More reforms expected from legislative sessions to bolster growth

BEIJING - China's upcoming annual legislative session is expected to see more reforms as economic weakening calls for renewed efforts of reviving growth engines.

A slew of disappointing data at the start of the year - when indices measuring industrial activity, consumer prices and trade for January slumped - resulted in uncertainty weighing on economic sentiment.

The official factory activity purchasing manager's index (PMI) slumped below the boom-bust line for the first time in more than two years, while inflation dropped to a 5 year low and trade sank beyond expectations.

Despite multiple analysis saying January's figures were incomplete because of the base effect of the Lunar New Year, which fell on Feb 19 this year, considerable concerns remained, which sparked renewed calls for monetary easing.

More recent statistics are yet to be released, with the exception of a preliminary reading of manufacturing by HSBC showing marginal improvement in February.

"However, domestic economic activity is likely to remain sluggish, and external demand looks uncertain," said HSBC chief China economist Qu Hongbin last week.

This outlook has prompted economists, including Qu, to call for more policy easing.

"China should ease its monetary policy to avoid passive tightening and reduce risk," wrote UBS economist Wang Tao in a research note Thursday.

Indeed, China's central bank cut the benchmark interest rate by one fourth of a percentage on Saturday.

Experts agree, however, a fundamental solution to the economic woes lie in far-reaching reforms the country has embarked upon, and widely expect the upcoming session of the National People's Congress (NPC), China's top legislature, to be essential to produce concrete results.

As usual, the Chinese premier is expected to deliver a government work report, which Asian Development Bank economist Zhuang Jian believes would "comb through reform measures undertaken in 2014".

Last year saw a fiscal reform program, designed to improve the taxation and local government financing systems within two years; the liberalization of the household registration system; and revisions to lending interest rates, which gave commercial banks more freedom.

The government also abolished registered capital and administrative registration requirements for new businesses, and slashed red tape blamed for stifling private investment.

The economy grew at its lowest pace in 24 years, expanding by 7.4 percent, signaling that China was indeed on the "new normal" path forward.

China will strive for solid economic development and push forward unwavering reform and opening up measures, President Xi Jinping said at the annual Lunar New Year greeting dinner.

"The Chinese leadership has determined that reform is the way to bolster economic development, which set the tone for this year and beyond," said Chi Fulin, director of the China (Hainan) Institute for Reform and Development.

Barclays' China economics team expects the NPC to show more commitment to structural reform with a focus on strengthening market-oriented resource allocation, economic rebalancing and growth sustainability, according to a research note Thursday.

The team is upbeat over future policy and implementation details related to reforms of state-owned enterprises, fiscal and local government debt management, financing mechanisms, income distribution and the "Belt and Road" initiatives.

"The NPC will also signpost priorities on the long term reform agenda," said two Bloomberg economists in a note Friday.

They said a national plan for transforming ownership and operation of state-owned enterprises, following pilot schemes in 2014, is imminent. There are also signs of progress on the intractable issue of rural land rights, important to raising rural incomes and driving urbanization.

The Chinese leadership has defined the year 2015 as "the key year of comprehensively deepening reforms", "the first year of comprehensively promoting rule of law" and "the final year of the 12th Five Year Plan". As the first significant political events in 2015, the annual "two sessions" are also expected to address social,legal and judicial aspects.

The reforms will be wide ranging and better coordinated, to ensure a stronger environment for economic development," said Wang Xiaoguang, a researcher at the Chinese Academy of Governance.