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China to implement social, financial reforms following Third Plenum

ChinaFollowing the end of the Third Plenum, China announced recently that it would implement the most significant financial and social reforms the country has seen in nearly 30 years.

The 60-point plan includes reforms to land and residency mandates, as well a relaxation of the one-child policy and allowing financial markets to play a more significant role in the economy.

Financial reforms include the establishment of a deposit insurance system by early next year, loosening controls on utility pricing and reforming the system for initial public offerings, CNBC reports.

Analysts have indicated that the insurance system would protect depositors, thereby alleviating concerns in China that some smaller lenders could be forced out of the market as banks compete for deposits. The Bank of China removed controls on interest rates earlier this year.

They are moving towards a market bias and putting more emphasis on market,” Chi Lo, a senior strategist for greater China at BNP Paribas, said, according to CNBC. “The implication is that the non-state sector will play a greater role.”

Additionally, state-owned enterprises will be required to pay more significant dividends to the government, while private firms will be encouraged to play a greater role in the economy.

Under the plan, the losers could be the four major state banks, including ICBC, China Construction Bank, Agricultural Bank of China and Bank of China, which dominate the lending sphere, Reuters reports.

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