2013-10-28

China's Big Reform Train Keep Rolling

Despite being bearish on China due to the credit bubble and short-term factors, long-term one must be extremely bullish.

This weekend came a big reform that could lead to a huge increase in business formation.

China relaxes company registration requirements
According to the statement, requirements for the minimum registered capital for limited liability companies, one-person limited liability companies, as well as joint-stock companies with limited liability, will be scrapped.

Requirements on the site registered for business operation will also be relaxed, the statement said.

To improve transparency and strengthen business credit, the current annual inspections on registered companies will be replaced by annual reports open to public inquiry, while companies that commit aberrant behaviors will also be made public.

A system of subscribed capital will also be promoted in an effort to lower the cost of founding a company, said the statement.

China's State Council think tank sets out roadmap for reform
The proposals span eight areas: finance, taxation, land, state assets, social welfare, innovation, foreign investment and clean governance, according to a copy of the 10,000-word report published over the weekend by China News Service. It recommends sensitive changes like breaking up state monopolies and speeding land reforms.

The source of the recommendations was as interesting as the details. Among its authors were the think tank's chief, Li Wei, who served as secretary to former premier Zhu Rongji, and Liu He, a top economic adviser to Xi.

Although the road map would be subject to behind-the-scenes horse-trading during the plenum, the document was clearly aimed at restricting the government's role in economic matters and allowing more freedom in the market. It sets a timetable for action extending to 2020.
From everything I have seen, the trend towards reform is real, but there are those who are not as optimistic.
Guan Qingyou, assistant dean at the Minsheng Securities Research Institute, cautioned that the road map was only one of several research reports submitted to the top leadership ahead of the party plenum.

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