A rough guide to the state of China’s economy can be gauged by the number of times “reform” and “opening up” are mentioned in official communiques. Or variations on that theme.
After a meeting of the Central Committee for Comprehensively Deepening Reform on Tuesday, the count reached 20 in the CCCDR statement.
As usual, the proceedings were chaired by President Xi Jinping with 11 policy decisions pushed through, including ramping up the private sector, speeding up advanced manufacturing and moving towards a modern services industry.
“[We must] guarantee that all types of ownership have legal and equal access to factors of production, fairly and equally participate in market competition, and receive equal legal protections,” a statement released to Xinhua said.
“Promoting the integration of advanced manufacturing [with] a modern service industry is [also] an important way to enhance competitiveness and achieve high-quality development,” the official news agency reported.
“We must [continue] the trend of technological revolution, industrial transformation and consumption upgrading [by] exploring new models, [as well as] strengthening scientific and technological innovation,” Xinhua added, quoting from the central committee statement.
Yet this blueprint from Xi’s government to reinvigorate China’s state-run model is nothing new. Only now, it has become a priority with the trade war with the United States acting as a brake on an already slowing economy.
Before the communique was published by China’s economic team, news broke that Beijing would further “open up” the financial sector by expanding access to capital markets for foreign investors.
Key to this will be the decision to scrap the US$300 billion-ceiling on total asset purchases under its qualified foreign institutional investor, or QFII, scheme.
The QFII program was launched more than a decade ago and it allowed access to onshore stocks and bonds to institutional investors, although there was technically a dollar-denominated limit.
Later, a similar scheme, the Renminbi Qualified Foreign Institutional Investor program, or RQFII, was rolled out for overseas investors to buy securities using the offshore yuan. Again, it fell into a quota system, which has also been shelved, the State Administration of Foreign Exchange revealed.
“[It is] clear that [the country] is strategically making a positive push towards adding liquidity to the financial markets and renewing [the] flow of investment into China,” Paul Sandhu, the head of multi-asset quant solutions at BNP Paribas Asset Management in Hong Kong, told the Financial Times.
By the end of June, foreign investors held 2 trillion yuan (US$281 billion) of Chinese bonds and 1.6 trillion yuan in stocks onshore, data released by the People’s Bank of China showed.
But then last year, the world’s second-largest economy started to accelerate easing restrictions on foreign investment in the financial sector.
In July, the Financial Stability and Development Committee announced that it would remove shareholding limits on foreign ownership of securities, insurance and fund management firms in 2020 – 12 months earlier than originally planned.
Foreign investors will also be encouraged to set up wealth management firms, currency brokerages and pension management companies, the FSDC confirmed.
Still, this latest development by the State Administration of Foreign Exchange comes during a challenging period for Xi’s government.
“[The moves] bode well for reducing some of the risks in the market caused by the US-China trade negotiations, among other things,” Sandhu said.
Talks are due to resume in Washington next month as the dispute drags on into a second year.
To underline Beijing’s dilemma, the Ministry of Finance announced plans on Wednesday to exempt an array of American goods and products, including livestock feed, drugs to combat cancer and lubricants, from additional tariffs. They were due to kick-in on September 17.
“The exemption could be seen as a gesture of sincerity toward the US ahead of negotiations in October but is probably more a means of supporting the economy,” Iris Pang, the economist for Greater China at multinational banking group ING, said in a note.
“There are still many uncertainties in the coming trade talks. An exemption list of just 16 items will not change China’s stance.”
It appears excessive talk of “opening up” and “reforms” will only go so far in China’s state-run economic model.