SMALLER GOVERNMENT: Beijing residents use self-service machines at an administrative service center on April 18 (ZHANG XU)

Opportunities

The Chinese economy has faced inflation in the past few years, which has reigned in economic reform. Xu expressed the belief that inflation pressure will abate this year, bringing opportunities to advance economic change. According to the NBS figures, since 2013 China's consumer price index (CPI) growth has been far lower than the target of 4 percent set at the beginning of this year. The NBS said on May 9 that in April the CPI grew by 2.4 percent over a year ago. The 2013 Economic Blue Paper from the Chinese Academy of Social Sciences forecasts that the CPI growth in 2013 will not be higher than 3.5 percent, a good environment to advance economic reforms, especially in areas that directly impact people's livelihood.

In the short term, the government should adopt measures including cutting taxes and enlarging infrastructure investments to cope with slow economic growth; in the long term, the only way to revitalize the Chinese economy would be through fiscal reform, changes to the household registration system to give migrant workers more urban rights and ongoing urbanization in order to increase domestic demand, said Xu. "The slowdown of economic growth is a test of our resolution to reform."

Key points for reform

Li Wei, head of the Development Research Center at the State Council, thinks the core issue for the economic reforms is to balance the relationship between the government and the market. To achieve this, better allocation of resources in the market is needed.

"China must accelerate the transformation of government functions, improve administrative efficiency and reduce intervention in the market. The government should allow the market to play its role and alleviate itself of tasks which can be better handled by society," he said.

The May 6 State Council executive meeting decided to delegate power to lower levels concerning 62 items that were previously subject to central government approval, a move Li Wei backs. The most urgent task for China's economic reforms is to accelerate the building of a resource-saving and environment-friendly society and speed up pricing schemes for land, water, power, oil and natural gas so that their prices can truly reflect market demand and supply, he said.

Wang Dongjin, former Vice Minister of the National Development and Reform Commission, said whether the government can properly recognize and balance its relationship with the market will decide the success of the new round of economic reforms.

Wang said the number of items subject to government approval is reducing, but the government still frequently participates in microeconomic activities, which will only exacerbate unrestrained administrative power, the waste of resources, environmental pollution, redundant construction and a surplus of production capacity, and also cause corruption. The root cause for such a situation is that there is no effective restraint mechanism on government interventions and the power to allocate resources.

According to Wang, current economic reforms should focus on "reforming" the government: It should return the power once monopolized by the government during the planned economy to the market, companies and society. Reforms should reduce the government's hand in microeconomic activities. In the meantime, the government should stick to strengthening education, health care, employment, social security and public services.

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