What transition means for the stock market is probably that many existing listed companies are going to suffer, rather than benefit, from the reforms that will follow the Third Plenum.

For example, the capacity of the steel industry based in Hebei, a province of less than 0.2 million square kilometers, has exceeded that of the entire United States, a country of 9.6 million sq km. And that is not a record to boast of. The density of all related industrial discharge is one source of the ugly and unhealthy choking smog that from time to time envelops the North China plain, including the national capital Beijing.

The National Development and Reform Commission, the top regulator, has already ordered several heavy industries, steel-making included, to cut their production capacity.

The governor of Hebei would be racking his brain to find ways to relocate the workforce to be made redundant by the partial shut-down of the province's steel industry, while also maintaining its general GDP growth.

More than ever, high-growth industries will need to feature light assets, low demand for energy and materials, extensive networks and services, more mid- or high-skilled jobs and good integration with international standards. Many existing listed companies, especially State-owned industrial corporations, will have inherent difficulties adapting to the transition unless they are placed under very intelligent, market-toughened leaders.

In the meantime, high-growth cities will no longer feature big smoke-stack industries, but more probably clusters of small enterprises in diverse services, young entrepreneurs and talented people from other provinces and perhaps overseas, moderate housing prices, decent utilities and environmentally friendly planning and implementation of urban development programs.

An economy's transition is first of all a result of competition in the marketplace. But it can be quickened by government decrees. We are seeing signs of both factors working together now. After the Third Plenum, we will be seeing even more.

The author is editor-at-large of China Daily.