Realizing Reform

　　The Second Session of the 12th National People’s Congress (NPC) passed the Report on theWork of the Government by Premier Li Keqiang onMarch 13. The report， delivered on March 5， the openingday of this year’s annual NPC session， mentions theword “reform” 77 times and the measures proposedby the report encompass the sectors of the economy，politics， people’s well-being， rule of law and ecologicalprogress.

　　This is the first report on the work of the governmentby Premier Li. All of the 60 detailed reform tasksproposed by the Decision of the Central Committee ofthe Communist Party of China (CPC) on Some MajorIssues Concerning Comprehensively Deepening theReform adopted last year are included in this report.Moreover， on issues of taxation， finance， pollution control，urbanization， medical reform and education， thereport puts forward even more detailed guidelines.

　　Zhao Xijun， Vice Dean of the School of Finance ofRenmin University of China， said the report indicatesthat the Chinese Government is implementing theblueprint of reform formulated by the Third PlenarySession of the 18th CPC Central Committee lastNovember， and it has enough determination and confidenceto effectively implement the blueprint.

　　China’s measures of comprehensive reform are alsogood news for the world economy. Because the fortunesof the Chinese economy are so indelibly linkedwith those of the global economy， sound economicand social development in China will bring opportunitiesto the wider world.

　　High expectations

　　Zhao said that according to the Report on the Workof the Government， reform measures among the ninekey aspects of government work can be grouped intothree categories. Those pertaining to the economyinclude streamlining administration and delegatingpower to lower levels， tax reform， financial reform andaccelerating economic transformation. Those relatingto social development and management includeadvancing urbanization， improving people’s well-beingand reforming the household registration system.Finally， reform in ecological progress comprisesmeasures for advancing the transformation of energyproduction and consumption.

　　Reform is the primary theme of the government’swork this year， with economic reform in particularlabeled the paramount task. In contrast to bygoneyears， this year’s reforms will mainly tackle the difficultiesthat， up to now， have not been addressed.

　　For example， last year， the government reduced thenumber of items subject to government review andapproval， and this year the government may work onsome more contentious items. According to the report，the government will introduce a system to list allitems over which government review and approval arerequired， with an aim to make the government administrationmore transparent. China will also refashion itsbusiness registration system nationwide and carry outregistration of subscribed capital. In addition， annualinspections of businesses will be replaced by annualreporting. For the government， this is a self-imposedrevolution with the aim of incentivizing potential marketparticipants.

　　Another area of difficulty is fiscal and tax reform.Zhao said reform of the fiscal and tax system basicallyinvolves how much the government will take， howmuch the market will reserve and how much residentscan get. With regard to the government itself， it alsoinvolves how much fiscal revenue is allocated to theCentral Government and how much goes to local governments.

　　It is a reform of the fiscal and tax system，but in fact it involves relationships between interests inthe government， the market and among the commonpeople. It also involves relationships among various interestswithin the Central Government and variouslocal governments. Therefore， navigating through thisjungle of conflicting interests and attitudes in order toblaze a path to clear solutions will be a very difficultand challenging task.

　　Zhao said that it can be expected the commitmentsto financial reform laid out by the report will be honored.Owing to factors such as shadow banking andlocal government debt risks， the academic circle hasbeen questioning the overall health of the Chinese fi-nancial industry. The report vows to deepen reformof the financial sector， including measures such ascontinuing to liberalize interest rates.

　　The public is also concerned about reforms ofownership. Premier Li’s report vows to formulatemeasures for non-state capital to participate in investmentprojects of enterprises under the CentralGovernment， and allow non-state capital to take ona number of projects in areas such as banking， oil，electricity， railway， telecommunications， resourcesdevelopment and public utilities. The governmentwill formulate specific measures to permit privateenterprise participation in franchising， to reform therailway investment and financing system， and toopen competitive operations in more areas so as tocreate a platform for the full participation of privatecapital.

　　Zhao continued that although China has announcedthe introduction of many measures tosupport development of the non-state economy，the “glass door” for private capital to enter stateownedmonopoly industries has not yet beenbroken through. This year the government will takelarger strides in this regard.

　　Big resistance

　　“It is not easy to implement these reform measures，”said Yang Weimin， deputy head of the Officeof the Central Leading Group on Finance andEconomic Affairs. “The biggest resistance not onlylies in the difficulty and complexity inherent in thereform measures themselves， but also comes fromvested interest groups.”

　　According to Yang， after 36 years of development，the benefits of the previous round of reformshave been almost exhausted. Facing problems， oldand new， and demands from interests in all areas，the process of implementing reforms for the futureis becoming increasingly difficult. From Premier Li’sreport， people will find that implementation of reformmeasures has touched a nerve among vestedinterest groups. To carry out reform measures，China must therefore break through the obstaclespresented by mental shackles and vested interests.The report echoes the decision by last year’sCPC plenary session that steps be taken to “makethe market play a decisive role in resource allocation.”

　　This year， China will cancel or delegate tolower-level governments an additional 200-plusitems previously subject to central governmentreview and approval， items over which many governmentdepartments are reluctant to lose control.

　　At a press conference held on March 6， Li Yining，a member of the National Committee of theChinese People’s Political Consultative Conference(CPPCC) and a renowned economist， expressed hisconcerns regarding resistance to reform.

　　Li said today’s situation for reform is differentfrom three decades ago， because the problemsthat most need to be addressed represent thornyissues. The resistance to reform comes mainlyfrom two areas. First and foremost are the interestgroups， as reform will damage their interests. Thesecond source is a feature of human nature， namely，people’s innate resistance to change. Having becomeaccustomed to one way of doing somethingand having grown to rely on that system， peopletend to be loath to try alternative methods.

　　While meeting the press on March 8， ChiFulin， a CPPCC National Committee member andPresident of the Hainan-based China Institute forReform and Development， said that at this criticalmoment， China must pay special attention tobalancing the relationship between various partiesand coordination of the reform. As far as reformsgo， now comes the hardest part. Given the presenceof conflicts of interest within， and indeedbetween， different departments， industries andlocalities， any reform must address multifacetedproblems and attempt to circumvent the hurdlesput in place by vested interests and people’s naturalresistance to change.

　　Making breakthroughs

　　China’s reform used to be led by the government，but the future reform will be a revolution imposedby the government on itself. This will be a painfulprocess， which needs not only great determination，but also great political wisdom.

　　Yang said that in order to carry out the reformmeasures， six strategies should be employed.

　　First， measures easier for implementationshould be introduced， followed by more difficultones. Whether a measure is easy or difficultdepends upon the public acceptance of it， not thescope involved. If society has reached agreementon a measure， it should be carried out in a timelymanner. As for the reforms on which an agreementhas not yet been reached， efforts should be madeto reach wider consensus through discussions，research and pilot projects.

　　Second， the overall reform objective throughsmaller measures of an incremental nature shouldbe accelerated. For example， in fiscal and tax reform，the focal point for this year is to extend trialsfor replacing business tax with value-added tax.This may seem to be a small measure， but it willhelp to light the way toward reform of the wholelocal tax system， which is in turn pivotal to reformof the division of power between central and localgovernments.

　　Third， grasping the core and key points in thereforms of various fields.

　　Fourth， the tempo of reform should be controlled.The government should be both bold and steady inadvancing reforms. For example， reforms must becarried out under the existing legal framework，though some breakthroughs canstill be made. The government should notadvance the reform blindly without firstconsidering present limitations.

　　Fifth， steady progress is to be made.Based on full assessment and agreementreached， reform measures must achievereal effects.

　　The final strategy is to focus on concreteresults and measurable achievements.

　　At present， some departmentsand localities are swift to action， butfew of their measures have made anysubstantive progress.

　　The Chinese Government has determinedthat the process of comprehensivelydeepening the reform will becompleted in seven years， and 2014marks the first year. As it stands， directionsof many reforms have been madeclear and the measures have been readiedfor implementation. However， it is of vitalimportance that reform measures must beissued at the proper time and tempo， Yangconcluded.

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