In the run-up to the Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee, an event scheduled to take place in Beijing from Saturday to Tuesday, the central leadership has repeatedly emphasized the need to deepen reforms.

Judging from remarks made by top leaders, China's next major round of reforms will be comprehensive, touching upon taxation, finance, markets, enterprises and other fundamental aspects of the economy. But in a speech made at the recent Asia-Pacific Economic Cooperation (APEC) forum, President Xi Jinpingmentioned that reforms would come with a "necessary cost."

What does this "necessary cost" refer to? And who will bear it? In terms of reform goals, central authorities appear to be targeting interest groups standing in the way of the nation's transformation into a fully fledged market economy.

In all likelihood though, it's ordinary people who will be left - at least in part - to shoulder the expense of reforms. To guarantee a "soft landing" for China's society, safety nets need to be put in place to catch those vulnerable to change.

In the course of pushing forward reforms to State-owned enterprises (SOEs), some inefficient enterprises may have to go bankrupt. Meanwhile, with the administrative streamlining and the delegation of powers, many government institutions will have to survive in a more competitive environment or shut their doors. For disadvantaged entities, recent history offers a reminder of the consequences of reforms.

In the late 1990s, China embarked on a painful series of SOE reforms. Back then, the Chinese government adopted an aggressive "grasp the big, let go of the small" approach which subsidized and restructured larger SOEs while allowing smaller ones to undergo privatization or bankruptcy. This strategy succeeded in terms of producing industry giants in fields which together form the backbone of China's industrial economy. But in the course of cutting the dead weight off the State sector, 30 million jobs have been lost since 1998, according to the Ministry of Human Resources and Social Security.

China is facing circumstances similar to those in the 1990s - although today's challenges loom larger. During the last major bout of reforms, China was working to enter the World Trade Organization (WTO) and still enjoying the fruits of its demographic dividend. Benefiting from both factors, the Chinese economy recorded unprecedented rates of expansion over the following years, mopping up problems such as unemployment in the process.

But the country has nearly exhausted its demographic and WTO advantages. China is facing a transitional period where it can no longer depend on rapid growth to cushion the impact of sweeping reforms. If there are not enough safety nets in place, the country and its people could be headed for a major adjustment.

Based on reform hints which have surfaced in the media, we can guess where cracks will emerge. Reforms to the land transfer system, for example, could exacerbate the woes of landless farmers. If this rather sizable population cannot reap the benefits of urbanization over the coming decade, their inability to access desirable jobs and social goods will only add to the pressure on the government over the long run.

Official pledges to eliminate excess capacity may also lead to unemployment in regions without diversified economies. Workers will need to be reemployed if they are left jobless after restructuring.

The elderly could face difficulty as well if the social pension system is left to strain under a widening financial gap.

At this point, most experts and officials seem to agree that China must switch to a more sustainable economic growth model. But after years of rising incomes and improving lifestyles, the country needs a social safety net to prevent vulnerable individuals and groups from falling through the reform cracks.

This Article is written by Anbound research team and translated by the Global Times, original publication please visit:

http://www.globaltimes.cn/content/823309.shtml#.UpQ7g7KcFkk