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Market reforms enter new era

By Takehiko Nakao
0 Comment(s)Print E-mail China Daily, January 6, 2014
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With regard to labor market, the Third Plenum highlighted reform of the household registration management system to bring in market forces through greater labor mobility. The Party's Urbanization Working Conference held on Dec 11 and 12 reiterated the clear message that rural migrant farmers can be registered as urban residents more easily in future, starting from some medium and small cities, and can enjoy social benefits equal to those of other urban residents. At the same time, the land use rights of farmers will be made tradable in the market. This land reform will enable interested rural farmers to become permanent urban residents. Reforms in land and labor markets are needed for social fairness, they also contribute to sustainable economic growth.

Contrary to the popular perception, the strengthening of markets does not mean the weakening of the government. A well-functioning market relies on a capable and efficient government. To promote the role of the market, the government has pledged to give high priority to ensuring macroeconomic stability and the adequate provision of public services, while limiting the scope of government intervention to areas of "market failure". It is an essential role of the government to deal with externalities-chief among them, pollution and climate change -by encouraging more efficient use of natural resources and promoting alternative energy sources. This would help create an "ecological civilization".

Governance reform and promoting the rule of law are key for realizing the expected decisive role of the market. In this regard, I welcome the plan to modernize the fiscal and taxation system by setting up a multi-year budgeting framework; ensuring fair, efficient and transparent taxation; and providing a clearer delineation of responsibilities between central and local governments. It is particularly important for local governments to develop a well-designed revenue structure by introducing property tax, resource tax and environment tax instead of selling land. I appreciate that the piloting of the conversion of business tax to value-added tax has achieved some success.

The Asian Development Bank has been supporting the development of China for the last 27 years through a number of loans for electricity, transport, urban development, education and other projects amounting to $28 billion. ADB has also provided grants for knowledge work in areas such as the environment, economic planning, and fiscal policy. We are committed to providing the strongest possible support to China to implement the reform plan decided at the Third Plenum by enhancing knowledge cooperation with various key government agencies. At the same time, we look forward to sharing China's experiences with ADB's other developing members with a view to achieving our shared goal of inclusive, sustainable growth, and building a better world for all.

The author is president of the Asian Development Bank.

 

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