President Xi Jinping’s newly announced reforms, which may be the most sweeping since Deng Xiaoping’s liberalization in 1978, are aimed at giving more influence to market forces and loosening government controls. Here are the key points from Bloomberg’s interpretation of China’s upcoming agenda announcements:

  • Plans to change the nation’s financial sector include a new registration system for initial public offerings and allowing qualified private investors to set up small-to-medium sized banks. Tencent Holdings Ltd., Asia’s biggest Internet company, is part of a group applying for a banking license in China. “Companies that got too comfortable with the old system now are going to have to change,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore, who previously worked for the World Bank. “This is potentially a huge step forward in opening up the economy.”
  • Grabbing headlines was the policy shift allowing couples to have two children if either parent is an only child, easing the rule which required that of both parents. That could boost Chinese demand for diapers, infant milk powder and other baby-related sectors, said Summer Wang, an analyst at Bank of Communications Co. The one-child policy has left China with an aging population. Of China’s 1.36 billion population, 17.1 percent are aged below 15, compared with India’s 28.5 percent, Brazil’s 25.4 percent and Russia’s 15.9 percent, according to data compiled by Bloomberg.
  • New entrants won’t have the scale to challenge China’s biggest banks in the next three to five years, said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group, which manages more than $22 billion of assets. Among proposed changes are making budgets more transparent, improving transfer payments, setting up risk-warning and debt-management systems for central and local governments and speeding up legislation on a property tax. 
  • The pledges included establishing market-determined prices for resources, boosting private-sector and foreign investment, and encouraging urbanization by scaling back the hukou, or household registration system, to allow rural migration to smaller cities. The measures are to be implemented by 2020. “China will become a high-income country under the leadership of Xi,” Justin Lin, former chief economist for the World Bank and adviser to China’s top leadership, said Nov. 17.
  • The country is also trying to bring in a market focus for commodity pricing. The plenum’s proposals are negative for sectors including coal and power equipment, because of environmental protection initiatives, Citigroup’s Shen said. “More market-based pricing will raise costs for most consumers where the resource is currently undervalued,” said Sijin Cheng, a commodities analyst at Barclays Plc.

Read the full article from Bloomberg here.