IE Insights China's Third Plenum: Decisive Shifts towards a Market-Oriented Economy and People-Centric Urbanisation
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INTERNATIONAL ENTERPRISE SINGAPORE IE Insights Vol. 15_Feb 2014 China’s Third Plenum: Decisive Shifts towards a Market-Oriented Economy and People-Centric Urbanisation After 35 years of rapid economic growth fuelled by investment and manufacturing, China’s double-digit GDP growth has steadied to the level of 7% to 8%, with the 2013 GDP registering a growth rate of 7.7%. To pursue sustainable growth, China will structurally transit to consumption- and services-led growth. Since taking over top leadership in 2013, President Xi Jinping has put forth a “Chinese Dream”, an all-encompassing vision of a reinvigorated China that is urbanised and moderately well-off. Last November, the Third Plenum of the 18th Communist Party of China Central Committee announced a comprehensive reform blueprint that could bring China closer to achieving the “Chinese Dream” by year 2020. In light of the new reform policies, Singapore companies can look forward to more opportunities presented by China’s move towards a market-oriented economy and a people-centric urbanisation. By Valerie ANG, LAW Chung Ming, Gordon TAN, Carol ZHUO China Group enquiry@iesingapore.gov.sg
Contents
03
Summary
04
Decisive Shift towards a
Market-Oriented Economy
• Market to play “decisive” role
• Opening up to fair competition
and improving SOE management
• Liberalisation of sectors
12
People-Centric Urbanisation
• Accelerating Hukou reforms
and improving land reforms
• Easing of the one-child policy
• Emphasis on environmental policies
19
Conclusion
20
Annex: Summary of the “Decision”
Disclaimer
While every effort is made to ensure that the information in this document is accurate, the information is
provided by IE Singapore to you without any representation or warranty. Any reliance on the information in this
document is at your own risk. IE Singapore does not accept any liability for any errors, omissions or misleading
information. IE Singapore and its employees shall not be held responsible for any consequence arising from
your reliance on any information provided by us. You are advised to consult your own professional advisors.
2Summary
// Since the late 1970s, China’s manufacturing-led economy has been characterised by
rapid double-digit GDP growth. However, in the wake of the global slowdown, China
became more cognisant that relying on the model of manufacturing and export-led
growth is not sustainable. There is a pressing need to ensure a structural shift from an
investment-led to a consumption-based growth, and the government is committed to
develop a more sustainable and steady economy, albeit with slower growth.
// The 18th Communist Party of China (CPC) Central Committee Third Plenary Session
(Third Plenum) that was held last November provided new growth and reform directions
for the Chinese economy. It produced a reform blueprint document titled, “The
Decision of the CPC Central Committee on Major Issues Concerning Comprehensively
Deepening Reform” (“Decision”1,《中共中央关于全面深化改革若干重大问题的决定》).
// Two strong themes emerged as the centrepiece of the “Decision”:
(i) Market-Oriented Economy: To build a competitive and vibrant economy, the Third
Plenum sets forth a range of reform policies to tackle existing market restrictions
(ranging from state dominance of the market, to industrial overcapacity, as well as
financial restrictions) and accelerate the opening up of China’s economy. Reform
policies aim to open the Chinese economy to more private and foreign participation,
consequentially allowing the Chinese economy to be more efficient and integrated
with the global economy. They also seek to enhance the ease of doing business
and increase market participation.
(ii) People-Centric Urbanisation: The “Chinese Dream” ideated by President Xi Jinping
envisions a country that places importance on “people-oriented” urbanisation (以人
为本的城镇化). Reform policies are directed to pursue better urban-rural integration,
address issues of China’s ageing population and gender ratio imbalance, as well
as place stronger emphasis on environmental protection. Urban-rural integration is
expected to expand urban opportunities as well as mitigate rising challenges like
income disparity.
// IE Singapore examines the potential impact of the wide-ranging Third Plenum reform
blueprint. Through a survey of Singapore companies about the “Decision”, we found
that they echoed our views that increased opportunities in areas such as urban
solutions, healthcare and pre-school education services could arise with the Third
Plenum reform decisions.
1 A summary of the “Decision” can be found in Annex.
3Decisive Shift towards a
Market-Oriented Economy
In a bid to secure new drivers of growth, China is liberalising
its economy further and allowing market forces to come
into play. One of the core tenets that came out of the
“Decision” is to let the market play a “decisive role” in
allocating resources. Alongside, the “Decision” proposes
the adoption of market-pricing mechanisms, state-owned-
enterprise (SOE) reforms, as well as liberalising the financial
and services sectors. This shift towards a market-oriented
economy is motivated by a need to improve the efficiency
and competitiveness of the economy. Singapore companies
will benefit from reduced corporate operation costs due to
streamlined processes as well as from lower market barriers
for private and foreign participation.
Market to play “decisive” role
Source:
《授权发布：中共中央关于 Market’s “basic role” will now be “decisive” (决定性作用). Government will
全面深化改革若干重大问
题的决定》, Xinhua News
play a service-oriented role and a market-based pricing mechanism will be
Agency, 15 November 2013 established.
What it means
According to the reform blueprint, a fundamental shift to a market pricing system would
mean that any price that can be set by the market should be left to the market. Areas
in which the Chinese government will continue to set prices will be confined to natural
monopolies, such as public utilities and public services.
In this respect, the Chinese government aims to build a pro-business and pro-citizen
regulatory environment, take on the role of macro supervisions and checks, making a
shift from the current role of administrative approval. The government’s macro regulation,
if executed well, is useful as it can reduce the vulnerability of the economy caused by
cyclical fluctuations. The fundamental shift to having the market play a “decisive” role
will unleash the potential of market players, making the economy more productive and
competitive. It will also build a more efficient government to serve the people.
4Decisive Shift
towards a
Market-Oriented
Economy
Prospects
With China’s push towards a market-oriented economy, there will be more scope for
private sector development through price deregulation and fair competition in industries
outside of the “negative list”2.
The “Decision”3 specifically listed price reforms of water, oil and natural gas, electricity,
transportation as well as telecommunications. Private and foreign players, including
Singapore companies, may soon be able to participate and compete for market share.
The reform policies will improve market efficiency and eventually sustain the competitive
growth of the economy, which bodes well for foreign companies with strong interest in
China. Increased efficiency, including simplified business registration procedures, will help
make venturing into the Chinese market easier, as well as reduce corporate operation
costs and create more business opportunities.
Figure 1: “Negative list” of Shanghai Pilot Free Trade Zone (SPFTZ)4
Published on 30 September 2013, the SPFTZ has adopted a “negative list” approach to foreign investment
management. The first version of the “negative list” listed 18 main industry sectors and 1,069 sub-sector
groups, of which 190 items were listed as restricted or prohibited. This approach deviated from the
rest of China which follows regulations under the “Catalogue for Guidance of Foreign Investment
Industries”. Foreign Invested Enterprises (FIEs) in the SPFTZ will be accorded national treatment at the
pre-establishment phase for sectors which are not listed within the “negative list”.
For sectors not in the “negative list”, procedures for investment (including FIEs) have changed from
a process of application for approval to a registration mechanism or filing process. Current procedures
for incorporation of a FIE in China typically take more than 33 working days, provided all required
documentation required by various bureaus are in order. Under the new regime within the SPFTZ, the filing
of documentation is now handled through a single government channel at the SPFTZ’s Service Centre.
Upon acceptance of the full documentation, business licenses will be approved in four working days.
2 The “Decision” only mentioned that the “negative list” includes areas involving national and ecological security,
strategic resource development and public interest, but did not provide more details. However, to gain some insights
to the list, we can refer to the “negative list” of the Shanghai Pilot Free Trade Zone (SPFTZ) in Figure 1.
3 The “Decision” refers to “The Decision of the CPC Central Committee on Major Issues Concerning Comprehensively
Deepening Reform” (《中共中央关于全面深化改革若干重大问题的决》).
4 Please view following links for full “negative list” of SPFTZ:
English - http://en.shftz.gov.cn/Negative%20List.pdf
Chinese - www.shanghai.gov.cn/shanghai/node2314/node2319/node12344/u26ai37036.html
5Decisive Shift
towards a
Market-Oriented
Economy
Opening up to fair competition and improving SOE management
Source: The state sector will continue to play a “dominant” role in the economy.
《授权发布：中共中央关于
全面深化改革若干重大问 Some state assets will be diversified to public and private enterprises.
题的决定》, Xinhua News
Agency, 15 November 2013
What it means
Increased private participation could result in better SOE management through corporate
governance and enhanced transparency. The Third Plenum also prescribed for SOEs to
pay a higher dividend payout ratio of 30% to the public budget by 2020. The emphasis
on market principle and fair competition conveys a strong message of developing market
mechanisms, as well as cross shareholding between public and private enterprises. This
should resolve overcapacity and remove resource allocation inefficiencies.
Shanghai was the first to release guidelines for SOE reforms. Its reform policies advocate
that SOEs be state-owned but not state-directed, and the government should distance
itself from the day-to-day management. Guangdong, Chongqing and Anhui are likely to see
similar reform plans in 2014.
Prospects
With the end goal of addressing overcapacity, the Chinese government will allow private
and foreign investments to participate in SOEs so as to make them more competitive.
This presents new opportunities for Singapore companies in businesses that had been
exclusive to Chinese SOEs. Partnership with Chinese SOEs can potentially help Singapore
companies tap into valuable networks and intelligence, generating more opportunities
beyond our traditional focus in China. An example is the telecommunications industry.
In December 2013, China’s Ministry of Industry and Information Technology issued
licenses to the first batch of domestic mobile virtual network operators, enabling
private firms to purchase mobile telecommunications services from three state-owned
telecommunications carriers and resell the services to consumers under their own
brands. More specifically, China is allowing foreign ownership in telecommunications
services in the SPFTZ. This translates into new opportunities for Singapore companies
in China’s virtual network operating market, which will be worth 20 billion yuan (S$4.07
billion) by 2015. Inevitably, there will be increased demand for new technology and
innovation systems that can resolve the overcapacity issue, and hence we will have more
opportunities to export our solutions.
6Decisive Shift
towards a
Market-Oriented
Economy
Singapore companies are keen to ride on the wave of favourable conditions.
“ Third Plenum aims to bridge the gap between SOEs and
Private-Owned Enterprises (POEs) by building a favourable and
fair regulatory environment. This will lead to more overseas
investments by private companies, especially those of small
and medium-sized ones. We anticipate more IPOs and M&A
activities, which would provide Boardroom with opportunities
to offer our accounting, restructuring, share registry, corporate
advisory and related administration support services. Also, with the
ongoing efforts by the Chinese authority to overcome domestic
industrial and investment overcapacities, we envisage that more
Chinese SOEs may look to invest overseas and establish offshore
businesses to manage their global transactions. Furthermore,
the recent easing of rules on overseas investments – removal
of administrative procedures to just straightforward registration
procedures – makes it easier for businesses to ‘go out’. Boardroom
is keen to capitalise on the trend of Chinese enterprises using
Singapore as a gateway to enter Southeast Asia by providing
corporate services and administrative support.
”
Lee Yow Fee, Managing Director, Boardroom China Limited
“ With the Chinese government encouraging private participation
in SOEs to diversify their investor base, this may include SOEs
‘going out’ to leverage on international capital markets including
Singapore. This presents us with listing opportunities.
”
Christine Lie, Chief Representative, SGX Beijing Representative Office
Other Singapore companies, such as YCH, are confident to take a bigger market share as
China invites more foreign participation.
“ The reform blueprint specifically mentioned that investment
restrictions in logistics will be eased. We see this lower entry
barrier as advantageous for us to capture more business
opportunities. We are confident that our broad-based competencies
spanning the entire value chain as well as outstanding track record
will continue to put us in a good position.
Roger Yap, General Manager, China, YCH Group
”
7Decisive Shift
towards a
Market-Oriented
Economy
Liberalisation of sectors
Financial sector liberalisation
Source:
《授权发布：中共中央关于 There will be easing of investment and foreign exchange as well as greater
全面深化改革若干重大问
题的决定》, Xinhua News
convertibility of capital account. There will be more flexible use of cross-
Agency, 15 November 2013 border currency transactions to reduce foreign exchange costs and risks.
What it means
The plan to ease capital and currency controls means that Singapore enterprises may
utilise cross-border loans and invest in China with greater flexibility.
More recently, China’s National Development and Reform Commission (NDRC) is revising
the regulation on outbound investments, with the aim to relax approval procedures for
overseas investments. The amended regulation will remove the need for approval from
central authorities for any outbound investments below US$1 billion5 (S$1.25 billion) if they
do not involve sensitive countries, regions or industries. Singapore financial institutes can
potentially benefit from increased capital market and M&A activities.
With the Chinese government calling for more innovative financial products, SGX sees
opportunities in the long term.
“ This would include our listing offering such as our REITs and
Catalist platform, bond listing, derivatives, commodities and
financial futures. We also have a Direct Listing Framework with
the China Securities Regulatory Commission that will facilitate
the listing of China incorporated companies in Singapore. We
will continue to work with relevant Chinese authorities and
intermediaries to achieve the best outcome for both countries.
Christine Lie, Chief Representative, SGX Beijing Representative Office
”
5 Currently, an outbound investment of more than US$100 million (S$125.1 million) in any non-resource project
required the NDRC’s approval at the central government level. For resource projects, outbound investments over
US$300 million (S$375.4 million) needed approval from the NDRC at the local government level.
8Decisive Shift
towards a
Market-Oriented
Economy
Liberalisation of services sector in pilot zones
The services sector is expected to open up even further, especially in
the newly-designated SPFTZ, which serves as a testing ground for new
programmes that open up the country’s financial and service sectors. In line
with the theme of greater market access, the finance, education, culture and
healthcare sectors will gradually open up to private sector participation,
Source:
《授权发布：中共中央关于 while investment restrictions on nursery, elderly care, architecture design,
全面深化改革若干重大问
题的决定》, Xinhua News
accounting and auditing, trade and logistics, and e-commerce will be eased.
Agency, 15 November 2013 More free trade zones (FTZs), like the SPFTZ, are also expected to be set up.
What it means
Alongside the emphasis on a consumption-driven economy, China will see its industries
move from being manufacturing-led to services-led. To further develop the services sector,
Third Plenum focuses on the liberalisation of China’s services sector, opening doors to
foreign participation. The “negative list” approach to guide investments demonstrates a
shift in regulatory philosophy, showing greater openness. China is syncing and integrating
with the global economy.
Prospects
Companies have their hopes and expectations for the Third Plenum and its reform policies.
“ We hope to see more reforms to reduce tax as well as innovation
and reform in the financial sector that could reduce our financial
costs and facilitate the approval and execution of our projects.
Goh Toh Sim, Chief Representative (China), Keppel Corporation
”
Many reforms, be it those involving the financial sector or the services sector, will be
tested in the SPFTZ and other FTZs before rolling out to the rest of the nation. Risks of
reforms will be contained and reforms will be more attainable.
With the establishment of a consolidated and open market, foreign companies will enjoy
national treatment for market access, if investments are not in the “negative list”. The
establishment of a unified and open market also makes investment policy more stable,
transparent and predictable. This simplifies procedures and is beneficial to Singapore
investors. The reform policies look to remove regional protection and monopolies, and
companies could potentially compete on more level terms. However, it is also important
to note that competition from both local and foreign players will intensify as a result.
Therefore, it is crucial for Singapore companies to differentiate ourselves with value-added
services and product offerings that cater to increasingly sophisticated local partners
and consumers.
9Decisive Shift
towards a
Market-Oriented
Economy
Also, the “Decision” reiterates the support for the SPFTZ, which has set a good example
for system innovation. Singapore banks such as DBS Bank have already ventured into
the free trade zone, and more Singapore companies should explore going into the SPFTZ
to benefit from the range of privileged policies. In addition to the SPFTZ, China hopes
to continue building a network of high quality FTZs that reaches out to the world. So far,
applications have come from places like Guangdong and Tianjin. The former is an integrated
FTZ covering Hong Kong, Macau, Baiyun Airport area (Guangzhou) and the three new
development zones of Nansha (Guangzhou), Hengqin (Zhuhai) and Qianhai (Shenzhen).
The reform blueprint mentions the liberalisation of many industries – finance, education,
culture, healthcare, architecture design, accounting and auditing, trade and logistics, as
well as e-commerce. There is the potential of increased opportunities in all these areas
and Singapore companies can ride on our comparative advantages in urban solutions,
healthcare and pre-school education services to capture a bigger scope of collaboration.
Ms Kwan Peck Leng, Managing Director of Crestar Education Group, believes the
reform policies will make the market for education services more attractive, but has
her reservations.
“ Size of opportunities will greatly depend on the extent of the
liberalisation. Often, the actual compliance on the ground varies
in different regions. We will observe further. Moreover, a freer
market will also imply greater competition due to the entry of
more foreign players.
”
Kwan Peck Leng, Managing Director, Crestar Education Group
Henceforth, entry strategies for the education industry could include a consortium of
smaller and niche companies that offer complementary programmes. An example is the
education consortium in Shenyang that involves eight enrichment players who came
together to leverage Singapore’s strong branding of high quality services. Moreover,
by means of a cluster approach, companies are not only able to mitigate business risks
but also increase the entry barriers for other competitors.
10Decisive Shift
towards a
Market-Oriented
Economy
In the healthcare industry, private investors will be allowed to set up new clinics,
especially not-for-profit medical institutions, and to participate in the restructuring of public
hospitals. This presents favourable conditions for our Singapore healthcare players to
participate in the industry.
“ With the proposed opening up of the healthcare sector, Q & M
is well-positioned to expand our presence in China, especially
with our track record and experience in dental healthcare and
management. With the Chinese becoming more exposed and
expecting better quality healthcare, we see a rise in demand for
a larger scope of services, and at the same time, higher quality
care. We look forward to implementation details of the opening
up, to see how it can dovetail with our expansion plans in the
next few years.
”
Cheah Kim Fee, CEO, Q & M Dental Holdings (China) Pte Ltd
Singapore has a strong track record in the services sector. IE Singapore will continue to
facilitate the entry of Singapore companies that provide financial, healthcare and education
services into China and help them gain a stronger foothold in the market.
11People-Centric
Urbanisation
Urbanisation is a trend to observe closely as it is a key engine
driving China’s economic growth. The goal of “people-centric”
urbanisation (以人为本的城镇化) puts people first, seeks to
lift standards of living for rural residents by focusing more on
social safety nets and promotes sustainable development
through a series of environmental policies. The rate of
urbanisation is expected to be gradual with an increased
focus on quality and sustainability. Henceforth, implications
will be more medium term. Nonetheless, there may still be
quick-wins by plugging the gaps of short-term needs.
Accelerating Hukou6 reforms and improving land reforms
Further relaxation of the Hukou system in small- and medium-sized cities
makes it easier for migrant workers to obtain urban resident status which
Source:
《授权发布：中共中央关于 increases their access to more job opportunities and better social benefits.
全面深化改革若干重大问
题的决定》, Xinhua News
Rural residents will be accorded land lease rights, which can be monetised
Agency, 15 November 2013 with greater ease.
What it means
While urbanisation continues to be an engine of economic growth, it will incorporate
social elements going forward. “People-oriented urbanisation” emerged from the reform
blueprint as a core concept. It puts the interests of people first, seeks to lift standards
of living for rural residents by focusing on social safety nets and promotes sustainable
development through a series of environmental policies.
The two-day urbanisation work conference in December 2013, attended by the seven
Politburo members, further elaborates that Hukou restrictions will be fully removed
in towns and small cities to allow integration of migrant workers. Restrictions in
medium-sized cities will be gradually eased while relaxation policies in big cities were
not specified. In contrast, Hukous will be strictly controlled in mega cities such as
Beijing and Shanghai, to even out development across the country. There is an
apparent focus on a “people-oriented urbanisation. In terms of geographical focus,
three metropolitan areas will be developed in the next steps of China’s urbanisation.
6 A Hukou is a record in the system of household registration required by law in China.
12People-Centric
Urbanisation
They are the Pearl River Delta with Guangzhou at its centre, the Yangtze River Delta with
Shanghai at its centre, and the Bohai Economic Rim with Beijing and Tianjin at its centre.
Moving forward, urbanisation will be market-led, according to the movement of the people
rather than government officials’ attempts to direct it in the pursuit of GDP growth so as
to avoid the emergence of uninhabited towns.
Ultimately, the “Decision” seeks a reasonable and orderly improvement of income
distribution. China hopes to increase the income of low-wage earners and bridge the
income gap between urban and rural areas. The same policies are aimed at reducing
income differences between regions. Access to more job opportunities and better social
benefits, as well as generating income from land lease rights, are various means to the end.
Figure 2: Absolute and relative gaps of urban and rural residents’ per capita incomes in China.
Income disparity between urban and rural residents is narrowing. China will
continue to push policies in this direction7.
Yuan
30,000 3.4
Urban
3.3
Rural 25,000
3.2
Relative gap (right)
20,000 3.1
Source:
China Development 3.0
Foundation, 2012, “The
Turning Period of China’s
15,000
Income Distribution,” 2.9
Beijing Development
Press, Beijing, pp. 13-14.
10,000 2.8
Updated according to
“China Statistical Yearbook
2011,” and “Statistical 2.7
Communiqué of the
5,000
People’s Republic of China
on the 2012 National 2.6
Economic and Social
Development.” 0 2.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
7 “Sustainable and Liveable Cities: Toward Ecological Civilisation”, United Nations Development Programme, June 2013
13People-Centric
Urbanisation
Prospects
Reforms are likely to be gradual in tandem with an increased focus on quality and
sustainability. Hence, there are new windows of opportunities in areas such as integrated
urban solutions, real estate developments, as well as architectural and planning services
arising from expanded land supplies. These opportunities are likely available only in the
medium term.
The Hukou reform policies will spur migrants to resettle into smaller and medium-sized
second and third tier cities. We encourage Singapore companies to take advantage of
this momentum and expand their project efforts in these places.
Singapore companies are aware of the geographical shift in focus.
“ We will continue to position our presence in strategic locations where
urbanisation and population growth are expected to take place.
Kwan Peck Leng, Managing Director, Crestar Education Group
”
Access to quality job opportunities and better social benefits, as well as easier
monetisation of land lease rights, will boost income and consumption of rural and migrant
population. This represents an increased pool of consumers, increasing demand and
opportunities for Singapore companies in the lifestyle, food and retail sectors. With
the rural residents having land lease rights, Singapore developers will have to engage
additional stakeholders beyond just local governments in securing projects. In line with
the government’s drive towards people-centric urbanisation, Singapore private developers
should integrate Singapore’s holistic suite of community (such as education) and
environmental services (such as waste management) as part of their project development.
Township development projects should also place priority on enhancing skills and creating
jobs for the local communities so as to facilitate better urban-rural integration. Project
proposals with these features will likely be more palatable to the Chinese government
going forward.
Mr Goh Toh Sim, Chief Representative (China) of Keppel Corporation sees opportunities
for his company.
“ Land reforms can effectively increase the supply of land and
housing. The urbanisation trend will provide opportunities for
Keppel to explore more township developments. Our strength in
infrastructure for waste-to-energy will continue to be a major area
for us to explore both in terms of the emphasis in urbanisation and
environmental protection.
”
Goh Toh Sim, Chief Representative (China), Keppel Corporation
14People-Centric
Urbanisation
Increased demand for connectivity and solutions to congestion will lead to opportunities
for smart transportation projects that our transport players can tap into.
ST Electronics’ President, Mr Lee Fook Sun, expects the continued push for urbanisation
to bring opportunities for the company.
“ Leveraging our project experiences and employing the latest
technologies, we have developed products and solutions that will
help growing cities address the challenges of urbanisation and
eco-sustainability. Also, the company remains relevant as China
continues to build MRT lines, and seek smart solutions to address
”
the traffic congestion problems in big cities.
Lee Fook Sun, President, ST Electronics
15People-Centric
Urbanisation
Easing of the one-child policy
Source: Couples are allowed to have two children if one parent is a single child.
《授权发布：中共中央关于
全面深化改革若干重大问
题的决定》, Xinhua News
Agency, 15 November 2013
What it means
China’s family planning policy is not ending but undergoing some “fine-tuning”. The aim
of this “fine-tuning” is to tackle the problems of gender imbalance as well as an ageing
population. It hopes to arrest the declining birth rate and better balance the demographics.
Meanwhile, the easing of the one-child policy will consider local conditions. The timetable
for implementing the new policy is left to the local governments.
Figure 3: Gender imbalance in the Chinese population, with 51.9% males
and 48.1% females in 2011.
China’s gender gulf (hundred millions)
8
7.20
7.00
7
6.68
6.48
6
3.8% 3.8%
gap gap
5.07
3.2% 2011 Chinese population
5
gap
Source:
4.76 51.9%
male
48.1%
female
United Nations
Development Programme 4
1980 1990 2000 2005 2006 2007 2008 2009 2011 2020
16People-Centric
Urbanisation
Figure 4: Population who are over 65 years of age as a portion of the total population.
Proportion is increasing and the Chinese population is ageing as seen from
the increasing proportion.
Billion %
2 10
8
1.5
6
Total population
1
Population over 65
4
Proportion (right)
0.5
2
Source:
National Bureau of
Statistics, “China
Statistical Yearbook 2012” 0 0
1982 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011
Prospects
The easing of the one-child policy would result in an estimated 15 to 20 million couples
eligible for a second child. While rising costs of living is a possible impediment to having
more than one child, a recent poll by the National Health and Family Planning Commission
showed that 50% to 60% of the eligible couples are willing to have a second child. This
presents both short- and long-term opportunities for Singapore companies in all related areas.
As China strives to adapt to this change, Singapore companies can cater to its short-term
needs in maternity wards, baby infrastructure and supplies. The change will boost demand
in healthcare related services such as obstetrics and gynaecology, maternity medicines
and treatment, medical testing facilities and baby care. There will be a bigger market for
infant formula, toys and clothing. Foreign brands have a comparative advantage because
of milk powder scandals as well as product quality scandals in China. China’s domestic
baby formula industry was hit hard in 2008, when melamine was found to have been
added to formula. Also, the recent announcement released by the China Food and Drug
Administration sets stringent requirements in areas that include production equipment,
safety, product tracking, and the purchase of raw materials. With the increased focus on
product quality, Singapore food brands reputed for quality and safety, have a competitive
edge over local brands.
In the medium term, more newborns will lead to a stronger demand for pre-school
education and enrichment classes.
In the long term, the easing of one-child policy will help sustain China’s consumption-led
growth. Businesses riding on China’s growth in domestic consumption can remain hopeful
that this policy will rebalance and maintain China’s population growth.
17People-Centric
Urbanisation
Emphasis on environmental policies
A market mechanism to encourage environmental protection will be built.
The pricing of natural resources will reflect market supply and demand,
rarity of resources, and costs of environmental damage. China’s environment
Source:
《授权发布：中共中央关于 authority will also tighten monitoring of all pollutants and set up an
全面深化改革若干重大问
题的决定》, Xinhua News
environmental protection and pollution control system that integrates
Agency, 15 November 2013 both land and water areas and coordinates efforts of multiple regions.
What it means
Urbanisation and development have to be sustainable and environmental policies are
crucial. While driving economic growth, China’s pollution has worsened as a result of
aggressive industrialisation. In view of these problems, the “Decision” puts preserving
the ecological system as one of the focal areas of the “Decision”, establishing systems
to drive environmental sustainability, resource efficiency and pollution mitigation.
Prospects
The emphasis on environmental protection may see subsidies being extended to lower
tiered cities for sustainable water and waste management projects. Singapore companies
can tap the momentum of long-term sustainability and quality as well as favourable
conditions to explore innovative Public-Private-Partnership models with local governments.
This includes joint ventures, strategic partnerships and Design-Build-Finance-Operate
approach to deliver the best valued services to the public through market mechanisms.
Ecological targets will be included in officials’ appraisal and there will be increased focus
on environmental preservation. This will boost demand for energy-efficient equipment
and buildings. Singapore companies offering energy-efficient or eco-friendly products and
services can potentially benefit from such demands.
18Conclusion
The lack of full implementation details with respect to the
timeline and sequencing of reforms makes it difficult to
gauge the likelihood of reform success at this juncture.
While we are hopeful about the possibilities the reform
may bring, we cannot be definitive at this point. However,
momentum is picking up for a comprehensive range of
economic reforms. We will be able to deduce more concrete
implications when more details are announced at the
“Two Sessions”8 (两会) in March 2014.
The Chinese leadership demonstrates strong commitment to push forward the reforms
with the commissioning of the “Leading Group for Comprehensive and Deepening
Reforms” (Leading Group, 深化改革领导小组). The Leading Group is led by President
Xi Jinping, with Premier Li Keqiang, Vice Premier Zhang Gaoli and First Secretary of the
Central Secretariat of the CPC Liu Yunshan as deputy group leaders. It will steer the overall
design of reforms as well as unified planning and coordination, pushing reforms as a whole.
As China works to direct its economy onto a sustainable consumption-led trajectory,
its challenge is to balance growth and the pace of reforms.
Most importantly, Third Plenum’s momentum for change is likely to support China’s stable
and sustainable economic growth. This is beneficial for Singapore given that Singapore is
China’s largest investor country9 and China is our largest trading partner10.
8 The “Two Sessions” refers to the National People’s Congress and the Chinese People’s Political Consultative Conference.
9 Ministry of Commerce of the People’s Republic of China, January 2014
10 International Enterprise Singapore, February 2014
19Annex:
Summary of the “Decision” 11
The domain and magnitude of reform is unprecedented as compared to the past third
plenary sessions (third plenums). It spans six focal areas, covers 15 reform areas and pans
out 60 reform plans. It adopts the “five-in-one” (五位一体) guideline, and emphasises the
need to jointly reform the structure in five areas: (i) economy, (ii) politics, (iii) culture,
(iv) society and (v) environment.
Reform Areas Reform Plans General Proposals
1 Guiding thoughts 1–4 • Reaffirms “socialism with Chinese characteristics”
for reform and ideological continuity with past leaders
• President Xi’s “Chinese Dream” as a vision of a
reinvigorated China that is urbanised and moderately
well-off
• Reforms are comprehensive, encompassing
(i) economy, (ii) politics, (iii) culture, (iv) society, and
(v) environment
2 Basic economic 4–8 • Develop a “diversified ownership” economy by
system reducing and marketising public sector, as well as
encouraging non-public sector participation through
lower market entry barriers into SOEs
3 Modern market 9 – 13 • Reduce red tape for enterprises
system • Price reforms
• Land reforms
• Liberalisation of financial system and capital account
4 Government 14 – 16 • Improve coordination of China’s fiscal, monetary,
functions and industrial policy to avoid wasteful investment
• Guard against cyclical volatility
• Empowering lower government levels
• Minimise government’s interference of businesses,
especially on unnecessary administrative approvals
5 Fiscal and 17 – 19 • More budget transparency
taxation system • Clarify which types of spending are central and which
are local
• Provide tax incentives to ensure an equitable tax burden
6 Urban-rural 20 – 23 • Keep collective land ownership system but provide
integration farmers with broader rights of land use beyond farming
including land lease rights
• Promote equalisation of urban and rural basic public
services
11 Modified from “Third Plenum Economic Reform Proposals: A Scorecard”, US-China Economic and
Security Review Commission, 19 November 2013
20Annex:
Summary of
the “Decision”
Reform Areas Reform Plans General Proposals
7 Further 24 – 26 • Relax investment access for foreign enterprises,
opening up with Shanghai Free Trade Zone as pilot
• Speed up building of free trade zones
• Expand opening up of inland regions through trade,
investment and shipping routes
8 Political system 27 – 29 • Modernise the role of National People’s Congress
as a supervisory body for examining and supervising
fiscal budgets and state-owned assets
• Encourage more interaction with grassroot
organisations, for instance, through forums and formal
soliciting of opinions from civil organisations
9 Rule of law 30 – 34 • More legal advisory services to inform people of their
basic rights
• Setting up of judicial courts
• Tougher enforcement for food, drug, and product safety,
environmental protection, labour and social security
• Prohibit abuse of corporal punishment
10 Restraining the 35 – 37 • Combat corruption by reporting cases of higher-level
use of power discipline inspection commissions and stationing the
Central Discipline Inspection Commission at all
central organs
11 Cultural system 38 – 41 • Build up modern public cultural service system for
instance, cultural service centres and non-public
cultural enterprises
12 Social services 42 – 46 • Reform the education system to narrow opportunity
gaps, for instance, through vocational schools and more
diverse tests of aptitude
• Support business startups, especially for college graduates
• Easing of the one-child policy
• Reform medical and health structure
• More equitable social security system
• Better mechanism to determine income distribution
13 Social 47 – 50 • Encourage more social organisations, for instance
management volunteering services
• Improve public safety, especially product safety
• Commissioning of the National Security Committee
14 Environmental 51 – 54 • Strengthen natural resource property right systems
regulation • Weaken GDP’s weightage for assessments of the
local governments
• Develop environmental protection markets
15 Defense and 55 – 57 • Increase integration among military units
military • Promote military-civilian integration, especially with
regard to allowing private enterprises to participate in
research and innovation
16 Party leadership 58 – 60 • Establish “Leading Group for Comprehensive and
over reform Deepening Reforms”
• Get cadres in Party in line with the new reform agenda
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