Call for reform and freeing-up of market forces in China

CHINA CANNOT delay on delivering tough economic reforms, Li Keqiang, the man widely tipped to replace Wen Jiabao as China’s premier in a leadership shuffle this autumn, has said in a message that gives vital clues to the future direction of China’s leadership.

His comments yesterday underline the top leadership’s efforts to push market-based change after the sacking last week of Bo Xilai, the ambitious leader of the city-state of Chongqing, who has sought a return to communist ways and who wanted a bigger state role in the economy.

Calls for unity are all over the place in China at the moment after Mr Bo’s sudden ousting, after a scandal when his vice-mayor Wang Lijun took refuge last month in the US consulate.

China was also prepared to “deepen reforms on taxes, the financial sector, prices, income distribution and seek breakthroughs in key areas to let market forces play a bigger role in resource allocation”.

His comments appear almost directly aimed at winning market economy status from China’s biggest trading partner, the European Union.

“China has reached a crucial period in changing its economic model and change cannot be delayed,” Mr Li said in a speech at an economic policy conference. “Reforms have entered a tough stage,” Mr Li said in a speech at an economic policy conference.

It was attended by top Chinese officials, International Monetary Fund head Christine Lagarde and foreign business leaders.

“We will make policies more targeted, flexible and forward-looking to maintain relatively fast economic growth and keep price levels basically stable,” he said.

Policies would stay flexible, aimed at maintaining healthy growth rates while managing inflation, with a focus on boosting domestic demand and pursuing structural reforms to make growth more stable and balanced.

His comments directly echo those Mr Wen made at the National People’s Congress last week.

Zhang Ping, head of the country’s planning agency, the National Development and Reform Commission, told the conference that economic policies maintaining relatively fast growth were key to the country’s future.

“First of all, we need to maintain steady and relatively fast economic growth – development is the key for resolving all problems in China,” Mr Zhang said.

Ms Lagarde said the yuan could become a global reserve currency with the right mix of market-oriented structural change, something the Chinese government is very keen on attaining.

“What is needed is a roadmap with a stronger and more flexible exchange rate, more effective liquidity and monetary management, with higher-quality supervision and regulation, with a more well-developed financial market, with flexible deposit and lending rates, and finally with the opening up of the capital account,” Ms Lagarde added.

“If all that happens, there is no reason why the renminbi [yuan] will not reach the status of a reserve currency occupying a position on par with China’s economic status.”