Cover Story: China Charts Course for Future Growth with Major Reforms at Key Meeting

China's top leadership recently concluded a key meeting charting the nation's course for the next five years, focusing on enhancing legal governance and deepening reforms. The main takeaways from this high-level meeting, which occurs twice a decade, include bolstering the rule of law, financial independence for local governments, foundational legislation for the financial sector, and creating a new model for the real estate industry [para. 1][para. 2]. These directives aim to increase China's economic resilience and sustainable growth, predicted to account for about 21% of the world's new economic activity from now through 2029 [para. 3].

The meeting emphasized an integrated approach to urban and rural development, ensuring balanced progress and maintaining China's global manufacturing leadership. Environmental sustainability and market openness were also focal points, with commitments to green transformation and greater international market access [para. 4][para. 5]. Specifically, measures to ensure the rule of law include improving constitutional review systems and creating laws to protect the environment and combat cross-border corruption [para. 7]. This approach is deemed fundamental to China's modernization efforts [para. 6][para. 7][para. 8].

On the fiscal front, reforms seek to balance government-market relations and improve local financial independence. This involves optimizing tax-sharing ratios, expanding local government bonds, and delegating more tax-setting authority to local governments [para. 14][para. 15][para. 16]. Additionally, a financial law is under development to unify regulations in the financial sector and close regulatory gaps. Recent monetary policy adjustments illustrate a shift towards using short-term interest rates as a key reference for lending rates [para. 18][para. 19][para. 20].

For the real estate sector, reforms aim to stabilize and transform the market by promoting rental and home purchase segments, increasing affordable housing, and revamping the financial and tax systems related to real estate [para. 24][para. 26]. The focus is on sustainable development to avoid the pitfalls of the previous highly leveraged model [para. 25][para. 26][para. 27].

Securing supply chains is another priority, especially in light of escalating tech rivalry with the U.S. Measures include bolstering key industrial sectors such as integrated circuits and advanced materials, relocating industries to mid-west areas, and refining resource management [para. 31][para. 33]. This strategic focus aims to build independent and controllable supply chains, supported by policies driving technological innovation and fostering emerging industries [para. 32][para. 33].

In terms of technological breakthroughs, the resolution highlights the importance of basic research and innovation. Measures include increasing funding for basic research, offering tax incentives for enterprises to invest in R&D, and improving the effectiveness of science funding [para. 36][para. 37]. Additionally, reforms are suggested to integrate rural populations into urban settings, improve access to public services, and support agricultural development through extended land contracts and moderate-scale operations [para. 41][para. 42][para. 44].

China's green transformation agenda aims to meet carbon reduction goals while enhancing climate adaptation. This involves accelerating the development of new energy sources like wind and solar and improving energy storage and planning [para. 49][para. 50]. To enhance market openness, the resolution outlines measures to build a unified national market, streamline regulations, and promote fair competition by reducing barriers to foreign and private investment [para. 53][para. 54][para. 56].

Overall, the leadership's meeting laid out comprehensive plans across various sectors, focusing on legal governance, fiscal reforms, technological advancements, sustainable development, and market openness to guide China's growth for the next five years [para. 2][para. 4][para. 6][para. 10][para. 18][para. 25][para. 31][para. 36][para. 45][para. 49][para. 53].