Ex-head of PBOC urges China to deepen reforms, limit government role in economy

BEIJING (Reuters) - China should deepen reforms to let market forces play a decisive role in the economy while limiting the state's role, Yi Gang, former governor of the People's Bank of China (PBOC), said in remarks published on Friday ahead of a key meeting on reforms.

The ruling Communist Party's Central Committee gathers next month for a meeting known as a plenum, the third since the body of elite decision-makers was elected in 2022, focusing on reforms amid "challenges" at home and abroad.

"Both theory and practice have proven that market allocation of resources is the most efficient," state media quoted Yi, deputy head of the economic committee of the Chinese People's Political Consultative Conference (CPPCC), as saying.

China allow market forces to play a decisive role in resource allocation, cutting restrictive policies that hinder fair market competition and property rights protection, Yi told a meeting of the CPPCC, China's top political advisory body.

"The role of the government should mainly be reflected in maintaining a fair and competitive market environment, providing public goods, and responding to market failures," Yi said.

In May, President Xi Jinping pledged to step up reforms to tackle institutional obstacles to economic modernisation.

China should also reduce "intervention and restriction of independent consumption in the consumption sector", Yi said, without elaborating.

Policy advisers have proposed reforms including overhauling the tax system to tackle the root cause of mounting local government debt, boosting household incomes and consumption and creating a level playing field for the struggling private sector.

China should further open up its economy to the outside world, including institutional openness in terms of rules, regulations, management, and standards, Yi said.

"The history of China and the world fully proves that openness brings progress, while closure inevitably leads to backwardness," he said.

(Reporting by Kevin Yao; Editing by Gareth Jones)