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Investors monitor and trade stocks at a securities exchange in Shanghai. (Bloomberg) |
China’s planned economic reforms are poised to reshape the competitive landscape, allowing private companies such as Alibaba Group Holdings Inc. to compete with state-owned banks, and easing the one-child policy to bolster demand for products from Nestle SA to General Motors Co.
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.”
President Xi Jinping’s 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. The changes outlined in a 60-point document after a Communist Party meeting last week present opportunities ― and risks ― to companies in almost every segment of the world’s second-biggest economy, which is heading for its weakest annual expansion since 1999.
China’s stocks rose Monday, with the benchmark index for mainland companies in Hong Kong surging 5.6 percent, the most since December 2011. The Shanghai Composite Index gained 2.9 percent while Hong Kong’s Hang Seng Index jumped 2.7 percent, the most in more than 10 months.
“It’s positive, very positive for sentiment,” said Catherine Yeung, investment director for equities at Fidelity Investment Management Ltd. in Hong Kong. Fidelity is adding more Chinese consumer-related stocks, including Internet and health-care companies, she said, without being more specific.
Policy makers will seek to reform a registration system for IPOs, according to the government statement. That may hasten the approval process for the more than 700 companies awaiting regulatory permission for their share sales.
The leaders also decided during the four-day meeting ― known as the third plenum ― to further increase the share of direct financing in the economy such as stock and bond sales, according to the government’s Nov. 15 statement.
The Communist Party’s meeting that ended Nov. 12 is set to have a similar historical significance as the one in 1978 when Deng decided on a reform and opening-up policy that heralded three decades of rapid growth, said Yao Yang, dean of the National School of Development at Peking University.
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.
The relaxation could boost Chinese demand for diapers, infant milk powder and other baby-related sectors, according to Summer Wang, an analyst at Bank of Communications. The one-child policy has left China with an aging population and a shrinking pool of young workers.
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.
Shares of infant-formula sellers, milk processors and other baby-product makers surged Monday. Diaper maker Hengan International Group Co. rose to a record in Hong Kong. Stroller and crib maker Goodbaby International Holdings Ltd., China Mengniu Dairy Co., China Modern Dairy Holdings Ltd. and Yashili International Holdings Ltd. also climbed. (Bloomberg)
