China's reform progress tops congress agenda

China kicks off its annual parliamentary meetings in Beijing Wednesday.

HONG KONG (CNNMoney)

The National People's Congress, often criticized as mere political theater, remains an opportunity for top Communist Party brass to reveal new plans and announce economic targets. This year's meetings are of particular note -- it's the first such gathering that President Xi Jinping and Premier Li Keqiang will preside over, since assuming their top posts a year ago.

Beijing promised a slate of reforms last year at two major political meetings, broadly pledging to clean up corruption, stabilize economic growth, and open up China's financial markets. That was on top of social measures that aimed at clearing heavy pollution and easing family planning policies.

The reform measures are nothing if not ambitious. Capital Economics called one laundry list of proposals "the most impressive statement of reform intentions that we've seen this century." But the big question is whether Beijing will follow through on its promises. Some reform initiatives -- such as reforming state-owned companies, managing local government debt and fiscal reform -- have lacked specifics.

Related story: China's anti-corruption drive eats into growth

Xi's sweeping anti-corruption campaign has placed a number of government officials and company executives under investigation. Officials have been banned from conspicuous spending -- no more extravagant banquets, riding in showy cars and gifting luxury items. Some critics say the crackdown is more about knocking out political opponents, but either way, it's a move that has gathered significant momentum.

China has also begun testing a number of financial reforms in a free-trade zone in Shanghai, including greater foreign investment access and experimentation with market-based interest rates.

Related story: Beijing loses billions as rich skip taxes

More recently, the People's Bank of China has allowed the tightly-pegged yuan to fluctuate a bit more than usual -- a possible sign that Beijing is getting serious about building a more market-driven economy.

Despite these strides, China still faces an uphill battle in implementing some reforms, especially in the face of slowing economic growth. While economists agree China needs to change, gains may not be reflected in the economy for years.

Related story: The economics of China's one-child policy

Looking ahead, there are a number of areas that experts say the government must still address, including tax reform, shadow banking regulation, food safety and shoring up the country's social safety net.

Tackling even just one of those could help alleviate a number of major challenges. Tax reform, for example, "is crucial for addressing local government debt, property bubbles, and financial risk," analysts at Barclays wrote in a recent research note.

First Published: March 4, 2014: 8:32 PM ET

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