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China awaits signs of reform from Beijing

Big plans are expected to be announced at China's upcoming third plenary session of the Communist Party's Central Committee. The session will also be an indication of party chief Xi Jinping's effectiveness in office.

China might be soon implementing a wave of reforms. There has been speculation that far-reaching reforms will be announced at the upcoming third plenum of the Communist Party (CPC) Central Committee from November 9 -12. The State Council's Development Research Center, a government think tank, has presented a whitepaper on reforms which could set the tone of the upcoming meeting. The suggestions are aimed at eight areas from finance and foreign trade to land usage rights and questions about social welfare and taxation. The underlying tone of the paper seems to be: more market, less state.

Yuan as a world currency?

One of the goals in the reform road map is to turn the renminbi into a world currency within the next decade - one that is not only used in trade and investment, but also as an international reserve currency.

Doris Fischer (Photo: DW/ Luisa Frey DW Akademie)

Doris Fischer says China needs to foster trust if the yuan is to be a world currency

Professor Doris Fischer of Würzburg University says this aim is not completely new, nor is it fundamentally unrealistic. But at the same time, she does not think the People's Republic is quite ready for it. "Whether the Chinese yuan is accepted as a world currency, whether it will become a reserve currency for other countries, that depends on what other countries have to say. And, of course, it also depends on how the Chinese economy develops and foreign trust therein," the China expert told DW.

She said Chinese banks were not yet ready for international financial markets. Before the Chinese currency could become fully convertible and freely exchanged, there would first have to be far-reaching reforms. She said the main state-owned banks were comparable to massive tankers that are not prepared for the choppy waters of international competition, having been protected by the state for so long.

It is expected that the recently-established Shanghai free trade zone will become a laboratory for experiments for the convertibility of the yuan. But it is not clear if and to what extent the yuan can freely exchanged there. It seems as though here, China is following one of its traditional idioms: "Crossing the river by feeling the stones."

Chinese migrant workers pass a parked car with a bicycle in central Beijing (Photo: EPA/OLIVER WEIKEN)

Many Chinese people have not profited from the economic boom of recent years

Opposition from estabished interest groups

This timid approach could also be applied to the breaking up of state monopolies in rail, energy and telecommunications. The whitepaper suggests increasing competition in these sectors through a controlled process. Fischer is skeptical whether the country's new leadership is strong enough to implement the suggestions. "There are people, entire groups of people even, who profit from the current setup of the system. The demands are far-reaching. But if they will be implemented any time soon? I don't think that is very likely."

She said there is likely to be less opposition to reforms in the welfare and public services system; all sides seem to agree this needs to be reformed. The growing gap between rich and poor is leading to social tensions. Many Chinese, especially in rural areas, were not able to profit from the country's great economic boom.

Land reform and social security card: good news for farmers?

The government think tank's whitepaper also stipulates land reform that will allow farmers to collectively sell their land. Plots of land that are disappropriated by the government should in future be paid for at market value. Chinese economist Cao Siyuan thinks this is a good start. "Why do the farmers lead miserable lives? Because they cannot extract any value from their land," Cao told DW.

"Up to now, authorities have paid very little to farmers for their land before selling it off to real estate companies at exorbitant prices." If farmers were adequately compensated for their losses, he said, it could ease tensions tied to expropriations.

Chinese President Xi Jinping (Photo: EPA/BAGUS INDAHONO)

The plenary session should give some indication of the direction in which Xi is taking the country

A further suggestion for reform goes along with the planned abolition of the so-called hukou, or ID, system, which requires all Chinese citizens to register their places of residency with the authorities. The system literally divides urban from rural populations; those who migrate from the countryside to cities in search of work find themselves marginalized. People can only receive welfare or public services - for example school education or medical care - in the cities or towns documented in their hukous. For China's 200 million migrant workers, this is an enormous problem. Now the government think tank is suggesting the creation of a country-wide social security system in which each citizen can receive benefits anywhere in the country.

Nothing to indicate reform towards democracy

Which of the think tank's suggestions will be implemented to what extent has yet to be seen. But one thing for certain is that one of the whitepaper's authors, Liu He, is a close economic advisor to party and state head Xi Jinping.

Cao Siyuan, who worked for the State Council's Development Research Center in the 1980s and later founded his own think tank, was critical of the fact that there is no discernable effort to implement reforms which would promote democracy and rule of law. "Political and economic reforms are like two legs. If you only move the one leg a step forward and drag the other behind, you will fall."

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