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POLITICAL ECONOMY
China unveils reforms to ease grip on economy
by Staff Writers
Beijing Nov 15, 2013


Rights activists cautious on China reforms
Washington Nov 15, 2013 - Human rights activists on Friday voiced caution over China's promises to loosen its one-child policy and shut down labor camps, fearing that abuses would still take place in different forms. Days after a key meeting, the Communist leadership announced that it would allow couples to have two children if one parent is an only child, widening the exemptions from a rule imposed in the late 1970s to control China's population. US Representative Chris Smith, who has campaigned for years against China's one-child policy, said that authorities would still have the power to forbid births by mothers who have two children or are unwed. "China is facing an implosion demographically and this is about as small of a step as they had to take," said Smith, a Republican from New Jersey and staunch opponent of abortion. "The coercive power of the state to dictate that you can have one, or maybe two, children remains unchanged. They need to end coercion and they need to end forced abortions," Smith told AFP. China took the decision as its working-age population begins to shrink for the first time in decades and as it copes with a gender imbalance, which threatens instability as society faces the prospect of tens of millions of men incapable of finding opposite-sex partners. Smith warned that "gullible Westerners" should not rush to praise China's steps, saying that previous pledges such as a ban on sex-selective abortion have not been carried out. The United States declined an official reaction to the promised reforms, with State Department spokeswoman Jen Psaki saying only that US officials were "looking closely" at China's announcements. Chai Ling, a leader of the crushed Tiananmen Square pro-democracy protests in 1989 who has since launched the group All Girls Allowed to campaign against the one-child policy, said that women in China were still forced to end pregnancies against their will. "This is a small step forward, but far from what needs to happen, which is completely abolishing the one-child policy," she told AFP. A 22,000-word document by China's rulers also announced the abolition of the deeply unpopular "re-education through labor" system. A United Nations report in 2009 estimated that China was holding some 190,000 people in such jails, where they can be sent without a court appearance. Former inmates say that a main target has been the banned Falungong spiritual movement, whose practitioners often face harsh physical and psychological pressure aimed at forcing them to renounce their beliefs. The Falungong organization said that China has been moving to shut down some labor camps but in some cases have simply moved practitioners to "drug rehabilitation centers" or other jails. "What this all means, at least for Falungong, is that the attempt to abolish the labor camp system is not a reversal in any way of the policy to arbitrarily detain and abuse Falungong practitioners around China," said Levi Browde, a spokesman for the New York-based Falun Dafa Information Center. Communist Party officials are "figuring out how to get rid of the labor camps because of all of the negative press that they've generated for the regime over the years while still achieving their goal of suppressing the Falungong." Corinna-Barbara Francis, an expert on the labor camps at Amnesty International, said that abolition would be "a big step in the right direction" but that authorities were looking for new ways to punish the same people. "There is the very real risk that the Chinese authorities will abolish one system of arbitrary detention only to expand the use of others," she said.

China on Friday pledged ambitious reforms to loosen the Communist authorities' grip on the world's second-largest economy, as leaders chart the way forward for the next decade.

The ruling party issued a document detailing economic reforms following a key meeting, known as the Third Plenum, which ended earlier this week.

The plans include requiring state firms to pay larger dividends to the government, and allowing private companies a bigger role in the economy, according to the document issued by the official Xinhua news agency.

The government will require 30 percent of earnings from "state capital" to be paid back to the public coffers and used for social security by 2020, it said.

China's 113 major state-owned enterprises (SOEs) directly under central government typically pay five to 20 percent of their profits to the government in dividends -- the part of a company's earnings distributed to shareholders.

"This will have an effect on facilitating a better competitive environment," ANZ Banking Group economist Liu Ligang told AFP, adding it would make cash-rich SOEs allocate funds more rationally.

China moved to shut down or merge loss-making state firms in the late 1990s, leaving a smaller number, but with immense power over large sectors of the economy.

Further reforms have been made difficult by opposition from the state sector, which has been enriched by close ties to the government and lack of competition.

In acknowledgement of private firms, China will allow private capital to take equity stakes in state-funded projects, Xinhua said, but gave no proportion.

China will also allow the set up of smaller banks and financial institutions using private funds, the document said. The country currently has just a handful of private banks.

In the financial sphere, China will push forward liberalisation of its interest rates and free convertibility of its yuan currency, the document said.

"The reform plan is very ambitious," said Wang Tao, an economist for UBS in Hong Kong.

"The implications for the economy and for the market depend crucially on the implementation," he said in a research note.

China currently sets deposit rates by administrative order, but the central bank began allowing banks to decide their own lending rates in July in a long-awaited move.

Beijing has repeatedly said it would push forward convertibility of the yuan -- allowing the currency to be freely bought and sold, and with it the movement of funds into and out of China.

The government keeps a tight grip on the capital account -- investment and financial transactions, rather than those related to trade -- over worries that unpredictable inflows or outflows could harm the economy and reduce its control over it.

In an indication of looser control on capital flows, China will allow more overseas investment by companies and individuals.

Beijing has encouraged companies to make foreign acquisitions to find supplies of raw materials and secure market access.

Farmers will be granted rights to "possess, use, benefit from and transfer their contracted land, as well as the right to use their land ownership as a collateral or guarantee", Xinhua said.

At present all land in China is owned by the state, with farmers only granted the right to till the soil in their area, rather than freehold possession.

The move could enable tens of millions of farmers to cash in on the value of their land, and invest in new businesses or move to the cities, with authorities pushing urbanisation as a way to raise living standards.

The government will also expand a number of existing reforms now being carried out on a limited basis, including setting up more free trade zones, the document showed.

China opened a free trade zone in the commercial city of Shanghai in late September, pledging to liberalise not only trade but also investment.

The document hinted that a property tax, now levied in only two cities, could be expanded to more locations but gave no timetable.

High property prices are a major source of discontent among citizens, and authorities have sought for more than three years to control their rise.

Cash-strapped local governments will also be allowed to issue bonds, the document said. China currently allows just a few cities, including Shanghai, to issue municipal bonds.

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