Recently, the State Council endorsed Opinions on Deepening Key Work of Reform of Economic System in 2017 (hereinafter referred to as Opinions), which was proposed by the National Development and Reform Commission (NDRC). Centering on supply-side structural reform, China will continue to deepen reform of economic system this year, including the tasks of advancing state-owned enterprises (SOEs) and state-owned capitals reform, strengthening development of property right protection system, deepening reform of fiscal and tax systems and promoting reform of financial system, which includes three basic systems about stock issuance, trading and delisting of listed companies, doing positive teamwork in revising the Securities Law, and severely cracking down various illegal behaviors in capital market. In addition, substantial progress is required to be made in deepening mixed ownership reform in the fields such as electricity, petroleum, natural gas, railway, civil navigation, telecommunication and military industry.
Specifically, the reform tasks in the multi-level capital market this year include improving basic systems about stock issuance, trading and delisting of listed companies, actively developing ChiNext Board and the New Third Board, and standardizing the development of regional equity market; doing positive teamwork in revising the Securities Law; severely cracking down various illegal behaviors in capital market; perfecting infrastructure of bond market, promoting reform of corporate bond registration management system, improving bond issuer information disclosure system and improving credit risk disposal system; piloting securitization of infrastructure assets; steadily enlarging coverage of institutions participating in piloting securitization of non-performing assets of banks.
Fu Lichun, a researcher from Northeast Securities Co., Ltd., said to the journalist of Securities Daily that the emphasis of different parts of the reform of the multi-level capital market is different. System construction of the Main Board will be further improved so as to better support high-quality listed enterprises and advocate value investment. As most of the companies listed on the ChiNext Board and the New Third Board are innovative start-ups, the focus should be providing more system dividend and innovative arrangement. Indispensible regional equity market (also called as the fourth board market) needs the most fundamental standardizing system. Strengthening supervision should be more responsible for the market, investors and enterprises. As for market with constant return, it should further improve system arrangements and support infrastructure construction and securitization of non-performing loans of banks.
“The multi-level capital market is one of the most important components of China’s financial system, which can better back up real economy. While improving their own development, each sector should form organic connection with each other to give full play to synergistic effect.” said Fu.
In terms of promoting reform of financial system, the Opinions requires improving interest rate liberation and regulation system, propelling development of benchmark interest rate and yield curve and improving yield curve of national bonds; further improving RMB exchange rate formation mechanism, reinforcing elasticity of exchange rate and keeping RMB’s stable position in global currency system; pushing forward RMB’s internationalization steadily and orderly; propelling reform of corporate external debt registration system, and establishing and improving management system of external debts and capital liquidity under macro-prudential management framework. The Opinions also requires deepening reform of financial institutions and financial supervision system, including positively and stably promoting reform of financial supervision system and enhancing construction of financial macro-prudential management system.
The Opinions proposes to deepen SOEs and state-owned capitals reform and boost implementation of documents about the SOEs reform, including carrying out equity diversification of central state-owned groups, propelling mergers and restructuring of central SOEs, and promoting pilot of reform of state-owned capital investment and operation companies. Besides, it also requests to deepen SOEs mixed ownership reform and particularly mentions that substantial progress should be made in deepening mixed ownership reform in the fields such as electricity, petroleum, natural gas, railway, civil navigation, telecommunication and military industry.
As for reform of fiscal and tax systems, it is requested in the Opinions to impel reform of defining respective financial powers and expenditure responsibilities. The government will implement instruction on moving forward with the reform to define the respective financial powers and expenditure responsibilities of the central and local governments and strive to make breakthrough in some basic public service fields; speed up work on formulating an overall plan for central and local government revenue sharing, study proposal on improving the local tax system, disentangle revenues distribution of the central and local governments and arouse the initiative of them.
In addition, tax system should be reformed and improved. The government should implement and improve policies on piloting the replacement of business tax with VAT across the board, simplify the structure of VAT rates, and undertake this year to turn the four tax brackets into three; deepen resource tax reform and expand coverage of pilot of water resource tax reform. As for this, the government will focus on detailing policy on the replacement of business tax with VAT and speed up launching supporting policy related to the replacement of business tax with VAT, said Jia Kang, principal economist of the China Academy of New Supply-side Economics, and the former president of Institute of Fiscal Science, Ministry of Finance.
The Opinions put forward deepening five priority tasks, namely, cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness, via reform, thereby achieving substantial progress in the five tasks. In terms of real estate industry, the government should take targeted policies to cut excess urban real estate inventory. It should bond reducing inventory together with urbanization of population. It needs to be clear that housing is for people to live in, promotes housing provident fund system, improve housing system with housing purchase and renting, continues to develop affordable housing, quickens the development of rental housing market, and moves faster to establish robust long-term mechanisms for promoting the steady and sound development of the real estate sector.
Translated by Vanessa Chen