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China's leaders open key meeting to set reform agenda

Kevin Yao and Ben Blanchard
Friday, 8 Nov 2013 | 10:35 PM ET

BEIJING, Nov 9 (Reuters) - Chinese leaders began a four-day secret meeting on Saturday to set a reform agenda for the next decade as they try to steer the giant economy towards more sustainable growth after three decades of breakneck expansion.

President Xi Jinping and Premier Li Keqiang must unleash new growth drivers as the world's second-largest economy loses steam, burdened by industrial overcapacity, piles of debt and soaring house prices.

The meeting will show just how committed the new leadership is to reform after formally taking power in March.

Economic reforms will dominate the meeting of the 205-member Central Committee of China's ruling Communist Party. Little if any news will be released during the secret gathering, although traditionally official news agency Xinhua releases a long dispatch on the last day.

State television's English-language news channel said the meeting had begun. It gave no other details.

Beijing has tightened security in the run-up to the meeting, and authorities have been more jittery than usual after a vehicle ploughed into a crowd last week on the northern end of Tiananmen Square, an event the government blamed on Islamist extremists.

While some social and political issues could be tackled, such as corruption and pollution, Western-style political reform is certainly not on the agenda.

Yu Zhengsheng, the fourth-ranked member in the elite Politburo Standing Committee of the Communist Party, said last month the meeting would deliver "unprecedented" economic and societal reforms.

Analysts have cautioned against high expectations as stability remains the watchword for the leadership, even amid media reports top policymakers could take bold steps to deal with entrenched vested interests, such as state monopolies.

The government has pledged to allow market forces to play a bigger role in setting the price of capital, energy and land, and to cut red-tape.

That suggests the biggest changes may be fresh measures to free up interest rates and fiscal changes to allow local governments to manage their debt better and move away from reliance on land sales for revenues.

The meeting may also decide to loosen the household registration system, which blocks migrant workers and their families from access to education and social welfare beyond their home villages.

The system is seen as an impediment to attracting more people to urban areas, a trend the government seeks to encourage to boost consumption.

The leaders may also push land reforms to allow farmers to sell land when they leave their villages. Currently, they cannot sell land freely and many do not leave their farms for fear local governments could grab them for development.

Historically, third plenums in China have served as a springboard for key economic reforms. New leaderships usually spend the first few months in office getting familiar with issues, building consensus before unveiling policy initiatives.

Former leader Deng Xiaoping launched historic reforms to open the economy to the outside world at a third plenum in 1978.

That was followed by a third plenum in 1993 that endorsed the "socialist" market economy, paving the way for sweeping reforms spearheaded by then Premier Zhu Rongji, which led to China's entry into the World Trade Organization.

But the third plenum, in 2003, under Hu Jintao and Wen Jiabao - predecessors of Xi and Li - failed to yield key reforms. In 2008, they unveiled a 4 trillion yuan ($656 billion) stimulus package, which fuelled a property frenzy and saddled local governments with debt of more than 10 trillion yuan that the economy is still trying to absorb today.