Opening-up the service sector key for reform
DURING the 13th FiveYear Plan period (201620), China's development will be powered bytransformation and reforms. While they can release the country's huge potential, China's economic transformation andupgrading will also face risks and challenges. Under these circumstances, China needs notonly macroeconomic policy adjustments, but also key breakthroughs in its structural reformand supply-side reform.
During the 13th Five-Year Plan period, therefore, promoting adjustment to a services-dominated industrial structure is a key task, and the government will push forward marketizedreforms and the opening-up of the service sector.
If the service sector increases to 60 percent of China's gross domestic product by 2020, thatwill not only create favorable conditions for reducing overcapacity, and destocking anddeleveraging, it will also facilitate the sector's transformation and upgrading and release thehuge demand potential.
Despite its great efforts to lower transaction costs for businesses through institutional reforms,which have formed a new driving force for its structural adjustments, the government stillneeds to make further efforts to open-up the services market to encourage and support theen- try of private capital.
Despite the adoption of some policies to encourage the flow of private capital to the servicesector, most of them lack operable details and workable methods, and administrative ormarket monopolistic practices still dominate. This calls for the making of a new market accesssystem for the service sector.
To adapt to a new round of globalization and its own domestic economic transformation andupgrading, the country should break the existing restrictions and open-up the service sectorinside its free trade areas, to create some replicable experiences. At the same time, it shouldapply policies to the service sector the same as it does to the industrial sector, such asnarrowing the price gap between land for services and land for industrial use and increase tax- cuts for small and medium-sized enterprises in the service sector.
The country should also optimize its distribution of State capital to lubricate its efforts toreduce the overcapacity in some industries.
To successfully promote structural adjustments during the 13th Five-Year Plan period, the keyis to achieve a major breakthrough in the elimination of overcapacity among State-ownedenterprises, and make these enterprises play an important role in adjusting the country'sindustrial structure. To this end, a clear reform program for the distribution of State capitalshould be worked out to promote the elimination, transformation, upgrading or merger ofState capital in different fields with overcapacity. The government should also accelerate reform of its decades-long hukou (householdregistration) system, and use a more equitable system to replace the existing dual urban-ruraldivide.
Urbanization will release new demand and create huge potential for new supplies. It stillposes the "biggest dividend" for China's transformation-based development. But reform of thehousehold registration system should not be based on simple name-changing, such aschanging the "temporary residential permit" to a "residential permit", instead substantial stepsmust be made toward cancelling the dual hukou system. That demands the country makeseveral changes in its household registration system, including shifting from populationcontrol between urban and rural areas to population services and management. At the same time, the government should increase its efforts to simplify administrativeprocedures.