March 2018 will be recorded as a crucial turning point in China’s reform timeline. Constitutional amendments passed by the National People’s Congress mark the maturity of an emerging market that has so far remained reactive to a global economy largely defined by the West. Path dependence theory would suggest China’s development is unable to break free from history, but what if bold reforms pave the way for path creation?

The proposed reforms may bring more certainty about the legal framework when China aspires to become an advanced and modernized country by the middle of this century. Putting speculation focused around the elimination of the two-term presidential limit aside, there is a whole host of other reforms beyond the headlines. No one yet knows the exact implications, but with time and language skills to look deeper into the entirety of the amendments, there is a higher chance of getting closer to the truth.

A constitutional amendment is by no means an easy process. The latest amendment was the fifth since its adoption in 1982. Each amendment addressed fundamental issues such as land-use rights, private property and human rights. An amendment requires a proposal by either the NPC Standing Committee or by more than one-fifth of all NPC deputies. Its enactment requires the approval of two-thirds or more of NPC deputies during the annual session.

At the heart of this amendment is the proposal to install a legal framework to allow restructuring of the State Council, which will consist of 26 ministries and commissions. Streamlining China's administrative system by cutting red tape is seen as a necessary step towards more efficient governance. Another way of looking at it, the new legal structure is designed to tackle the three critical challenges – financial risk prevention, poverty reduction and environmental protection – that face China's economy in its current transition period.

The latest shake-up of China's financial regulatory system is a prime example of institutional restructuring designed to resolve existing problems in the shadow banking sector. At the NPC meeting, Chinese lawmakers approved the proposal to merge the China Banking Regulatory Commission and the China Insurance Regulatory Commission to better handle financial risks.

Although any direct impact on global markets is perhaps yet to be felt, this effectively marks the biggest regulatory reform of China’s financial market over the past 20 years. It is also a much-needed step of critical regulatory restructuring for China to curb excessive borrowing and financial risks at this juncture.

China has also unveiled a revolutionary Cabinet restructuring plan, aiming to transform the incumbent State Council and ministries into a more efficient and service-oriented government. Once approved by the lawmakers, it will become the eighth Cabinet restructuring since 1982. The sweeping restructuring plan of State institutes includes creating an immigration administration, an agency to coordinate foreign aid, a combined banking and insurance regulator, and ministries of veterans affairs, emergency management and natural resources, among others.

Everyone familiar with Chinese policymaking will know that China sets long-term goals – often longer than five years. Long-termism, some argue, is China's most successful soft power.

One of the most frequently used phrases by government officials is 'Two Centenary Goals'. The idea was first proposed during the 15th Party Congress in 1997. Back then, China's GDP was merely 11 percent of US GDP. Fast forward two decades, China's GDP was 62 percent of US GDP. Even on per capita terms, the change has been remarkable. China's per capita GDP multiplied 10-fold in those two decades.

The concept of "Chinese Dream" is still ambiguous. One interpretation is the desire to achieve the Two Centenary Goals. The first centenary is 100 years since the establishment of the Communist Party of China. The goal here is to build a moderately prosperous country by 2021. The second centenary is 100 years since the establishment of the People's Republic of China. By 2049, China seeks to become not just prosperous, but also a democratic, civilised and harmonious modern socialist country.

The domestic legal institutional changes will help legitimize the Chinese Dream. Of course, the success of domestic development depends on the simultaneous advancement of China's foreign policy. This is where the constitutional amendments will have further impact.

With Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era added to China's constitution, the Belt and Road Initiative will have a much longer shelf-life as being part of the CPC's manifesto. Mutual consultation, joint construction and shared benefits are the three core principles underpinning Xi's Belt and Road Initiative. This reflects China's ambition to encourage more local engagement and foreign participation to jointly improve connectivity across key emerging and frontier markets.

Connectivity is what the Belt and Road initiative embodies. This is not only the flow of goods and services, but also of capital and people. To better connect with the rest of the world as well as its own people, it is vital that China finds its own path.

Jinny Yan is the Chief China Economist, ICBC Standard Bank. The views do not necessarily reflect those of China Watch.

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