Did Chinese Leaders Disappoint After All?


There were high hopes for government economic reforms in China, and the marketplace was listening intently when they announced their plans this month — unfortunately, the rather loose and uninspired announcement of their intentions led to poor market response.

When the strategy announcement was scheduled, economist Wei Yao stressed how important the discussion would be for China’s future prosperity in the marketplace. “We caution that the road map to be notably less aggressive [than hoped]” said Yao. According to Market Watch, the Chinese Communist Party’s economic strategy announcement was followed by a dive in Hong Kong’s Hang Seng Index and Shanghai Composite, falling 1.9 percent and 1.8 percent respectively. However, the disappointment did not last long, with a more detailed plan being leaked quickly after.

The Hong Kong and Shanghai indexes improved to a 1.7 percent gain in both on closing Friday afternoon, and after the official release of a sixty point plan on economic policy, the Hang Seng Index increased 2.5 percent Monday, and 1.8 percent for the Shanghai Composite. Analysts were exceedingly pleased in Asia, though most noted that implementation of the leadership’s strategy would be the true test of matters.

“Questions will remain over implementation, but this is the most impressive statement of reform intentions that we’ve seen this century,” wrote on analyst at Capital Economics, and her sentiments were echoed by man in the field of economics, with many commenting on the changes to State Owned Enterprises.

Yao was in agreement, saying that the “new leaders [of China] really delivered and promised a number of concrete changes. China’s reform boat has finally set sail.” She said that one notable aspect of the plan was the fact that farmers would be able to sell communally owned land at market prices. “This revolutionary change would undermine local governments’ monopoly over land markets and boost farmers’ income, thus providing them with the start-up capital to settle in the city,” said Yao.

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