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Last week, the Chinese ruling party completed its 3rd Plenum to discuss policy.  A rather vague communique disappointed expectations, but the release of the full text, ‘the Decision’, over the weekend has been received more positively.  Some of the more obvious social issues, such as the one child policy and forced labour for petty crimes have gone, and we are encouraged by efforts to build up a more centrally supervised prosecution/judiciary, as well as tax and local government spending reform.  Greater centralisation is a risk, but worth it given the corrupt local fiefdoms Bo Xilai came to represent.  It also seems clear they wish to reform the hukou residency system, and make rural land ownership more flexible.

The commitment to a free market, both in terms of domestic price setting of items like commodities and telecoms seems clear, as does free trade zones and greater engagement with global trade rules.  There is some caution about state-owned enterprise reform, but a focus on higher dividend payout ratios and ultimate ownership in a national pension system seems positive.  For the first time in a while, supporters of China’s prospects have something positive to say, and equity markets have moved higher on the day following ‘the Decision’.