Chinese leaders are holding their Third Plenum in Beijing this week and many are expecting crucial economic and financial reforms to be announced. This year's Third Plenum is the first for China's president Xi Jinping, who took office in March of this year.
Ann Lee, author of What the U.S. Can Learn from China: An Open-Minded Guide to Treating Our Greatest Competitor as Our Greatest Teacher, tells The Daily Ticker that the Third Plenum "has historically been a time where [Chinese leaders] talk about their long-range vision for the country and it tends to be very momentous in terms of major reforms."
She expects China will continue to reform its interest rate policies and open its service sector to more competition so "people can build businesses in these areas and not just focus on real estate." She also expects China will develop "some ambitious plans to overhaul the Chinese economic system" so that more people can move into the middle class --"inequality has gotten pretty severe in China" she notes.
But Lee says reforming China's capital account -- that is making China's currency fully convertible -- will be a contentious point even though it's what "Wall Street really cares about."
"China has had a very tight rein on its financial sector ...which people have argued has helped them avoid the Asian crisis in 1997 and helped them rebound very quickly in the 2008 crisis," says Lee.
Still, Lee expects more deregulation in China's financial sector. "The group in power now is more sympathetic to some of the arguments Wall Street has made," she says.
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