Third Plenum reforms draw positive response

The reaction among analysts and businesspeople to the recent Third Plenum of the Communist Party’s ruling elite seems to be positive, hardly surprising as the reforms in the policy plan to come out of the meeting exceed what everyone was expecting beforehand.

But now attention is turning to whether the government can deliver on its promises to shift policy to bring in a lot more private sector, a bit less public sector, or at least, better public sector.

European Chamber president Davide Cucino welcomed the changes in the document as they reflected a long-held consensus about the need for the government to cede political control to the market.

“All the reforms listed in the decision should be considered to be part of a dynamic loop: if one is not implemented fully, it risks adversely affecting all of the others. We welcome the changes, but they are overdue. The river is swelling. Crossing it by feeling for stones is prudent, but the choppy waters mean that it may also be dangerous to wait,” said Mr Cucino.

Analyst Wang Tao at UBS said the reform plan was more than expected, but the reform plans are meant for the coming years not months, some of them will be difficult to implement, and many of them are not going to be all positive for growth or for many of the listed companies.

“When all the excitement about reform plans cools, as the reforms get implemented – when the dust settles, what will likely be the impact of these reforms?” Wang asked.

UBS believes the overall impact of the reforms will be positive over the longer term, not necessarily in terms of higher GDP growth rate, but in terms of more sustainable and efficient growth, lower tail risk of a hard landing and meltdown in the medium- to long-term, and the improvement of household welfare and corporate performance at the micro level.

“The impact on various sectors may be mixed at different times. In addition, the sequencing of reforms, which in part depend on the resistance to various reforms, will also be important,” said Wang.

Entrepreneurial enthusiasm
Feng Jun, chairman of Aigo Digital Technology, believes Chinese entrepreneurial enthusiasm will be further inspired by the plenum in areas such as mobile internet.

"The mobile internet market offers huge opportunities. Chinese products and services like WeChat are not only a unique success, but also enhance the development of China's entrepreneurial landscape," Feng told the Global Times newspaper.

"But China is currently facing a big problem: There are fewer and fewer entrepreneurs because everyone wants to find a stable job.

“The government now encourages a market economy and reduces the threshold for company registration, which will surely motivate entrepreneurs.”

Mark Williams believes the reform plan is unlikely to have a big impact on China's immediate economic outlook.

“But, if implemented effectively, it should allow China to sustain stronger growth over the medium term than it otherwise would.

“However, the most important difference these reforms would make is in reducing the risk of a hard landing.”