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Markets reward China's reform ambition

Updated: 2013-11-18 14:46
( Agencies)

HONG KONG/BEIJING - Investors rewarded Beijing on Monday for a bold and wide-ranging reform plan, boosting stocks led by consumer goods shares seen as direct beneficiaries of the promised easing of China's long-standing family-planning policy and efforts to boost consumption.

The initial outline published at the end of a four-day conclave of China's top leadership disappointed markets with its lack of detail and its ambiguity. But a more elaborate account released on Friday won praise for its ambition and scope.

Leaked documents already sparked buying of mainland stocks and markets on Friday and that rally picked up on Monday.

"The full-version report addressed many uncertainties and questions ... and the comprehensiveness and depth of reform measures exceeded market expectations," said Haibin Zhu, chief China economist with JPMorgan.

China's CSI300 index of leading Shanghai and Shenzhen A-share listings rose 1.25 percent by 0200 GMT after it clocked its biggest percentage gain in two months on Friday, while the Shanghai Composite gained 1.1 percent.

Hong-Kong's index of mainland stocks climbed more than 3 percent to reach a six-month high.

The easing of the family-planning policy boosted shares of stroller maker and distributor Goodbaby International by more than 7 percent. Dairy products maker Mengniu Dairy was up nearly 6 percent.

Non-banking financial stocks also rose, while the overall market gains were tempered by sinking property stocks, both in response to a record rise in house prices, which raised expectations that the government might seek to cool the market, and plans to accelerate the introduction of a property tax.

Besides pledges to give markets a decisive role in key areas of the economy, such as pricing of resources and the financial system, the plan also included steps to boost China's urban population. Beijing sees helping hundreds of millions of rural dwellers migrate to the cities as key for more sustained development for the world's second-largest economy; its advance up the value chain and wealth creation.

Analysts and commentators suggested the plans are the most significant since Deng Xiaoping's reforms in the late 1970s and the early 1980s that opened up the country to the outside world and set it on course to become the world's factory floor.

"The government will withdraw from its intervention in the market," said Ding Yifan, deputy head of the Institute of World Development, a government-linked think tank, in describing the new approach in an interview with Xinhua News Agency.

He said that while state-owned enterprises would remain the backbone of China's economy they would be exposed to more competition and less protected than in the past.

"We will try to make them compete on an equal footing, which means the government will not continue to provide some fiscal or financial advantage to state-owned enterprises."

 
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