mercredi 27 novembre 2013

Importants annoucements from the Chinese government : liberalization of the economy to come soon

This might be a really important date in the history of China, following the experiment in Shanghai with a free-trade zone. There is no precise date annouced, but this is coming soon to a town near to you. This is a strong signal sent to the world economy and foreign investors.

What are the announcement that have been made and why are they so important ?

  1. Freedom of circulation

In China, the Hukou sstem has exsted for decades. This is an interior passport that restricts the freedom of circulation for Chinese citizens. Now, this time seems to be over, or soon will be ovre. This means freedom of circulation in the most popualated country in the word, really a revolution, nothing less. It means that the government wants to develop further the Chinese large cities. The measures will first benefit the small villages, and later on middle sized cities. Expect more migrant workers in the streets of Beijing and Shanghai in the years t come.

  1. Public companies with private capital

Another big change : the large Chinese public companies that have such an importante within the economy are going to be able to accept private investors. The opening of their capital to private funds might change everything in the Chinese economy. There will be a live test in the new Shanghai free trade zone.

  1. Distinction between public control and management within public companies

The structure at the top in Chinese public companies can be overcompicated and favor opacity. New measures are going to better distinbguish the management from the state regulators or controllers.

  1. A convertible yuan

The yuan will become convertible. When ? Still unknown.

  1. Interest rates : liberalization

The interest rates are strongly regulated, there will be some adjustments to these rules in order to have more liberty in the setting of interest rates.

  1. Private banks allowed

Another big change : private banking in China, yes, it's possible.

  1. Land rights transfers

Land is property of the state in China, this is not going to cahnge but the land rights that are granted to people will be transferable, this might mean large concentration trends in agriculture.

The liberalization raises some questions : is China heading towards a free eceonomy. Maybe not yet, the simplest remark is to notice that everything in these measures is managed via the centrak state.

China remains a country with a strong centralized governement and strong public companies, this is not about to change soon.

Source : Scout Real Estate
Market Study China

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