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State needs to retreat, let market forces in
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China needs to embark on a new round of structural reforms by allowing market forces to play a bigger role and reassessing the government part, the European Union Chamber of Commerce in China said in its latest report.
“While China could previously make a choice between economic restructuring and maintaining growth, economic restructuring is now necessary to maintain growth,” said the European Business in China Position Paper 2013/2014 released yesterday.
“Some small steps have been taken, but bigger play must be given to market forces to ensure that China’s increasingly limited resources are directed to the most productive areas of the society. To bring this about, the government must first reassess its role in the business environment,” the paper said.
Reforms are needed so that Chinese lenders can become profit-sensitive “real banks” so that resources are efficiently allocated, it said.
State-owned enterprises’ privileges needed to be curtailed and realigned with public interests, it said, adding that industrial policies and subsidies should be cut.
European Chamber President Davide Cucino said while the government strengthens its regulatory role, real reform demands ceding political control over the business environment.
He emphasized market forces “can only be strengthened if the government steps back from its current overly-dominant role.”
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