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The Asian business community's initial reaction Wednesday to a highly anticipated pronouncement of China's Communist Party leaders on how to overhaul China's economy: "long on goals and short on details"; "broad-brushed"; and falling "some way short" of expectations.
President Xi Jinping of China emerged late Tuesday after the four-day closed-door meeting of party leaders with a mandate to give markets a "decisive role" in the world's second-largest economy, and for reaching "decisive outcomes" for overhauls by 2020. China also plans a new top-level working group tasked with pushing through changes.
The seemingly investor-friendly talk failed to impress. The Shanghai composite index finished 1.8 per cent lower, and in Hong Kong, where many mainland companies are listed, the Hang Seng Index fell 1.9 per cent.
Many of the Chinese leadership's broad priorities - raising incomes for China's 1.3 billion inhabitants, for example - had already been widely telegraphed in speeches and editorials over the past year and had been welcomed by analysts who say China urgently needs to overhaul its outdated economic growth model.
As a result, a summary of the leadership's deliberations were largely a reiteration, leaving analysts hungry for more details of how and when the changes would occur. "There's a fair bit of disappointment," said Chris Weston, chief market strategist at IG in Melbourne, Australia. The new 2020 deadline for reaching "decisive outcomes" provided a useful time frame by which to expect progress, he said, but "people were expecting a bit more." The market, he added, wanted "more meat to sink its teeth into."
Fred Hu, founder of Primavera Capital, and a former chairman for greater China at Goldman Sachs, is optimistic about China's prospects. But he cautioned at an investor forum in Hong Kong on Wednesday: "Obviously this political commitment to a free-market economy has yet to be translated into concrete measures - the laws, regulations or policies remain to be seen."
The initial communique from the leadership conference was never expected to lay out in specific detail the complicated puzzle of changes that are needed to put the Chinese economy on the path to more balanced and sustainable growth. This left analysts reading the runes of the communique's precise wordings, and continued the longstanding guessing game as to what detailed changes will be announced, and - just as importantly - how thoroughly and quickly they will be implemented.
The meeting, said Yao Wei, an economist at Societe Generale in Hong Kong, laid out a broad road map and a rough time frame, and had the potential to mark a new beginning with positive change.
But, Yao added, "the real test starts now."
The task facing China's policy makers is complex. Economists say leaders need to wean the economy off the credit and government-led investments that have fueled growth for years. In addition, they say China needs to reduce its reliance on exports and manufacturing, get its people to spend more at home, and combat the corruption and environmental degradation that have accompanied the strong growth of the past few decades. For many investors, one of the most optimistic elements of the communique was a change in rhetoric.
Previously, the party had spoken in terms of the market taking a "basic" role. The shift to "decisive" role was significant because it "seems to suggest that a consensus has been reached about deepening market-driven reforms while avoiding embracing fundamental capitalistic changes," said Kevin Lai, an economist in the Hong Kong office of Daiwa Securities.
Another potentially significant development analysts pointed to on Wednesday is the planned establishment of a new party leadership group on economic policy to oversee the introduction of market-oriented changes. The details to who will head the group have not yet been announced.
©2013 The New York Times News Service
