China to unveil 10-year reform plan, expectations toned down

BY KEVIN YAO

BEIJING Mon Nov 11, 2013 4:14pm EST

(Reuters) - China's leaders will unveil a reform agenda for the next decade on Tuesday, seeking to balance the need to overhaul the world's second-largest economy as it loses steam with preserving stability and to reinforce the Communist Party's power.

The blueprint, which past experience suggests will be first published by the official news agency Xinhua, will show just how committed the new leadership is to reform after formally taking power in March.

Economic reforms were expected to dominate four days of closed-door talks that began on Saturday and involved the 205-member Central Committee of China's ruling Communist Party. The conclave was held under tight security at a Soviet-era hotel in western Beijing.

Some social and political issues could have been tackled, but Western-style political reform were probably not on the agenda, analysts said.

President Xi Jinping and Premier Li Keqiang must unleash new growth drivers as the economy, after three decades of breakneck expansion, begins to sputter, burdened by industrial overcapacity, piles of debt and eroding competitiveness.

Yu Zhengsheng, the fourth-ranked member of the ruling elite, said last month the meeting would deliver "unprecedented" reforms. However, several analysts and official media have sought to tone down expectations.

"The chances of seeing big surprises will be small," said an economist with a top government think-tank, who declined to be identified due to the sensitivity of the matter because he was involved in preparations for the meeting.

A draft plan on key reforms was formulated ahead of the conclave, combining proposals from various government ministries and top think-tanks.

The Development Research Centre, a think-tank for China's cabinet, proposed last month eight key areas for reform at the plenum - finance, taxation, land, state assets, social welfare, innovation, foreign investment and governance.

Some reforms still face stiff resistance from powerful interest groups such as local governments or state-owned monopolies, people involved in reform discussions have said.

Most progress is expected with steps such as letting market forces play a bigger role in setting the price of capital, energy and land, cutting red tape and some fiscal and tax reforms.

"I don't think the final document can exceed expectations - the opposite may be the case," said the economist with the top government think-tank in Beijing.

"It is absolutely impossible for them to add new reforms to the initial list," said the economist.

The meeting's communique will not reveal any heated debates that might have taken place behind the scenes, an arrangement that allows the Communist Party to present a unified voice on the plans. It is also unlikely to be particularly detailed.

The Central Committee's third plenum comes at a time when the party is still grappling with the fallout from the downfall of disgraced Bo Xilai, who had been a contender for a seat at the apex of China's power.

The former party boss of the southwestern city of Chongqing was jailed for life in September on charges of corruption and abuse of power, but he has many sympathizers.

Underscoring the party's worries, supporters of Bo have setup a new political party, in a direct challenge to the de facto ban on new political groups.

Historically, third plenums in China have served as a springboard for key economic reforms.

Former leader Deng Xiaoping launched reforms to open the economy to the outside world at a third plenum in 1978.

That was followed in 1993 with an endorsement of the "socialist" market economy, paving the way for sweeping reforms spearheaded by then Premier Zhu Rongji, which led to China's entry into the World Trade Organization.

This time, the focus is economic rebalancing by increasing the urban population and greater efforts to promote consumption to move away from exports and investment, China's main growth engines.

The leaders are expected to loosen the household registration system, which blocks migrant workers and their families from access to education and social welfare beyond their home villages.

They may also push land reforms to allow farmers to sell land when they leave their villages - a key hurdle to Beijing's urbanization drive to turn millions of migrants into consumers.

While the meeting will set the broad reform agenda, state agencies will be left to work out the details and the next event to watch will be the annual Economic Work Conference likely to be held in December.

(Reporting by Kevin Yao; Editing by Tomasz Janowski and Neil Fullick)