Reform of public finances is a must

Whether the US quantitative easing is to continue (and now the US Federal Reserve says it is), Chinese shares are most likely to experience a small high tide between now and the third plenary session of the Communist Party of China Central Committee scheduled for November.

Many expectations have been built up since mid-March, when a new cabinet replaced an old one remembered more for its huge stimulus to the State-owned enterprises during the world financial crisis than for many reform efforts.

Some people expected quick results: a new overall reform strategy; a comprehensive urban development program in which up to 200 million migrant workers and their families are to be settled in their adopted cities; a reform in public finance, especially the redefining and sharing of financial powers between central and local governments (and a solution to the mounting local government debt); reform of the domestic stock market; reform of the land system and urban residential housing program; an effort to narrow down the gaping income discrepancy between the rich and poor (along with a new tax scheme); reforms in public health, social security, education, and in virtually all things.