I Intensifying Reform Efforts

To ensure the realization of the economic and social development goals in the “13th Five-Year Plan” period, it is critical to form an effective incentive mechanism through institutional innovation, with the aim of dealing well with the relationship between the government and markets. Under the market economy, the mechanism influences the interest distribution pattern, leads the behavior of market main body, and decides the mechanism for economic development impetus. Only when China firmly pushes forward the reform and accelerates the reform in key sectors, can it stimulate the momentum and vitality of economic and social development.

Deepening Reform of Administrative System

It is important for China to streamline administration and delegate more powers to lower-level governments, and to society in general, while improving regulation, as well as optimizing service reform. It is of significance for China to continuously cancel and decentralize items for administrative approval, establish and standardize administrative examination and approval management system, as well as simplify procedures, make clear time limitation, and exchange the “subtraction” of government power for the “addition” of market vitality. It is necessary to formulate a negative list of market access, clarify the list of government powers and responsibilities, and make sure that nothing should be done without the authorization of the law and the legal duties regulated by the law must be done. In addition, the focus of the government’s administration should be gradually moved from the primary approval to the later service and supervision, and strictly normalize the later action in accordance with relevant regulations. It is vital for China to innovate the way of public service provided by the government and advance the diversification of the subject and the way of providing public service.

Pushing Forward Reform of Investment and Financing System

It is important for China to substantially shrink the scope of investment projects approved by the government and decentralize the approval authority, and to considerably simplify the pre-approval procedures for investment projects and implement the online parallel processing for project approval. It is vital to significantly ease restrictions on market access for private investment and encourage social capital to establish equity investment funds. It is advisable for Chinese government to provide investment subsidies, inject capital, and establish funds and other measures to guide society capital investment in key projects. Furthermore, it is important to actively promote the cooperative mode between the government and social capital in infrastructure, public utilities, and other fields.

Deepening Reform of State-Owned Enterprises and State-Owned Assets

It is vital for China to accurately define the different functions of various state-owned enterprises and make classified reforms in them. It is advisable to accelerate the pilot operation of state-owned capital investment companies, build market-oriented operation platform, and improve the management efficiency of state-owned capital. Besides, it is important to orderly implement the reform of mixed ownerships in state-owned enterprises and to encourage and normalize the equity participation by non-state-owned capital in investment projects. In addition, it is important to speed up the system reform in the fields of electric power, oil, and gas. Multiple measures should be taken to eradicate the historically formed social functions from enterprises to safeguard the legitimate rights and interests of workers. It is critical for China to improve the modern enterprise system and reform and perfect the incentive and restraint mechanism of enterprise operators.

Deepening Reform of Fiscal and Taxation Systems

China should improve the financial budget system; set up an open, transparent, standardized, and complete budget system; and implement interim fiscal planning management. It is advisable for China to reform the transfer payment system, reduce or combine a number of special transfer payment projects, and increase the size and proportion of general transfer payment. Besides, it is necessary to improve the definition of authority of office and right of property of the central and local governments for reasonable adjustment of income distribution in the central and local governments, and improve the mechanism of matching financial resource with authority in the central and local governments for increase of financial resource of the basic-level governments. In addition, it is important to establish and improve the coverage of state-owned capital management budget and revenue-sharing system in all state-owned enterprises and to increase the ratio of state-owned capital management budget included in the common public budget.

Deepening Financial System Reform

China should accelerate the interest rate marketization reform and establish and improve the market benchmark interest rate system. For this purpose, China should improve RMB exchange rate formation mechanism, give full importance to the basic role of market supply and demand in the formation of exchange rates, and enhance the flexibility of the two-way floating of RMB exchange rates. Besides, China should steadily achieve the convertibility of RMB capital accounts, expand the scope of international use of RMB, and improve RMB global clearing service system. In addition, it is important to relax financial industry access restrictions; accelerate the development of private as well as small and medium-sized financial institutions for issues of small and micro businesses and those concerning agriculture, farmer, and rural areas; and improve modern financial systems. Furthermore, it is advisable for China to strengthen the construction of multilevel capital market system, implement stock issuance registration system reform, develop regional equity market oriented to small and medium-sized enterprises, promote the securitization of credit assets, expand the issuing size of corporate bonds, and develop financial derivatives market. Last but not least, China should make innovation in financial supervision to prevent and resolve financial risks.

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