After the vague Communique released after the conclusion of the Third Plenary Session of the 18th Communist Party of China Central Committee, last Friday brought the full Decisions document and a personal note from Party Secretary Xi Jinping explaining the rationale for the Party's various decisions. The two documents lay out the biggest package of economic reforms since the early 1990s - and deliver a clear sense that the leadership is fully committed to their implementation. The Decisions document addresses a wide range of issues and is infused with many progressive ideas. Seeing them all in one document, backed by a clear sense of urgency, is heartening. Moreover, the half-personal, half-official document from Xi Jinping sends a clear message - he stands behind these reforms. Given his authority in the system as Party General Secretary, this increases the likelihood of meaningful implementation.

In his explanatory note to the Plenum document, Xi claims a clear lineage back to former leader Deng Xiaoping's 1992 reforms. This package is just the next step in the same direction. Market reforms and opening-up have been enormously successful, he says, but there are still some big problems: uneven development, uncoordinated policy, unsustainable growth, rising inequality and rising social contradictions. This diagnosis of the economy's ailments is almost exactly the same as that of the former leaders.

Listing this issue first, Xi writes that over the last 35 years, the Party has been searching for the right relationship between the government and the market. In 1992, the Party decided that the market was "basic", but it has now determined that conditions are ripe for the market to be "decisive". This might sound like linguistic jujitsu, but it is explained in Xi's next sentence: "Theory and practice prove that the market is the most efficient way to allocate resources."

The ramifications of this statement could and should run very wide: the market should set most prices (utility pricing is the obvious place to start), State subsidies should be limited (since they distort the normal price mechanism), private property should be respected, entry barriers to sectors should be lowered, capital controls should be loosened, and State intervention in business should be reduced. Much of this spirit runs through the document - and in the coming debates, it could act as the North Star guiding policy details.

State-owned firms are also to contribute 30 percent of their after-tax profits to the budget by 2020. This is an important step; the State Council's plan for dealing with inequality earlier in the year was a lot more vague on this point. At present, central SOEs do not pay dividends into the budget, but rather a portion of their dividends are redistributed to other SOEs via the State-owned Assets Supervision and Administration Commission. The figure of 30 percent appears to have been inserted in what is otherwise a non-specific document to establish a non-negotiable red line.

There is also a mysterious single line in the Decisions document about allocating some State capital to the National Social Security Fund, another long-held desire of the reformers. Once the National Social Security Fund gets equity in SOEs, it would receive dividends directly and it could send in independent directors, which would be a step forward in governance standards.

If these progressive pledges are pushed through in the next few years, there would likely be significant improvements in SOE efficiency. The key is how aggressively such measures are pursued.

There is a lot of talk in the Plenum document about "government function reform" - making the bureaucracy less interventionist and more business-friendly - a priority for Premier Li Keqiang. At the recent Trade Union Congress, Li gave a relaxed speech about how he sees the economy. He told the story of a young entrepreneur who wanted to open a bookshop in his hometown. The man dutifully collected the 20-odd business licenses demanded by the local bureaucracy, and then after he opened the shop some officials turned up to say his window glass was the wrong color. Since the owner had no spare cash, they demanded books as payment. For the Premier to speak publicly about the venality of parts of the bureaucracy he oversees is a breakthrough. Only by eliminating the need for so many licenses and stamps and by simplifying rules can he eliminate the space for bribes. Again, though, the key is implementation, all the way down to the local level.

The Ministry of Finance has been mandated to oversee open and transparent budgets, create a local government debt-management framework, sort out the transfer system and expand the bases of VAT and resource taxes. The document has also called for the acceleration of Property Tax legislation. And it said that municipalities should be able to issue bonds, though this is unlikely to occur on a meaningful scale any time soon.

Financial-sector reforms are broadly as we expected: accelerated interest-rate liberalization, further opening-up of the capital account, privately held banks, and greater freedom for companies to issue foreign debt and do cross-border transactions. But another win for the market was the announcement of a registration system for IPOs, to address the corruption in the existing approval system. The People's Bank of China also got backing for a deposit insurance system and a bank resolution framework, both essential for completing rate reform and resolving the wave of non-performing loans that is coming.

The Plenum document also called for a unified market in "construction land", which is the land that farmers build their homes on. Such land will now be opened up for direct sale by farmers, which would boost farmers' incomes, provide cheaper housing, and potentially spur more land reform.

There will also be a new group to lead these reforms. Leading Groups are formed by members of the Party leadership to oversee major policy areas, the Finance and Economics Leading Group, for example, co-coordinated the drafting of the Third Plenum document's economic sections. Setting up a new leading group to oversee reforms is a good move, as a high-level body is needed to drive reforms through an often resistant and uncoordinated bureaucracy. In recent months, some reformist economists have called for the revival of the Party-level body that drove reforms during the 1980s.

The key to all this will be implementation. But we now have a road map of sorts, so we are cautiously optimistic about the prospects for the economy during the next few years.

The author is head of research, Greater China at Standard Chartered Bank.

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