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Experts foresee reform of hukou, capital flow

Updated: 2013-11-09 09:13
( China Daily)

In which areas do you think reform would be carried out at the upcoming meeting? And on what scale?

It's hard to make detailed policy projections. But I believe the three new driving forces (which were mentioned before) should be achieved with corresponding reforms in the following seven areas: the financial system, the hukou system, State-owned enterprises, the land system, fiscal revenue and tax distribution system, the administrative system as well as factor price reform.

For instance, the reform of the hukou system is closely related to in-depth urbanization. More effective investments are encouraged to consolidate public transportation, infrastructure and the building of satellite cities. These will benefit both the economic output and people's welfare. Real urbanization can effectively prolong the duration of residents in the city, whose productivity will therefore be better unleashed as they get to improve their capabilities under better conditions.

What would be the biggest challenges and risks for carrying out reforms?

All I can see are two potential risks in the short run, or next year.

The first is inflation. The consumer price index is likely to rise to 3.4 to 3.5, but it will still remain at a manageable level. Besides, the producer price index has been contracting for a long time. So a price hike may be heartening news to manufacturers.

The other problem is local governments' debt problems. Recent estimates suggest that all levels of government bear a combined debt burden totaling 29.5 trillion yuan ($4.84 trillion). In the foreseeable future, the debt servicing ratio will hit 100 percent. Given that net assets of the governments amount to 33 trillion yuan, the major concern remains liquidity issues.

What would be your most expected reform? Why?

Experts foresee reform of hukou, capital flow

The reform should be comprehensive, covering all important sectors.

Reform of the hukou system could bring about a more sufficient labor supply and improve the labor participation rate. Meanwhile, it could stabilize the group of migrant workers in cities, especially the young generation of migrant workers. It is a move to guarantee social stability in the future.

Besides, any country that wants to realize modernization must improve the proportion of urbanization.

What measures will be taken on social reform? How should China cope with the diminishing demographic dividends?

There has been negative growth in the working population since 2011. No country can rely on a demographic dividend forever.

Our rapid economic growth would slow down eventually. The growth would instead come from technological progress and productivity improvement.

To achieve technological progress, we have independent innovation and can also introduce, absorb and digest the experience from other countries and then re-innovate.

Experts foresee reform of hukou, capital flow

Through reform, we should target institutional dividends. Currently there are still many institutional obstacles that are hindering efficiency.

What would be the biggest challenges and risks for carrying out reforms?

The reform could affect vested interests. We need political courage and wisdom to tackle vested interests, a subject mentioned at the 18th National Congress of the Communist Party of China.

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