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Commentary: Remedies for economic challenges (3)

By Chorching Goh and Klaus Rohland  (China Daily)

08:06, October 25, 2012

In capital markets, recent reforms to introduce more flexibility exchange and interest rates are positive steps, but more importantly, competition should be introduced and regulation and supervision strengthened. To this end, financial institutions should be commercialized to meet varied demands of households, enterprises and governments. Financial infrastructure and its legal framework need to be upgraded, and a system for crisis management and insolvency schemes developed.

Sequencing the reforms is important. Front-loading fiscal reforms to eliminate off-budget borrowing by local governments; channelling SOE dividends to the budget; introducing new tax instruments, such as land and property taxes will create conducive conditions for more effective enterprise and factor market reforms. Introducing competition to State-dominated sectors will pave the way for SOEs' reform.

Lastly, price, regulatory and institutional changes in factor markets are essential. Actions such as improving the fiscal strength of local governments, introducing competition to "strategic" sectors and ensuring factor-input flow into activities that yield the highest returns shall contribute to the desired structural transition.

【1】 【2】 【3】

Email|Print|Comments(Editor:厉振羽、张洪宇)

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