Open­ing-up the ser­vice sec­tor key for re­form

The Pak Banker - - OPINION - Chi Fulin

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.

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