Want Daily president Huang Ching-lung's public-interest lecture at the Hung Chun-pei Culture and Education Foundation

(Taiwan Business News) On April 12, the Hung Chun-pei Culture and Education Foundation and Taiwan Business News invited Want Daily president Huang Ching-lung to speak at the National Dr. Sun Yat-sen Memorial Hall on "Cross-Strait Exchange and Social Progress." Drawing on his many years of experience in news communication and media management, President Huang discussed cross-Strait exchange and gave a systematic introduction to mainland China's current situation, leaving the audience much the wiser.

Huang Ching-lung began with the "Xi Eight-Point Rules" promoted after Xi Jinping recently took office. He said that the concept of "let some people get rich first" from the Deng Xiaoping era shaped the repressive, conservative yet economically open system we were once familiar with. Over sixty years of development, the Communist Party's closed power structure gave rise to privilege and corruption. Taiwan's Kuomintang was the same at the time. To check these problems, Taiwan later lifted the ban on political parties and newspapers, and through various "Ten Major Chiang Ching-kuo Reforms" finally achieved an economic miracle. Huang Ching-lung said Xi Jinping's "Xi Eight-Point Rules" carry a certain flavor of this.

Want Daily president Huang Ching-lung's public-interest lecture: China's wave of reform leaves Taiwan unable to stand aside

Want Daily president Huang Ching-lung said that last year's Third Plenum decided China's policy direction for the next ten years, and the two bodies that drew the most outside attention were the establishment of the Leading Group for Comprehensively Deepening Reform and the National Security Commission. Both groups are led by General Secretary Xi Jinping, with the aim of further consolidating his power. Huang Ching-lung said China is both the world's factory and its market, tightly connected to the globe. China has a deep understanding of its own position in globalization, but it has too many internal problems, and if institutional reform is not carried out, its economy will be unable to withstand external pressure.

After the Third Plenum, following the June cash crunch and a slow second-quarter economic growth rate of 7%, Taiwanese businessmen could not help but feel that this year's economy was full of undercurrents and towering waves, and they were no longer as optimistic about China's prospects as before. The most obvious sign is that China's economic growth has already slowed, from the double-digit growth of the past to 7.5% this year, while China's local fiscal debt is severe, showing that the old model of relying on government investment to drive growth no longer works.

The Third Plenum mainly involved establishing new anti-corruption mechanisms and bodies, an economic reform plan (whose core was adjusting the central-local tax-sharing system), and a plan to transform local government functions. The Shanghai Free Trade Zone was presented at the Third Plenum only as a central "model" to introduce policies promoting economic transformation in various regions.

The new anti-corruption mechanisms include three main elements. First, courts in each locality are made independent of local governments and local political and legal committees, directly led by Beijing through the Supreme People's Court, with funding and personnel decided by the Supreme People's Court. Second, the Supervisory Bureau and the Anti-Corruption Bureau are made independent from the administrative hierarchy, modeled on the U.S. Federal Bureau of Investigation, becoming an independent top-down body not subject to the leadership of local governments and party committees. Third, the role of the People's Congress is strengthened. The immunity of People's Congress deputies is strengthened so that they truly serve as people's representatives, overseeing officials on the people's behalf, and legislation grants them greater impeachment powers.

The second element is continued economic reform and opening up. Within the "three rural issues" policy of agriculture, rural areas and farmers, policy bias widened the development gap between urban and rural areas and enlarged the wealth gap. In the course of urban development, the problem of land consolidation was also aggravated, and some farmers who lost their jobs or land became floating population seeking work in cities and towns, bringing the problem to the cities as well. In a vicious cycle, the three rural issues kept expanding into a nationwide social phenomenon.

This problem also occurred in Taiwan in its early years, so past rural reform experience is regarded by the mainland as a very important subject of study. Our rural credit departments and farmers' associations became benchmark subjects of study for its rural finance; in addition, rural urbanization, freeing up the rural household registration system, and railway construction, once marked by unequal urban and rural household registration and unequal access to resources that drove people to crowd into cities, are now being addressed as the mainland pursues plans for a domestic-demand economy and the great westward development, and reform of the household registration system is undoubtedly an important milestone.

China's financial industry is currently dominated by six major state-owned commercial banks. These six banks' assets account for two-thirds of all commercial bank assets, and each of the four banks - Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank - has assets exceeding 25% of GDP. This setup lets banks easily make money by lending to other large state-owned enterprises, and these state-owned enterprises themselves dominate industries such as energy, transportation, telecommunications and commodities. But borrowing or obtaining financial services is not as convenient for ordinary people as in Taiwan, and small and medium-sized enterprises are sprouting up like bamboo shoots after rain in China. This Third Plenum made important changes regarding finance.

At present, to continue deepening China's financial reform, several fundamental breakthroughs are needed: first, market-oriented interest rate reform; second, exchange rate reform; third, establishment of a deposit insurance mechanism; fourth, internationalization of the renminbi. All financial reforms aim to achieve greater market orientation, giving different financial institutions equal opportunities to compete; for small and medium-sized financial institutions, the most important thing now is not to get bigger but to get stronger.

On interest rates, the market-oriented interest rate plan has been submitted to the State Council. The near-term goal is to establish a sound independent pricing mechanism; the near-to-medium-term goal is to improve the central bank's interest rate control capacity; the medium-term goal is to fully realize market-oriented interest rates.

Regarding market-oriented interest rates, the Wall Street Journal said that mainland bank deposit rates still have a ceiling, which harms consumers' interests and makes banks overly reliant on profits from interest rate spreads. On exchange rates, analysts believe the fluctuation range of the renminbi exchange rate will gradually be widened, and the frequency and intensity of central bank intervention in the market will be reduced; the main market participants will be expanded, with more financial institutions and enterprises brought into the interbank foreign exchange market, and foreign exchange trading products enriched.

On the capital account, accelerating capital account convertibility will also be an important part of the next stage of financial reform. Authoritative sources revealed that capital account convertibility may speed up, achieving breakthrough progress within the next two to three years.

On the deposit insurance system, the Wall Street Journal reported that the Third Plenum will establish banking reform, the first step being to create a bank deposit insurance system to open the banking industry to private capital. Xinhua Net also pointed out that relevant regulatory officials have stated they will relax market access and encourage private capital to set up banks.

In addition, renminbi internationalization will also be touched on at this plenum, mainly in relaxing capital controls, including reducing obstacles to overseas funds investing in China's stock and bond markets. After years of rapid growth, the mainland's economic structural imbalance and the challenges of transformation and upgrading have grown ever greater, making this Third Plenum the best opportunity for the mainland's new generation of leaders to push reform. China is already part of globalization, and Taiwan's "anti-China" or "China-phobic" sentiment should calm down and recognize its situation, so that it can make the best global arrangements amid this wave.

Profile of Want Daily president Huang Ching-lung

President Huang Ching-lung graduated from the Department of Journalism at National Chengchi University, and was a visiting scholar at the East Asian Institute of Columbia University in the United States and a visiting scholar at the Northeast Asia Policy Studies Center of the Brookings Institution in the United States. He has served as a congressional reporter for United Daily News, head of the political desk at Independence Evening Post, chief editorial writer and editor-in-chief of China Times Evening News, head of the online supply department at China Times, and interview director and editor-in-chief of China Times, and is currently president of Want Daily.

Hung Chun-pei Culture and Education Foundation 2014 public-interest lecture