenum reform agenda—‘letting the market play a decisive roll in allocating resources’—has yet to channel resources to the right places for private investment to have any staying power as a driver of growth. The invisible hand is not taking over as planned.Nor will it until SOE reform produces tangible results: removing inefficient monopolies, cutting back industrial overcapacity and allowing more dynamic entities into the market. Several more joint-ownership pilots were announced in may by central SOEs, notably China Telecom. But until quotas limiting private sector partnership are lifted, expanding this roster remains lip service. Even as the need for definitive action becomes more urgent, sceptics question what sort of corporate governance model can rectify the disparate interest implicit in joint-public and private management and assure transparency. ‘Authoritative third parties are needed,’ Zhou Qiren 周其仁 asserts.
cover photo: Getty Images
this month's themes may position
macroeconomic growth model 增长模式—recalibrating macroeconomic controlscautiously stimulating investment 3
urbanisation 城镇化—agglomeration could deepen divideintegrating Beijing-Tianjin-Hebei 5
banking 银行业—integrating innovative and traditional financeregulating internet finance 7
fiscal policy 财政政策—deepening tax reformGiving MSEs green light to go 9
state-owned enterprises 国有企业—waiting for systemic guidelinesmixed ownership – conflicting governance incentives 11
credit 信用—housing market reaching turning pointdeflating the overcapacity bubble 13
may 2014learn more: access context
3
economy
cautiously stimulating investmentSteady rebalancing and sustainable growth still require investment—the question is on what scale and by whom. Industrial-upgrading enthusiasts are wary that further fiscal stimulus will only benefit fading industries, a short-sighted fix for unemployment concerns. Easing monetary policy
coupled with micro stimulus could encourage private investment and reduce financing costs, spurring short-term growth. Long-term investment can boost labour productivity and thus incomes, ultimately increasing do-mestic consumption.
China can’t 'step on the brake and the gas' any longerShanghai Securities News 17 Apr 2014
Lin Caiyi: the economy does not need stimulus Caixin Online 15 Apr 2014
2014 growth should be investment-driven; industrial upgrading needs financial supportEconomic Information 17 Apr 2014
China’s economic growth relies mainly on invest-ment, but the latter cannot in the long-term rely on the government. State investment projects... only temporarily delay the downturn...The economy will have a smooth ride if the state takes its foot off the monetary brake and the state investment gas.
My personal view is, no. Given the overall economic situation, the current downturn in manufacturing sen-timent indicators [merely] reflects capacity reduction in traditional industries; given structural adjustment, a weakening in manufacturing does not equate to overall macroeconomic weakness.
China must continue primarily relying on investment as it transforms from an externally-oriented economy to one driven by domestic demand. Investment in the short-term increases demand and employment…and… in the long-term raises labour productivity, in-creasing future income...
GAO Liankui 高连奎Renmin University of China Chongyang Institute for Financial Studies
LIN Caiyi 林采宜Guotai Junan Securities
Justin LIN Yifu 林毅夫PKU National School of Development
Innovative economist Gao’s idea ‘society with low living costs’ supports granting government more management power to reduce subsistence costs. His 2014 book The internal and external situation of China criticises liberal scholars like Zhang Weiying 张维迎 as being ‘populist’.
Chief Economist Lin researches institutional economics, anti-monopoly regulation, and macro economic policy. Lin drafted China’s blueprint for bank card development. She is an adjunct professor at Fudan University and a member of independent policy think tank China Finance 40 Forum.
Former World Bank chief economist Lin remains optimistic about China’s economy. Lin’s new structural economics favours investment-driven and government-led growth. Lin co-founded the CCER in 1994 with Yi Gang 易纲, Hai Wen 海闻 and Zhang Weiying 张维迎.
RUC Chongyang Institute for Financial Studies Guotai Junan Securities PKU National School of Development (NSD)Jointly established by RUC and Chongyang Investment Ltd., it leads the Chinese think tanks by employing noted foreign researchers and policy advisers.
Among China’s largest securities companies with C¥6.1 billion, Guotai Junan’s IPO is due in 2014 after a five-year effort.
Founded on the basis of CCER, NSD is best known for China Economic Quarterly, its International MBA(BiMBA) program, and annual NBER-CCER Conference.
macroeconomic growth model 增长模式
may 2014learn more: access context
4
economy
mid-term outlook: recalibrating macroeconomic controls
may june july august september october november december january february march april may
‘Consumption-driven growth’ remains a buzzword, fuelling discussion of what should now be considered economic vital signs as the state nominally steps back from the market. Official pronouncements against macro stimulus might be sidestepped by selectively lowering commercial
bank reserve ratios with an eye to helping agribusiness and MSEs. New investment projects will likely focus on areas like education, medicine and the environment. Exports are also expected to increase after Li Keqiang’s 李克强 visit to Africa this month.
officials scholars commentatorsLI Keqiang 李克强 YU Yongding 余永定 DU Jianguo 杜建国
LIU He 刘鹤 LIN Yifu 林毅夫 ZHANG Jingwei 张敬伟
Xi Jinping 习近平 CHI Fulin 迟福林 XU Jin 徐瑾
we are watching for- moving twoard a consumption-driven economy- shifting focus from GDP- stable growth strategies
may
2 may 2013
Endogenous growth re-quires enabling micro-entities to supply goods and services, says Zhang Monan 张茉楠
june
29 jun 2013
Blind inflation of credit and zeal for growth caused recent financial panic, argues Tsinghua University Li Daokui 李稻葵
september11 sep 2013
FT Chinese Online Xu Jin 徐瑾 outlines Li Keqiang’s eco-nomic ‘roadmap’: sustainable growth targets, opening through FTZs, and market mechanisms
12 sep 2013
Private investment will best facilitate transition to con-sumption-led growth says Chi Fulin 迟福林 China Institute for Reform and Development
october
8 oct 2013
DRC’s 383 plan calls for government to stop making decisions better made by markets—and rely instead on macroeconomic monetary and fiscal controls
16 oct 2013
Leaders must be brave enough to abandon Plans and trust the market, argues reformist Zhang Weiying 张维迎 Peking University
november
4 nov 2013
Hukou reform, urbanisation, increasing competitiveness, and innovation will catapult the economy past the Lewis turning point, says Cai Fang 蔡昉 CASS
4 nov 2013
People’s Daily 人民日报 denounces local government’s ‘GDP obsession’, championing ‘green development’ and eco-nomic transition
13 nov 2013
Higher-quality investment will keep the economy strong and gradually rebalance capaci-ty, says former World Bank chief economist Lin Yifu 林毅夫
15 nov 2013
Slower growth a must to curb overcapacity, claims CASS Yu Yongding 余永定
29 nov 2013
The Third Plenum's reform blueprint may negatively impact short-term economic growth, predicts Renmin University's Liu Yuanchun 刘元春
december
18 dec 2013
Central Economic Work Conference moves from mac-roeconomic controls toward institutional innovation and supply-side interventions, ap-plauds Mizuho Securities’ Shen Jianguang 沈建光
18 dec 2013
Lower entry barriers in ser-vice sector and high-end man-ufacturing before other reforms, suggests Renmin University Tao Ran 陶然
january
21 jan 2014
2013's 7.7 percent GDP growth signals turning point in devel-opment speed, says Charhar Institute's Zhang Jingwei 张敬伟
february
5 feb 2014
Tertiary overtaking secondary sector meaningless without la-bour productivity improvement, argues independent scholar Du Jianguo 杜建国
macroeconomic growth model 增长模式
may 2014learn more: access context
5
economy
integrating Beijing-Tianjin-Hebei Beijing-Tianjin-Hebei integration has emerged as a method to enhance re-gional co-operation, upgrade industrial infrastructure and alleviate Beijing’s population and resources pressures. As a national-level development strategy, it faces practical problems such as disparate and rising house
prices, imbalances among different areas and environmental pollution. Economists are doubtful that true urban-rural integration will be achieved, fearing employment and tax revenue reductions in the cities and rent seek-ing classes appearing in Hebei.
Beijing-Tianjin-Hebei integration—the new urbanisation strategy?Southern Metropolis Daily 6 Apr 2014
Beijing-Tianjin-Hebei integration—the new urbanisation strategy?Southern Metropolis Daily 6 Apr 2014
Residents in the Bejing, Tianjin and Hebei area cannot rely on rentier livingSina Blog 11 Apr 2014
Local governments eager for political achievements often pile up and seize resources to become big cit-ies... if this path is taken, integration benefits will not reach the medium and small cities throughout He-bei… small cities will still have no chance to develop, rural problems will remain unresolved.
If the BTH area is integrated, Hebei will not benefit in the short-term, but suffer setbacks... it will directly shoulder the burden [of] regional pollution control... and in steel and heavy-industry centred areas … lo-cal employment, reimbursing corporate losses, and revenue reduction will become real problems.
Worries about rising house prices in Gu'an and Baoding are groundless... Really deserving concern is that [the BTH area] is heading down the same road as areas like the Pearl River Delta—where local hu-kou residents, via differential rent, are turned into a class of non-enterprising 'rentier' citizens.
FENG Kui 冯奎NDRC China Centre for Urban Development (CCUD)
ZHENG Xinye 郑新业Renmin University of China School of Economics
YE Tan 叶檀National Business Daily columnist
International Cooperation and Training director Feng Kui wields a grasp of the institutional history of the hukou to promote Centre Director Li Tie’s 李铁 emphasis on adequate public services in hukou reform.
With expertise in public economics and energy economics, Zheng believes the current oil price is undervalued since it does not reflect environmental costs. China’s large number of Fuerdai (the second generation rich) reveals problems in the current tax structure.
Political historian turned journalist admired for her well-sourced and sharp opinions, she has attacked calls to suspend the one child policy for fear a baby boom will strain public services. Best known for searching analyses of the capital, securities and real estate markets.
NDRC China Centre for Urban Development (CCUD) Renmin University of China School of Economics National Business DailySince the Central Economic Work Meeting of December 2012, CCUD has played a central role in policy develop-ment, including organising the March 2013 China Interna-tional Urbanisation Forum.
A policy-focused school, its quarterly Macroeconomy Forum is a well-oiled vehicle through which the school’s research and macroeconomic data is transmitted to minis-tries.
Covering the Yangtze River Delta industrial engine, NBD is home to celebrity analysts Ye Tan 叶檀, Tan Haojun 谭浩俊 and Yu Fenghui 余丰慧.
urbanisation 城镇化
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6
economy
mid-term outlook: agglomeration could deepen divide To reduce dependence on financing through land seizures, the 2014-2020 Urbanisation Plan proposes utilising municipal bonds to fund urban infrastructure construction. Improved services delivery and environment concerns have been prioritised in an attempt to secure social stability
through urbanisation. Beijing-Tianjin-Hebei integration may foretell urban agglomeration as the new model, but implementation threatens to create clear winners—mega cities and more advanced factories—and losers—rural and urban fringe areas.
officials scholars commentatorsLI Tie 李铁 CHI Fulin 迟福林 REN Zhiqiang 任志强
XU Kuangdi 徐匡迪 FU Weigang 傅蔚冈 MA Guangyuan 马光远
YANG Weimin 杨伟民 TAO Ran 陶然 YI Peng 易鹏
we are watching for- urban-rural integration’s impact on local government finance- urbanisation-driven industrial shift- BTH integration exacerbating economic disparities
june
7 jun 2013
Small-town urbanisation nation-al priority, says Chen Xiwen 陈锡文 LSG on Rural Work
july
30 jul 2013
Per capita cost for migrant worker healthcare, housing, and education is C¥130,000, finds Urban Blue Book
august
9 aug 2013
Small city welfare bene-fits are not enough to attract migrants as most resources are retained in higher-ranking cities, says NDRC Li Tie 李铁
december
4 dec 2013
The 3P Resolution commits to urban-rural integration, sig-nalling government commitment to rural poverty and modern-ising agriculture, says NDRC urbanist Song Jiankun 宋健坤
8 dec 2013
Without privatisation and hukou reform, small-town urbanisation is another official rort, says real estate tycoon Ren Zhiqiang 任志强
13 dec 2013
Urbanisation meeting calls for curbing excessive urban building but avoids the most sensitive issue—land transfer
16 dec 2013
Work Conference calls for mu-nicipal bonds, financial institu-tion reform, private investment, and tax system improvement
january
17 jan 2014
Leave some land unurban-ised—current practice suits an industrial era that will end soon, advises IFF urbanisation director Yi Peng 易鹏
20 jan 2014
Neglecting rural services to build up urban centres aggra-vates problems like overcapac-ity and pollution, warns Wen Tiejun 温铁军 Renmin University agricultural economist
urbanisation 城镇化
may june july august september october november december january february march april may
16 aug 2013
Ye Tan 叶檀 says small-town urbanisation is unlikely given China’s highly centralised politi-cal system
30 aug 2013
Linking urbanisation with urban residency rights for rural migrant workers is emphasised by CASS vice president Li Yang 李扬
september
24 sep 2013
‘Counter-urbanisation’ has surfaced in Chengdu and Chongqing hukou reform pilots, says CASS labour economist Cai Fang 蔡昉
24 sep 2013
Fund urbanisation through municipal bond markets, sug-gests finance vice minister Zhu Guangyao 朱光耀
october
15 oct 2013
65 percent urbanisation is expected by 2030, says former CPPCC vice chairman Xu Kuangdi 徐匡迪
november
5 nov 2013
Claiming small towns are underdeveloped, Zhao Hui 赵晖 Ministry of Housing and Urban-Rural Development pro-poses systemic reforms
may 2014learn more: access context
7
economy
regulating internet financeYu’ebao will not be outlawed, but more regulations are on the way. This month sees heightened debate on internet financial supervision in an attempt to strike a balance between innovation and risk prevention. Sys-temic regulatory improvements rather than direct administrative control
are likely to be more effective. Departmental coordination and the develop-ment of cross-institutional frameworks will be essential in reforming exist-ing excessive or unclear regulations.
Internet finance regulation: change don't conserveFinancial Times Chinese Online 3 Apr 2014
Zhu Bangling: no double standards for internet finance National Business Daily 2 Apr 2014
Xie Ping: The necessity and particulars of internet finance regulationCaixin Online 23 Mar 2014
Internet finance...needs innovative, moderate, and classification-based financial regulation, which through encouraging innovation and risk prevention promotes the healthy development of coordinated regulatory principles.
Legal and consistent internet finance regulation is ur-gently needed, and with no double standards…reg-ulation is overly suspicious concerning…third-party payments and Yu'ebao, but there is unclear, even non-existent, regulation in areas such as P2P and precious metal cash commodity investment.
Regulation should promote development…If inter-net financial institutions are to have the same func-tion as traditional ones, they must accept the same regulation…Regulatory arbitrage will otherwise likely emerge, which ill-benefits fair market competition, and may also generate unforeseen risks.
LIU Ying 刘英Renmin University of China Chongyang Institute for Financial Studies
ZHU Bangling 朱邦凌National Business Daily
XIE Ping 谢平China Investment Corporation
Liu conducted research in Peking University before becoming a research fellow at Chongyang. She recommends Shanghai FTZ imitate the Netherlands, and regards micro financing and internet finance as essential in creating a system of ‘inclusive finance’.
An experienced commentator on capital markets, Zhu argues for the rule of law and more transparency in IPOs. The IPO reform is not only for new stock issuances but for more coordinated development of capital markets.
First to propose the concept of ‘internet finance’ in 2012, progressive Xie has since researched its supervision. Specialising in monetary policy and financial regulation, Xie has earned the Sun Yefang Economic Science Award three times.
Renmin University of China Chongyang Institute for... National Business Daily China Investment CorporationJointly established by RUC and Chongyang Investment Ltd., it leads the Chinese think tanks by employing noted foreign researchers and policy advisers.
Covering the Yangtze River Delta industrial engine, NBD is home to celebrity analysts Ye Tan 叶檀, Tan Haojun 谭浩俊, and Yu Fenghui 余丰慧.
China’s US$600 billion sovereign wealth fund. Newly appointed chairman Ding Xuedong 丁学东 favours a Eu-ro-centric over a US-centric portfolio.
banking 银行业
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8
economy
mid-term outlook: integrating innovative and traditional financeTightening policies on internet finance result from the vested interests of traditional banks’ and regulators’ distrust of financial innovation. Some PBoC officials have proven progressive though with Li Yue 励跃 wanting to leave regulatory room for innovation while Sheng Songcheng 盛松
成 suggests banks hold reserves on Yu’ebao. With the China Financial Stability Report urging competition and self regulation, there may yet be a role for internet finance in China’s new banking superstructure.
officials scholars commentatorsZHOU Xiaochuan 周小川 WU Xiaoqiu 吴晓求 TAN Haojun 谭浩俊
WU Xiaoling 吴晓灵 SHEN Jianguang 沈建光 NIU Wenxin 钮文新
PAN Gongsheng 潘功胜 PENG Wensheng 彭文生 ZHANG Ping 张平
we are watching for- private bank pilots- deposit insurance system developments- clarified PBoC and CSRC roles in Yu'ebao regulation
august
28 aug 2013
Only traditional banks can provide a full range of financial products and services, says Dong Wenbiao 董文标 Min-sheng Bank
september
16 sep 2013
There should be small and medium-sized enterprise partic-ipation in the banking system, insists PBoC governor Zhou Xiaochuan 周小川
20 sep 2013
Internet banks offer better opportunities than traditional banks, says Wu Xiaoling 吴晓灵 National People’s Congress
october
8 oct 2013
Shadow banking at C¥20.6 trillion as of 2012, CASS reports
8 oct 2013
Private banks may become ATMs for large enterprises, fears Zhejiang SASAC’s Tan Haojun 谭浩俊
11 oct 2013
CBRC sets an individual shareholding limit of 15 percent to diversify the capital mix and level the field of small players in rural banks
november
26 nov 2013
Private banks need ‘living wills’ detailing steps to deal with bankruptcy, argues Yan Qing-ming 阎庆民 CBRC
29 nov 2013
Private banks should first be required to have deposit insur-ance before operating, suggests Bank of Communications Lian Ping 连平
december
10 dec 2013
Banks must be allowed to fail, says Zhejiang SASAC’s Tan Haojun 谭浩俊
13 dec 2013
Banks should be endowed with limited liability to make sure the state is not left holding the bag on collapse, says Wu Xiaol-ing 吴晓灵 National People’s Congress
january
7 jan 2014
CBRC announces five pri-vate bank pilots. Alibaba is a contender in the first licensing round expected before March 2014
7 jan 2014
Document No.107 clarifies that CBRC, CIRC, CSRC, PBoC are responsible for shadow banks
8 jan 2014
Shadow banking regulation is a mere palliative and does not address the underlying problem, says commentator Ye Tan 叶檀
february
21 feb 2014
CCTV commentator Niu Wenxin 钮文新 starts the hot debate on Yu’ebao by com-paring it to a ‘financial parasite’ that creates no value but earns excessive profits
march
4 mar 2014
PBoC governor Zhou Xiaoc-huan 周小川 clearly stated that ‘Yu’ebao will not be shut down’ during the CPPCC meeting
banking 银行业
may june july august september october november december january february march april may
may 2014learn more: access context
9
economy
giving MSEs green light to growBroad tax cuts for MSEs follow preferential policies adopted in 2013 and with internet finance’s easy loans, MSEs are expected to experience a golden period of development. Tax breaks may decrease fiscal revenue in the short term, but as MSEs account for two thirds of employment, their
health is linked to employment and wage increases, which will drive con-sumption growth. The fine print is that there is little experience or frame-work for helping them weather harder times.
Yu Fenghui: Internet finance revitalises MSEsNational Business Daily 4 Apr 2014
More timely support for MSEs People’s Daily 9 Apr 2014
Use tax cut policy to radiate 'positive energy'Hexun Online 5 Apr 2014
While necessary however for the state to [expand tax breaks for MSEs], the main issues affecting MSEs are with business conditions such as financing and information transfer. Internet finance can in this re-spect be a tool used to stimulate firms.
Being able to absorb large numbers of workers and operate at low cost, MSEs are major platforms for employment and entrepreneurship. Supporting them through fiscal and tax measures will in turn provide social benefits, and is a major plank in this year's effort to boost employment by 10 million.
The issue now is whether, in the current econom-ic situation, it is effective to give tax breaks only to MSEs? Is it possible to expand these cuts... for the entire real economy? ... Public finance is, after all, determined by the economy; fiscal budgets are only healthy if the latter is...
YU Fenghui 余丰慧National Business Daily
BAI Jingming 白景明Ministry of Finance Research Institute for Fiscal Science
TAN Haojun 谭浩俊Hexun Online
Influential commentator for Xinhua, CCTV and NBD and named in ‘ten influential figures’ by Ifeng, Yu sees internet finance as a major innovation in 21st century China. The risks involved cannot be described as ‘systemic’ even though they may exist.
A State Council subsidised expert, Bai argues that preferential tax policies need to be cleaned up in order to realise inter-regional equity. Controversial for his defence of central government issued debt, the existing tax-sharing system and excessive year-end government expenditure.
Zhenjiang SASAC branch office deputy director Tan blogs on economic affairs. Defending tax breaks for private sector MSEs, he argues that local governments can make up revenue losses by reducing spending and better using public savings.
National Business Daily Ministry of Finance, Research Institute for Fiscal Science Hexun Online Covering the Yangtze River Delta industrial engine, NBD is home to celebrity analysts Ye Tan 叶檀, Tan Haojun 谭浩俊, and Yu Fenghui 余丰慧.
Provides fiscal policy advice to the State Council and rele-vant ministries. Director Jia Kang 贾康, an authority on tax theory, proposed the tax sharing system in 1986.
One of the largest financial websites in China, Hexun pro-vides financial data, capital market and investment instru-ment information for the rising middle class.
fiscal policy 财政政策
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economy
mid-term outlook: deepening tax reformThe Third Plenum has raised the fiscal system as a critical pillar of state governance. It is expected that fiscal and tax reform—led by Lou Jiwei 楼继伟—will dominate the next round of institutional reforms. Budgetary and tax reforms have already been launched. Better budget planning is to be
prioritised and deepening the business tax to value-added tax transition, reducing tax for MSEs, and environmental and property taxes are all on the table. However, tax and administrative problems in central-local relations remain unresolved.
officials scholars commentatorsLOU Jiwei 楼继伟 WANG Xiaolu 王小鲁 MA Hongman 马红漫
WANG Jun 王军 LIU Shangxi 刘尚希 TAN Haojun 谭浩俊
XU Shanda 许善达 LIU Jianwen 刘剑文 HU Shuli 胡舒立
we are watching for- central-local government tax-sharing system reform- property tax pilots and related legalisation - further implementation of BT-VAT
april
18 apr 2013
Discussing local pilots where VAT replaces BT, Lou Jiwei 楼继伟 and Wang Jun 王军 say national roll-out will occur in specific industries
22 apr 2013
New taxes will offset local governments’ budget con-straints, as GDP growth slows and revenues decrease, argues Hu Shuli 胡舒立
august
7 aug 2013
VAT reform is a springboard for central-local fiscal relations overhaul, advocates Liu Shangxi 刘尚希
14 aug 2013
Li Keqiang’s promised stimulus should be aimed at productive economy and oppor-tunities for SMEs, says com-mentator Tan Haojun 谭浩俊
14 aug 2013
Compared to 2008’s pack-age, the new stimulus will shun excess capacity and disburse more slowly, expects Citibank’s Shen Minggao 沈明高
15 aug 2013
Fiscal policy experts agree tax system reforms should aim to give provincial and local gov-ernments more fiscal responsi-bility in line with administrative authority
september
18 sep 2013
A chaotic revenue sharing system below the nation-al level causes current local government financing problems, argues Jia Kang 贾康
23 sep 2013
The state should rely on the VAT and income tax, leaving consumption and property taxes to local governments, forecasts Chen Changsheng 陈昌盛 NDRC
24 sep 2013
Grey income helps expand middle class, observes econo-my commentator Ye Tan 叶檀
october
17 oct 2013
Fiscal systems are for redis-tributing income, not macroe-conomic control, says constitu-tionalist Liu Jianwen 刘剑文
november
15 nov 2013
Shi Zhengwen 施正文 China University of Political Science and Law applauds the Third Plenum’s unprecedented focus on public finance
18 nov 2013
A nationwide property tax must be underpinned by legis-lation and public consultation, agree Wang Yongjun 王雍君 and Qin Hong 秦虹
march
6 mar 2014
Prioritise regulation over transparency in budget reform, urges National Academy of Economic Strategy Director Gao Peiyong 高培勇
6 mar 2014
Liu Shangxi 刘尚希 praises proposed shift from binding to anticipatory revenue budget and medium-term planning in new budget reform
6 mar 2014
Budget and tax system will be the breakthroughs in the fiscal and tax reforms this year, announced Minister of Finance Lou Jiwei 楼继伟
fiscal policy 财政政策
may june july august september october november december january february march april may
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economy
mixed ownership – conflictive governance incentives Debate on mixed ownership continues. A reform pattern combining ‘top-down’ design and ‘bottom-up’ innovation has met with many practical implementation problems. Supervision of mixed-ownership firms may prove to be even more difficult than purely state-owned ones. Differing
state and private incentives are combining to threaten the realisation of mixed-ownership reform and vested interests prove dogged. Share price discovery and setting through national capital markets may alleviate private shareholder’s concerns.
Reform Leading Group should lead on capital market reform, breaking vested interestsIfeng Online 4 Apr 2014
Mixed ownership reform should blend 'top-down' with 'bottom-up' People’s Daily 8 Apr 2014
Who will oversee mixed-ownership reform?Sina 12 Apr 2014
Mixed ownership is in fact a signed contract between two different property rights [regimes] that accords with market demand, and since share pricing is an inseparable part of this contract, an open, national capital market must be used [for pricing]; else it will be difficult to transform the SOE hierarchy…
Reform that combines 'top-down' with 'bottom-up' approaches, generally speaking, starts with the lat-ter: allowing grass-roots levels to explore … and then comes the former—carrying out top-level design and including setting a clear [reform] direction … current mixed-ownership reform should stick with this path.
Mixed-ownership characteristics … make oversight more difficult [than public or private firms because:] 1. State and private goals are not the same ... 2. The incentive system in is not unified. … 3. Supervisory efforts are easily blunted. ... 4. The fight for control will be more intense.
ZHOU Qiren 周其仁Peking University National School of Development
HUANG Qunhui 黄群慧CASS Institute of Industrial Economics
TANG Zhijun 唐志军Hunan University of Science and Technology
PKU National School of Development dean, moderate reformist Zhou attributes China’s slowing economic growth to the high transaction costs from excessive regulations. Long concerned about rural land reform, he supports grey market housing and free trade in rural land.
Huang leads a national research project on transforming the state-owned economy. Pointing out conflicts in the SOE model and leaders’ roles, he suggests classifying 115 central SOEs as public policy-oriented, functional and competitive.
An active commentator, Tang suggests competitive SOEs auction no less than 40 percent of their shares to private enterprises. Auction proceeds should go to a social security foundation, local governments (to repay debt) and citizens.
Peking University National School of Development CASS Institute of Industrial Economics Hunan University of Science and Technology Founded on the basis of CCER, NSD is best known for the China Economic Quarterly, International MBA(BiMBA) program, and annual NBER-CCER Conference. Current leader is Yao Yang 姚洋.
Founded in 1978, it contributes to every national Five-Year Plan by researching on regional economy, industrial layout and Western China Development. It publishes two top-level journals China Industrial Economics and Economic Man-agement Journal.
Co-founded by central and Hunan provincial governments in 2003, it focuses on energy, civil engineering, mechatron-ics and coal mining.
state-owned enterprises 国有企业
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12
economy
mid-term outlook: waiting for systemic guidelines Following the Sinopec pilot, CNPC announced their mixed-ownership experiment, partly opening its oil and gas transmission business to the private sector. The comprehensive guidelines on realising mixed-ownership has also been submitted to the State Council, but successful
implementation will necessarily take longer. The MOF’s new policy of collecting 5 percent more SOE profits is indicative of the gradual movement to cancel SOE’s privilege and break old monopolies. A systemic great leap is unlikely to happen.
officials scholars commentatorsMA Kai 马凯 WU Jinglian 吴敬琏 LI Jin 李锦
HUANG Shuhe 黄淑和 ZHANG Wenkui 张文魁 LI Yuyang 李予阳
JI Xiaonan 季晓南 CHU Xuping 楚旭平 HU Shuli 胡舒立
we are watching for- changing SOE regulations: Shanghai, Chongqing, Shenzhen- profit and non-profit corporate goals being disaggregated- private capital buy-in to mixed-ownership SOEs
may
21 may 2013
SASAC vice-chariman Shao Ning 邵宁 advocates distin-guishing ‘public interest SOEs’ from those subject to market competition
august
4 apr 2013
Economic Daily’s Li Yuyang 李予阳 defends the status quo. Large SOEs may not dominate given that they take their prices from the state
8 aug 2013
Sheng Hong 盛洪 identifies monopolistic SOEs as a major cause of stagflation
september
1 sep 2013
SASAC director-general Jiang Jiemin 蒋洁敏 detained for ‘disciplinary violations’
5 sep 2013
Liu Shengjun 刘胜军: cor-ruption is ‘twin sister of market dominance’. Urges SOEs with-draw from sectors where they are ‘competing with the people’
october8 oct 2013
DRC publishes 383 Plan, SOE and SOA reform should focus on redefining functions and capitalising state assets
november
15 nov 2013
3P Resolution published. SOE reform focused on mixed ownership more prominent than expected
18 nov 2013
Wu Jinglian 吴敬琏 wel-comes 3P moves: raising SOEs’ public services role, more after-tax profits to social insurance, and raising dividend payments
21 nov 2013
Chu Xuping 楚旭平 SASAC Re-search Centre forecasts SOEs will mostly be mixed-ownership firms by 2020
december
4 dec 2013
SOE heads should be paid only by government as civil servants and the company’s sal-ary contribution slowly phased out, says Renmin University professor Nie Huihua 聂辉华
11 dec 2013
Reowned economist Li Yining 厉以宁 recommends an intermediary management body between SASAC and SOEs to manage state capital allocation
17 dec 2013
‘20 measures’ – the guidelines for SOAs released by Shang-hai, signal possible application elsewhere
february
1 feb 2014
SASAC deputy Huang Shu-he 黄淑和 says SASAC will pilot direct executive hiring by boards of directors in select centrally managed SOEs
march
4 mar 2014
Break down administrative monopolies like Sinopec com-pletely, not just a ‘generous slice of flesh’, argues Huang Wenfu 黄文夫 China Business Times
5 mar 2014
Golden shares, an inno-vative method used in 1980s British SOE reform, is a practical compromise, says Ye Tan 叶檀
may june july august september october november december january february march april may
state-owned enterprises 国有企业
may 2014learn more: access context
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economy
deflating the overcapacity bubbleThe overcapacity bubble in the real economy is threatening to emerge again but both its root causes and effective deflation strategies prove elusive. Large SOEs have policy incentives to exaggerate their excess capacity thus confounding an overcapacity bubble with a statistical one.
If government is to avoid distorted aggregate demand it must tackle seri-ous market reforms. Fundamentally, markets need to be able to allocate resources and investment needs to drive demand in order for the excess capacity bilge to be expunged by necessary industrial upgrades.
Zhao Changwen: managing overcapacity means popping the real economy bubbleChina Business News 2 Apr 2014
CASS: Firms and industries join forces to fake 'overcapacity' China Business News 8 Apr 2014
Treat both symptoms and the root causes of overcapacityEconomic Daily 17 Apr 2014
Both the real and financial markets have—since both they and the market economy are incomplete—ex-perienced bubbles, and this is the basic reason for overcapacity ... To fundamentally resolve overcapac-ity, bubbles need deflating—even popping. Yet not all economic entities will benefit in this process …
There are currently no incentives for domestic indus-tries to accurately report capacity utilisation data …Resolving over-capacity consists mainly of 'weed-ing-out and eliminating outdated capacity', espe-cially firms with limited production capacity: meaning policy … safeguards the interests of large firms.
Short- and long-term measures need combining … the former [should] reduce and control excess ca-pacity, and the latter … set up a long-term mecha-nism for fixed asset investment formation, giving play to the market's decisive role in resource allocation [to] prevent ... large-scale, widespread overcapacity.
ZHAO Changwen 赵昌文DRC Research Department of Industrial Economy
ZHONG Chunping 钟春平CASS National Academy of Economic Strategy
CAO Jianhai 曹建海CASS Institute of Industrial Economics
Director Zhao opposes the popular idea that all SOEs should quit competitive markets, embracing the idea of fair competition between private and state-owned enterprises. Zhao spent several years as a visiting scholar at elite western institutions after earning his phd.
Zhong heads the Department of Comprehensive Economic Strategy and argues for transparent information to increase the efficiency of public policy making. He believes China's slowdown is due to structural failure and inadequate domestic demand.
Known critic on high housing prices, Cao claims there is no real progress in Third Plenum goals and the real estate bubble will burst before 2022. Recognised as one of ‘Nine Influential Figures on the Internet’ with Lang Xianping 郎咸平 and Yu Jianrong 于建嵘 in 2010.
DRC Industrial Economy Research Department CASS National Academy of Economic Strategy CASS Institute of Industrial EconomicsResearches industrial structure transformation, new paths of industrialisation and the development of specific sectors. Former director Feng Fei 冯飞 is a State Council funded expert who used to teach CCP Politburo class.
Focusing on fiscal and trade policy, and encouraging the services sector. Directly serves central policy makers and ministries including NDRC, MOF and MOFCOM.
Founded in 1978, it contributes to every national Five-Year Plan. Researches regional economy, industrial layout and western development. It publishes two top-level journals China Industrial Economics and Economic Management Journal.
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economy
mid-term outlook: housing market reaching turning pointAfter a long boom house prices are on the brink of depreciation. Land finance will push local governments, especially governments in third and fourth-tier cities, to rescue the housing market by loosening regulations and control. However, this alone is unlikely to halt the general
trend of depreciation. Meanwhile, structural market reforms promoting industrial upgrading in commodities industries must be balanced against overestimations of overcapacity.
officials scholars commentatorsMIAO Wei 苗圩 TAO Ran 陶然 SHI Hanbing 时寒冰
JIA Kang 贾康 XIE Yifeng 谢逸枫 NIU Dao 牛刀
QIN Hong 秦虹 WANG Depei 王德培 MA Guangyuan 马光远
we are watching for- long-term mechanism to solving overcapacity problem- real estate bubble burst - property tax
september
9 sep 2013
Give individual owners access to land market before attempting financial liberali-sation. Otherwise, real estate bubble won’t deflate, says Tao Ran 陶然
11 sep 2013
Cosy relations between de-velopers and local governments are deflecting central measures to regulate property prices, says analyst Tan Baoluo 谭保罗
14 sep 2013
A real estate tax will help regulate supply and demand and slow price increases, says Jia Kang 贾康 MFO Fiscal Sci-ence Research Institute
14 sep 2013
Property tax may be neu-tralised by local governments eager to attract talent and investment, worries Economist Xu Shanda 许善达
october
8 oct 2013
Excessive state-power, GDP-centric performance eval-uation and regionalism are root causes of industrial overcapac-ity, says Chen Shengyong 陈剩勇
8 oct 2013
Overcapacity has been building since long before the 2008-09 loose monetary policy, says Wang Depei 王德培
8 oct 2013
End government interven-tion, improve market mecha-nisms, and let failing industries fail to fix industrial overcapacity, argues Li Ping 李平 CASS
20 oct 2013
Create demand abroad through overseas investment to address overcapacity due to negative export growth, argues Zhou Qiren 周其仁 Peking University
november
18 nov 2013
A nationwide property tax must be underpinned by legis-lation and public consultation, agree Wang Yongjun 王雍君 and Qin Hong 秦虹
19 nov 2013
A property tax will provide local governments revenue for public services, says Liu Jianw-en 刘剑文 China Law Society
19 nov 2013
A property tax may temper rising house prices, but the real advantage is decoupling local governments from land finance, says Jia Kang 贾康 Ministry of Finance
19 nov 2013
Allow local governments to shape the tax in their jurisdic-tions, recommends Liu Huan 刘桓 Central University of Finance and Economics
december
12 dec 2013
Future real estate controls will be modulated for local conditions and issued at a slow-er pace, anticipates expert Xie Feng 谢逸枫
12 dec 2013
The real estate market is losing steam. The Wenzhou case shows economic and social stability depends on housing price stability, finds Chen Gong 陈功 Anbound Consulting
19 dec 2013
Miao Wei 苗圩 MIIT Minister calls local government compe-tition for investments ‘excessive and even illegal’
may june july august september october november december january february march april may
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