China's Economic Reform Goals Are Bullish for Global Economy
NEW YORK (TheStreet) -- Asian markets reacted bullishly Monday to new economic reform goals from China.
Released after a four-day meeting of top Communist Party officials, the objectives are the first major economic reform push from President Xi Jinping, who took office this year.
Because China is the largest trading partner for many nations, financial markets are interpreting this policy document as bullish for regional and global economic growth. The world's financial sector, in particular, has been looking for the economy of the world's most populous nation to evolve from being export-driven to consumer-driven.
Following are some of the goals Beijing included in the statement:
Opening up the country's financial markets.
Changing registration for stock market listings, which will encourage more foreign investment.
The introduction of a bank deposit insurance program that will create confidence in the country's financial institutions.
Interest-rate liberalization aimed at encouraging savings and rewarding investors.
Reducing state ownership of businesses.
Encouraging competition among private firms.
Reform of the country's household registration system, which has an impact on matters ranging from employment to social benefits.
Greater protection for the environment.
Doing away with labor camps.
Promoting social security programs to provide a safety net.
A relaxation of the nation's infamous one-child policy, to increase the number of consumers and workers.
The financial market measures are particularly needed. Beijing needs to allow market forces to determine the value of its currency and interest rates. It also needs to develop greater depth in its capital markets to allow for a more responsible regime of financing development and spending within the country.
Doing away with the one-child policy will lead to an immediate increase in consumer spending. In the long term, it will also provide a greater pool of workers. That is much needed as a shortage is anticipated. More workers will also facilitate the financing of social security programs. The new safety net being created will provide a foundation of consumption for all in China.
This is bullish for companies looking to tap increasing consumer demand in China. Coca-Cola
Commodities such as copper, coal, and iron ore should all gain from increasing consumer demand. China uses more coal, copper and iron ore than any other country. All are needed in the construction process and the operating of factories, farms, machinery and machinery. Increasing growth in China is positive for all of these commodities.