Sweeping reforms will reshape China landscape for firms from Alibaba to GM

HONG KONG – China's planned economic reforms are poised to reshape the competitive landscape, allowing private firms such as Alibaba Group to compete with state-owned banks, and easing the one-child policy to bolster markets for companies from Nestlé to General Motors.

China's financial sector is set to change with plans that include a new registration system for initial public offerings and allowing qualified private investors to set up small to medium-sized banks. That has progressed in the past few months as Tencent Holdings Ltd., Asia's biggest Internet company, is part of a group applying for a banking license in China.

"Companies that got too comfortable with the old system now are going to have to change," said Tim Condon, chief Asia economist at ING Financial Markets in Singapore, who previously worked for the World Bank. "This is potentially a huge step forward in opening up the economy."

President Xi Jinping's reforms, which may be the most sweeping plan since Deng Xiaoping's liberalization in 1978, are aimed at giving more influence to market forces and loosening government controls. The changes outlined in a 60-point document after a Communist Party meeting last week present opportunities — and risks — to companies in almost every sector of the world's second-biggest economy, which is heading for its weakest annual expansion since 1999.

China's stocks rose, with the benchmark index for mainland companies in Hong Kong surging 5.6 percent, the most since December 2011.

"It's positive, very positive for sentiment," said Catherine Yeung, investment director for equities at Fidelity Investment Management Ltd. in Hong Kong. Fidelity is adding more Chinese consumer-related stocks, including Internet and health care companies, she said.

Policymakers will seek to "push forward reform for a registration system" on IPOs, according to the government statement. That may hasten the approval process for more than 700 companies awaiting permission for their share sales.

Citic Securities Co., the country's biggest brokerage by market value, jumped 13 percent in Hong Kong trading.

Billionaire Jack Ma, execu­tive chairman of Alibaba Group, has said China's financial sector needs an outsider to "stir things up," according to a transcript compiled by the official People's Daily.

"The entry of tech giant Alibaba into the lending business should give the nationwide banks some concerns about future competition," said Jim Antos, an analyst at Mizuho Securities Asia Ltd. in Hong Kong. "Private banks that can rely on technology to bypass the expensive and time-consuming job of building out a branch network could become significant competition for the commercial banks in only a couple of years."

The Communist Party's meeting that ended Nov. 12 is set to have a similar historical significance as the one in 1978 when Deng decided on a reform and opening-up policy that heralded over three decades of rapid growth, said Yao Yang, dean of the National School of Development at Peking University.

Among proposed changes are making budgets more transparent, improving transfer payments, setting up risk-warning and debt-management systems for central and local governments and speeding up legislation on a property tax.