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China's Ten Most Important Economic Policies for 2004

As a routine, China's top authorities issue a directive at the beginning of every year that outlines each and every task for the year and specifies the policies and measures for their accomplishment. The so-called "No. 1 document of 2004," which was issued on February 8, 2005, was different, in that it called for accomplishment of just one task, that is, the task of helping farmers increase their incomes over the years to come, highlighting the importance attached by the ruling Communist Party to the "problems facing agriculture, farmers and the countryside."

On March 14, the National People's Congress, China's highest legislature, adopted a constitutional amendment to the effect that the "State shall protect citizen's legitimate private property" and that the "State shall respect and protect human rights."

On July 1, the People's Republic of China Administrative Licensing Law became effective for implementation. The law specifies the limits of government powers - what the government can and cannot do. It came, in particular, as a blessing for investors and business people, who sometimes fell victim to the abuse of power by officials and had to overcome elaborate "red tape" obstacles to get things done.

On July 25, the State Council published a decision to reform China's investment system. The decision allows full independence to investors in the handling of matters related to investment, while limiting government powers to exercising macrocontrol over investment through guidance. 

On January 31, the State Council published the Opinions on Advancing the Reform of the Capital Market and Ensuring its Stability. The directive calls for, among other things, an increase in the number of qualified institutional investors (QII).

On December 1, the all-powerful Political Bureau of the Central Committee of the Communist Party of China decided that, in 2005, China would follow a cautious financial policy. The policy "should be effective enough to prevent inflation while guarding against deflation."

Beginning October 29, the benchmark rate of interest on bank deposits and loans was raised in accordance with a decision of the People's Bank of China, China's central bank. For one-year deposits, it was raised by 0.27 percentage points, from 1.98 percent to 2.25 percent. For one-year loans, the benchmark rate of interest was raised from 5.31 percent to 5.58 percent, also an increase of 0.27 percentage points.

The People's Republic of China Foreign Trade Law, which became effective on July 1, allows individual citizens to engage in foreign trade. The law also calls for still more effective protection of intellectual property rights.

The People's Republic of China Law on Securities Investment Funds became effective on June 1. The law allows franchised trading of securities and tightens control over access to China's securities markets.

With the approval of the State Council, the China Insurance Supervisory Commission, the country's watchdog for the insurance industry, allowed Chinese insurers to seek listing on securities markets.