All-round reform

China must accelerate construction of a new agricultural management system and give farmers more proprietary rights, to realize the equal exchange of production factors, achieve a fair allocation of public resources between urban and rural areas, and promote healthy urbanization, the communique said.

Granting farmers overdue property rights of collective land is a breakthrough, said Pan Jiahua, a researcher on urbanization with the Chinese Academy of Social Sciences, who explained that a land-transfer market becomes conceivable once farmers' proprietary rights are confirmed.

This milestone will bring concrete benefits to farmers, lay a foundation for modern agriculture, and pressure local governments to end their reliance on land transfers for large profits, he said.

Li Tie, a researcher on city development with the National Development and Reform Commission, said: "Only by removing institutional restrictions hindering the free flow of economic factors can the potential of healthy urbanization really be released."

  While the law allows the transfer and lease of land rights, an effective market mechanism covering a variety of aspects is still required, including the processing of land rights transfers and protecting farmers' interests. The methods of land acquisition used by local governments and developers vary from place to place and from case to case and tend to provoke complaints and resistance from farmers. The ultimate victim of the lack of a working land rights market is farm modernization. Small, uneconomic plots are no longer adequate to meet the rising demand from cities for basic food supplies, nor do they generate good incomes for farmers.

China's financial market system will be improved, according to the communique.

Guo Jianguang, a professor at the Central University of Finance and Economics, said the market, rather than the government, is likely to play a more important role in deciding China's exchange and interest rates. As an effective measure to control the macroeconomy, the exchange and interest rates have long been tightly regulated, he said.

China started to allow banks to decide their own lending rates in July, although deposit rates are still fixed by the central bank. The limit on the deposit interest rate should be lifted step by step to benefit the public, Guo said. A deposit insurance system should be established as soon as possible to prevent banks from malicious competition, he added.

The task consists of two components: Reform of the renminbi exchange regime and reform of interest rates. The mechanism for deciding on the exchange rate is becoming more market orientated. The currency's exchange rate with the US dollar has risen from 8.5 to 6.2 over the last decade, amid growing exports. Along with this is the renminbi's use as a global currency in trade and investment, which has necessarily led to liberalization of convertibility for the capital account. Since the mid-1990s, piecemeal progress has been seen in the liberalization of interest rates.