BoC research chief urges reform

By Ma Yujia
0 Comment(s)Print E-mail, February 22, 2013
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China needs to launch 12 programs to deepen price, fiscal and tax system reforms in the next three years, according to Cao Yuanzheng, the Bank of China chief researcher.

An independent committee must also be established to map out and supervise the implementation of these reforms, Cao said while addressing the annual Chinese Economists 50 Forum held in Beijing on February 17.

Cao argued that the 12 programs should include: resource pricing reform; interest rate reform; exchange rate and capital account reform; increasing fiscal support for social security, healthcare and education; reducing expenditures on official receptions, vehicles and overseas trips; indirect tax reform; import tax reform; resource and environmental tax reform; individual income tax reform; transferring 20 percent to 30 percent of state-owned shares over to social security within the next three years; revising the fiscal budget to improve financial transparency; and promoting the development of a local bond market.

Cao also believes that the traditional government-led growth model needs to change, largely because the global economic crisis triggered a new round of adjustments to the world's economic structure.

China has also experienced great economic and social change. It has made progress in developing into a mid-to-late stage industrialized country. As Chinese society continues to age and demographics widen, the country faces the risk of running out of money to support an aging population.

Traditional growth patterns have produced a wide array of negative conditions, such as reduced growth quality, economic structural imbalances; widening income gap and opaque social justice institutions.

China has so far been successful in pursuing resource price, exchange rate and tax reforms, and the government enjoys public support through a recent mandate to curb corruption.

These tasks will have a neutral impact on China's GDP growth rate during the next three years.

According to Cao, the reforms will significantly reduce the risks China's economy may face in the long term and improve its economic structure, therefore improving the stability and sustainability of its macro-economic growth.

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