BEIJING, April 9 (TMTPOST) China released guidelines on Thursday evening aiming to improve the market-based allocation of production factors in an effort to speed up the free and orderly flow of the factors and stimulate its economy.

The guidelines, titled “The Communist Party of China (CPC) Central Committee and the State Council’s Opinions Regarding Improving Market-based Production Factors Allocation Mechanism”, was hailed by some observers as a milestone in China’s economic reform and opening-up.

Efforts will be made to remove institutional barriers that stymie the free flow of production factors, i.e. the inputs needed for the creation of goods or services, which include land, labor, capital and technologies and data, according to the document.

The highlight of the guidelines is to “establish an integrated urban and rural land markets for (economic) construction”. The current land market mechanism has become a barrier to further economic development, some experts on land markets have argued for a long time.

Under the current land system, all urban land is state-owned while rural land belongs to farmers collectively. Farmers are not allowed to sell their land directly to developers and instead the government buys it first at low prices and resells it to developers at higher prices, which reduces the benefits of farmers.

“Implementation regulations related to land administration laws must be amended quickly; related supporting regulations must also be improved; guidelines regarding the entry of rural collectively-owned non-farm land into land markets must be formulated and promulgated, “ says Section Three of the guidelines, following Section One and Section Two that set out the general idea and basic principles for improving the market-based factors allocation mechanism.

Many apartment buildings in China have been built on collectively-owned rural land and therefore they are not allowed to trade freely. The guidelines may help ease the restrictions. 

“The rural land acquisition system must be reformed fully; the scope of state-owned urban land used for a fee must be expanded. A fair and reasonable distribution system for added value from the entry of collectively-owned rural land into markets must be established. Regulations regarding land acquisitions for the purpose of public well-being must be established,” according to Section Three.

A senior official of the National Development and Reform Commission of China (NDRC) said the reason for formulating the guidelines was that the relatively backyard markets of land, labor, capital, technologies and data have negatively affected their efficiency in allocating resources, in an interview with Economic Daily, a major Beijing-based newspaper under the direct leadership of the State Council, China’s cabinet。

However, the official stressed that “prices for 97% of goods and services” have already been determined by markets.

He elaborated the approach to increasing flexibility in land administration from two perspectives.

First, flexible methods in land acquisition for industrial purpose must be ushered in. The mechanisms for long-term lease, acquisition after rental, flexible land supply and land as a capital contribution must be improved in order to improve land markets for industrial purpose, he said.

Second, land supply for non-farm purpose should be increasingly managed by provincial governments and a national system where non-agricultural land is traded should be established, he added.      

Data as a production factor  

The official of NDRC, the economic planner in China, also explained why data is also a production factor.

While it is commonly known that land and labor are primary production factors for agriculture and capital, technologies, management and entrepreneurship are production factors for the manufacturing industry, information resources (represented by big data) are evolving into a production factor in the information age, he said.

The NDRC official said that China must upgrade its manufacturing industry by applying digital technologies and the internet in a smart way while using big data to improve the government’s administration efficiency.

China must “promote digitalized administration services, build smart cities, establish a national information-sharing system (and) analyze risk factors by utilizing big data platforms to improve risk detection, forecast and prevention capabilities,”  he said. 

Labor market reform

The senior official also laid out the blueprint for promoting the smooth flow of labor forces.

A trial to recognize years of residency to gain household registration for non-locals in all cities across the Yangtze River Delta and Pearl River Delta must be started. Restrictions on non-locals from becoming permanent residents must be lifted for most cities except a few megacities, he said.

“A pilot program to register people by the place where they live for the longest time must be started,” he stressed. In China, household registration has been mainly based on a person’s birth place, rather than their actual residence.

He also said the professional accreditation system must be improved to ensure people who work in the private sector also have a good opportunity to be awarded relevant accreditation.

Editor: Huixia Sun 

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