Many observers have superficially dismissed the outcome of the Third Plenary Session as vague, dull, with no new bold statements or changes offered. I beg to differ. The session intends to reform the institutions of an entire country. It will take more than a four-day offsite to drive reform in China - the most populous country in the world. It was never the case that execution would be started on Nov 12; more likely December or January 2014 before flesh would be put on the bones.

The session's communique shows that the policy mix of Lionomics is still an unstoppable force. Premier Li Keqiang had already announced reform of government and State-owned institutions, relaxation of controls over the economy to allow the ingress of market forces and rebalancing of society to close the wealth gap and reduce opportunities for corruption. That the Third Plenary Session confirmed these objectives should be applauded as a mark of determination rather than a recital of high-sounding words.

It is true that analysts have been disappointed by the stalling of the Shanghai Free Trade Zone, where progress after initial announcements has been glacial. In a free trade zone (FTZ), petty local jealousies rise to the surface, of the kind often spoken about in Hong Kong - "Why does it receive a 'favored treatment'?" Strangely, it might be harder to develop a FTZ than to reform a country's institutions. This should not color our analysis of the session.

Two key elements of the plenary session were mold-breaking. The creation of two high-level, cross-department, coordinating committees - one on security and one on reform, was a major institutional change. It is not as if China needs more security agencies. This one increases the influence of the president, premier and the reformers, and is a vital element on the path to reform - which is the function of the second new major committee.

China is not a dictatorship and the power to influence change throughout the country is highly devolved. Consensus is the Chinese way. The country is too large and modern for old-fashioned dikat and local governments have to be persuaded, not directed. The top leadership is too far away to keep a constant eye on them. Central agencies, State-owned enterprises (SOEs) and local governments have to be motivated and incentivized to move in the same direction. Until now, many incentives have encouraged local government divergence, as localized interests have swung policies away from the feudal vision.

It is true that the devil is in the detail - or in this case, execution. But the very establishment of the two new committees makes it more likely that the leadership will be able to influence policy throughout government and start executing their vision.

The other element was in the role of market forces (which was mentioned 22 times in the communique) in playing a "decisive role in the allocation of resources". Wake up everybody, this is a major announcement by the Communist Party of China in the full glare of publicity. The plenary session has made the leadership highly accountable to the execution of what many observers had dismissed as "high-sounding words".

It is true that the leadership will have to concentrate on the "low-hanging fruit" and not on all 12 key topics mentioned in the communique: market forces, prospering firms, land reform, exchange and interest rates, competitive banking, taxation reform, local government financing, the environment, relaxation of approvals, universal social security, urbanization and hukou reform, and cultural development. Something will be left by the wayside. But this leadership seems determined to reform the basics.

Premier Li said at a meeting of the State Council that the government had to fulfill its reform promise, including relaxing pricing for resources, improving air quality and setting up more FTZs. This is a statement of intent, something that politicians usually seek to avoid for fear of becoming a hostage to fortune.

Many observers said that State-owned enterprises had scored a goal against reform; yet to be realistic, SOEs are not going to go away. They control the commanding heights of economy and are very powerful institutions. Those at higher levels of such organizations are currently having a good time and they will fight tooth and nail to preserve their status quo, and income levels. But it is clear that they are to have their wings clipped, which will increase economic supply side efficiency and reduce opportunities for corruption. Less government intrusion and more private enterprises are further defining the mantra "socialism with Chinese characteristics'.

We should think of the Third Plenary Session as an important stepping stone; quoting Deng Xiaoping when he talked about "crossing the river by feeling the stones". The communique fits nicely into Lionomics. It may sound similar to previously announced measures but the political instruments are now in place to start making Lionomics happen.

Almost all parties agreed that we can't stand still. This is perhaps the last chance for real reform before vested interests make it too difficult to do so. For China's sake, the reformers need to win this battle as economic growth slows and debt headwinds blow.

The author is chief executive of Port Shelter Investment Management.

(HK Edition 11/18/2013 page9)