By Benjamin Kang Lim BEIJING, Feb 28 (Reuters) - China's parliament opens its annual session on Monday with hopes of passing a landmark bill that would protect private property for the first time and see Communist leaders embrace another pillar of free markets. The National People's Congress is likely also to pass a corporate income tax bill that would end preferential treatment for foreign-funded firms, trim the budget deficit and debate measures aimed at tackling rural poverty and pollution. The 12-day NPC session will be its last before the 17th Communist Party Congress this autumn, when a sweeping leadership reshuffle is expected as President Hu Jintao cements his grip on power. The largely ceremonial parliament meets in full session each year to endorse policies set by the ruling Communist Party and, amid anticipation over the looming leadership changes, analysts will be watching this year for signs of political jockeying. "Major personnel changes are unlikely (at parliament) because they will be decided at the 17th Congress," journalism professor Zhan Jiang said. Security will be tight around the Great Hall of the People off Tiananmen Square and around the hotels that will host about 3,000 NPC deputies descending on the capital. In past years, Beijing police rounded up disgruntled out-of-town petitioners and beggars. Dissidents and civil rights campaigners were placed under house arrest or shunted to the provinces to avoid embarrassing protests. PROPERTY, TAX LAWS The property rights law -- the first of its kind since the 1949 Communist revolution -- would give equal protection to private and state-owned property and is aimed at curbing arbitrary land grabs by corrupt officials. It was shelved last year because conservatives argued that it would speed privatisation and exacerbate the widening gap between rich and poor which has spawned rural unrest. The Communist Party has embraced capitalist tools such as stock markets and in 2002 opened its doors to private entrepreneurs. The corporate income tax law would unify the rates paid by foreign and domestic firms, ending a two-decade-old practice of offering incentives for foreign investment and levelling the playing field with their Chinese counterparts. State media have put the new rate at 25 percent. Domestic firms currently pay 33 percent, while many foreign-funded firms are subject to 15 percent income tax. Minggao Shen, an economist with Citigroup in Beijing, said the overall impact of the tax change on foreign direct investment would be limited as China continued to offer relatively cheap labour and the promise of a huge market. "I still think investment in China will be attractive for longer-term investors -- both domestic and foreign," Shen said. Premier Wen Jiabao gives his annual address to parliament on Monday, and is expected to announce the government's economic growth targets and other policy measures aimed at helping hundreds of millions in the backward countryside. The National Development and Reform Commission, China's main planning agency, said in January that the government intended to reduce its already small budget deficit again this year. Finance Minister Jin Renqing, who projected a budget deficit of 295 billion yuan in 2006, down 1.7 percent from 2005, is due to present the 2007 budget. DEFENCE BUDGET With international attention focused on China's military after the January unveiling of its Jian-10 multi-role indigenous fighter jet and its destruction by missile of an ageing orbiting satellite, analysts expect the nation's defence budget to see double-digit growth once again. Robert Karniol of Jane's Defence Weekly said there had been double-digit annual growth in the military budget for a decade, adding: "There are no indicators to suggest a change of tack." Analysts expected Premier Wen as usual to extend an olive branch to Taiwan in his keynote speech. Beijing, which has claimed sovereignty over the self-ruled democratic island since their split in 1949, is locked in a propaganda battle with President Chen Shui-bian whom it suspects of trying to lead Taiwan towards formal independence. China's top judge and prosecutor will detail on March 13 the government's crackdown on corruption. The pair will come under the spotlight after Chen Liangyu was toppled as Shanghai's party boss and lost his seat in the party's decision-making Politburo. (Additional reporting by Jason Subler)
