China May Revamp Rural-Land Rights as Part of Reforms

China May Revamp Rural-Land Rights as Part of Reforms: Economy

China Politburo member Yu Zhengsheng said the Communist Party would consider “unprecedented” economic reforms next month, as a top research agency proposed changes to rural land ownership rules and social security. The Development Research Center under the State Council, or cabinet, has also proposed adding “outside investors” to boost competition, China News Service reported Oct. 26, citing a publicly released plan. Yu’s comments in the southern city of Nanning were reported by the official Xinhua News Agency on Oct. 26.Credit Suisse Group AG said the proposals are ambitious and exceed its expectations, while Nomura Holdings Inc. said the government’s effectiveness in implementing reforms remains to be seen. Analysts surveyed by Bloomberg News this month said policies flowing from the meeting, called the third plenum, will reduce the odds of a severe slowdown or financial crisis.

The meeting “will focus on studying comprehensive and deep reform,” Yu was quoted as saying in Xinhua’s report. “The depth and strength of the reforms will be unprecedented and will promote profound changes in every area of the economy and society.”

The plans are part of “probably the most ambitious” economic initiatives since the People’s Republic of China was formed and should be viewed as the foundation of President Xi Jinping’s reform framework to be unveiled at the third plenum, Dong Tao, a Hong Kong-based economist at Credit Suisse, said in a note today. Even so, the “details are missing at this moment” and their effectiveness depends on “policy design and execution,” Tao wrote.

Stock Market

The benchmark Shanghai Composite Index (SHCOMP) of stocks fell 0.4 percent at 11:20 a.m. local time. While money-market rates rose last week by the most since a June cash crunch, China’s brokerages are betting that the increase is a sign of strength in the economy rather than finance-industry weakness.

Yu is ranked fourth in the seven-strong Politburo Standing Committee headed by party chief and President Xi. The comments were made in a speech at a forum to promote relations with Taiwan.

Premier Li Keqiang has pledged to cut the state’s role in the economy, change the financial and fiscal systems, and overhaul land and household registration rules to sustain growth.

The research center’s proposal to let farmers use land as collateral or transfer it to others is “highly controversial,” and the party’s final plan may be vague and reflect a lack of consensus for aggressive change, Zhang Zhiwei, chief China economist at Nomura in Hong Kong, said in a note today. Under existing regulations, farmers own rights to use land collectively and can’t sell to developers directly, leading to grabs by local governments.

Earlier Plans

Many of the proposals in the research center’s plans appeared in China’s five-year plan released in 2011 and progress “has not been significant,” Zhang said.

Yu’s remarks follow comments Xi made to foreign business executives last week that “comprehensive reforms” would be “planned out” during the plenum, according to an English-language Xinhua report on Oct. 23 that didn’t specify any policies. Dates for the meeting haven’t been announced.

“We must properly handle the relations between reform, development and stability, and with greater political courage and wisdom, further open our minds, unleash and develop social productivity, and enhance the creative forces of the society,” Xi was quoted as saying.

Third Plenum

Next month’s gathering will be the third full meeting, or plenum, of the party’s current Central Committee, including Xi, Li, ministers and the heads of the biggest state firms and banks, who took over in a once-a-decade power transition that started in late 2012. Thirty-five years ago, a similar Communist Party gathering saw Deng Xiaoping and his allies inaugurate a series of reforms that began to open up China to foreign investment and loosen state controls over the economy.

“I don’t expect to see concrete measures announced at the meeting, but I do expect to see concrete setting of a clear direction and objectives,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong who previously worked for the World Bank in Beijing. “It’s clear that in the financial and monetary areas there’s a full mandate to move ahead, but so far we haven’t had the same signals in other key areas of reform.”

The government has already made progress in areas including cutting regulation, “but that’s low hanging fruit,” Kuijs said. “Some recent statements, such as on the fiscal front, seem to indicate it’s going to be pretty tame.”

U.S. Production

Elsewhere in the world today, Sweden reports on September retail sales and Italy will provide a business-confidence index. The U.S. will see releases on September industrial production and pending home sales.

China has pared its growth ambitions, targeting annual expansion of 7 percent this decade, compared with the 10.5 percent average pace of the last 10 years.

Bloomberg’s survey of analysts conducted from Oct. 11 to Oct. 18 indicated that the odds of a severe slowdown in China or a credit crisis will fall after the summit as leaders tackle local-government debt and financial reforms.

Fifteen of 23 economists and political analysts said policies flowing from the meeting will reduce such risks, and a majority said the plans will help China become a high-income economy by 2030.

Asked which reforms are most needed now and most likely in the next 12 months, survey respondents ranked changes in financial markets and local-government funding as both most urgent and probable. Expectations were lower for reforms to the residence-registration or hukou system, which limits labor mobility, the rule of law and state-owned enterprises.

To contact Bloomberg News staff for this story: Stephen Tan in Beijing at; Wenxin Fan in Shanghai at; Nerys Avery in Beijing at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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