China’s Singapore Swing

BEIJING – The Chinese Communist Party has released the final document of the Third Plenum of the 18th Central Committee. In the CCP’s history, the third plenum has traditionally been the occasion for the party to announce its major policies for the next 5-10 years. This year happened to be one of leadership transition, so the third plenum became more important. As expected, its final document unveils a plan for comprehensive reforms that will reshape China’s economy and society in the next decade.

For starters, the household registration (hukou) system will be reformed. Small cities and towns will allow migrants to apply for the local hukou with no strings attached, and medium-size cities will do the same, with some restrictions. Although large cities will remain as closed as ever, the new policy will dramatically weaken the institutional foundation of China’s long history of urban-rural and regional divides.

Similarly, the one-child policy that has been enforced for the last 34 years will be modified. In most provinces, parents who are both single children themselves already can have two children. The new policy recommends that provinces allow couples to have two children if either parent is a single child. While this will affect only around 10 million couples – a small number in a country of more than 1.3 billion people – the reform represents a gigantic step toward ending the one-child rule.

Farmers, moreover, will be granted the right to sell their residential land on the open market and will be much more likely to be compensated at market rates when their land is taken by the government. State-owned enterprises (SOEs), meanwhile, are expected to surrender more of their profits to the government – up to 30% by 2020. This extra revenue will be used to finance China’s social-security system.