Chinese Entrepreneurs May Have Reason To Cheer In 2014


Chinese leaders wrapped up a four-day closed-door meeting last Friday, according to The Wall Street Journal, laying out their rough vision for the macro-economy in 2014. The conclusions are hard to interpret. China has been engaged in “opening and reform” since 1978, a period now 6 years longer than Mao Zedong’s tenure, which prompted reforms in the first place. The declaration issued on Friday to continue reforms, therefore, leaves us wanting more.

But what can entrepreneurs look forward to? While reality slowly processes the party’s all-encompassing goals, news has already arrived that China’s State Council plans to reform and broaden its stock market early next year. This will be a relief to the 800-plus firms currently in limbo because of the Chinese government’s 2012 moratorium on IPOs.”

Additional reforms should give entrepreneurs reason to cheer. First, the OTC stock market will expand to smaller businesses that have traditionally been shut out of capital markets and ignored by large banks, according to The Wall Street Journal. This offers some proof that the Party is serious about their repeated declarations that small businesses are vital to the economy.

Second, China’s Securities Regulatory Commission announced that responsibility for pricing shares at the time of public offering would shift from the government to the marketplace. This ought to lend integrity to the system and boost morale of the perpetually sanguine Chinese retail investors, who represent the largest investor class. The little guy in China has reason to be optimistic. Will the new wave of reforms keep him that way?

To be fair, that’s not all the Communist Party Central Committee issued. They also asserted that individual levels of government would be responsible for debt repayment, and vowed to implement stricter debt control measures. Aided by a large shadow banking industry, China’s local government has taken on enormous amounts of debt since 2009, mostly for real estate and infrastructure projects. Controlling risk has become paramount.

Reuters reports that growth rates are between 7.2% and 7.6% — high enough to keep employment in check in Premier Li Keqiang’s eyes — and reduced industrial capacity was called for as well.

And for dessert? Measures to maintain food safety.