China reportedly planning major economic reform
Members from a military band perform during the rehearsal ahead of the opening ceremony of the Chinese People’s Political Consultative Conference at the Great Hall of the People on March 3, 2012 in Beijing, China.
China's leaders are bracing for some difficult decision-making come October, when the Third Plenum of the 18th Communist Party Congress will be held, a key policy-drafting event that will reportedly include major economic reforms.
A source close to the Politburo told Australia's The Age that a new seven-point economic plan is being drawn up by Liu He, the head of China's Central Leading Group on Financial and Economic Affairs.
The report comes amid an intense anti-corruption purge led by new President Xi Jinping, with BBC News reporting on Monday that a leading politician is under investigation.
It is unclear whether the focus on corruption is the leadership's response growing public protests lead by dissidents such as Ai Weiwei, or if the operation is just a smokescreen for high-level political infighting.
What is clear is that China's politicians are under increasing scrutiny: "Liu Tienan, a deputy director of the National Development and Reform Commission, is being investigated over suspected serious disciplinary violations, the Central Commission for Discipline Inspection of the Communist Party of China said Sunday [12 May]," said China's Xinhua, according to BBC News.
No additional details were given. Suspicions about Liu Tienan were first raised in a Caijing Magazin article that questioned some of his financial dealings, according to BBC, citing the state-run Global Times as saying the response to the piece "predicts that the focus of power of Chinese public opinion is further shifting to the internet."
All this makes for turmoil at the top, and as social inequality grows in China, the economy is seen as a possible dealbreaker for the current leadership. Some hedge fund managers told The Age that China faces a so-called "zugzwang" moment, referring to a point in which a chess player has to move but would like to pass.
"In China policy is made when the pain of inaction is higher than the pain of action, and we've reached that point," David Hoffman of the Conference Board China Centre for Economics and Business told The Age in a report that provided the following sketch of the reforms:
"Mr Yi, backed by bank governor Zhou Xiaochuan, is advising on how to liberalise interest rates and the exchange rate and reduce capital controls.
Wu Xiaoling, a former deputy governor of the central bank, has been asked to advise on fiscal reforms, aimed at adjusting the pattern of central transfers and implement effective property and consumption taxes. A third reform priority is China's vexed land transfer and usage system, which has been criticised for encouraging violence, bribery and excessive construction. The fourth priority is to facilitate urbanisation including by reforming a 'hukou' permit system that prevents migrant families from the countryside from enjoying normal urban schooling, health and other services. The other three reform priorities involve reducing inequality of income distribution; slashing administrative red tape and imposing market prices on coal, oil and other resources."
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