Reforming China
Even the Chinese Concede: Xi’s Reforms Aren’t Working

The New York Times has located a rare and curious object: a report from a Chinese state think tank admitting frankly that Xi Jinping’s economic reforms have failed:

The new report, a 217-page study titled “The Reform Obstruction Phenomenon,” was written by researchers from the Economic System and Management Institute of China’s National Development and Reform Commission, which steers policy on industry, energy and many other sectors. The head of the commission, He Lifeng, and his deputy, Liu He, both have ties to Mr. Xi. But nothing in the report suggests that it had their blessing. […]

“It’s an inescapable objective fact that the enthusiasm of many local governments to get things done has fallen greatly,” said the report. “The lack of vigor in implementing reform plans has become the most pressing difficulty in our country’s efforts to comprehensively deepen reform across the board.”

But the authors do not blame the sluggishness just on foot-dragging cadres and state executives, an impression sometimes left by state-run news media reports.

“Currently, a bigger reason why reforms in some of our country’s key sectors have had difficulty moving forward may lie in the thinking behind the top-level design of these reforms,” the report said.

It added, “the source of the obstructions lies in the policy making.”

The criticisms leveled in the report—that debt-laden state companies have avoided implementing necessary market reforms, that China needs to lower its reliance on exports, that bureaucratic infighting has prevented serious tax overhauls—are not exactly groundbreaking. But it is surprising to see such assessments emanating from a state organ, with implicit criticism of Xi’s leadership that suggests serious discontent among China’s reformist camp.

Many of those reformers are pinning their hopes on a renewed reform drive in Xi’s second term, but there are good reasons to doubt he will follow through. As WRM noted last year, “Every time a clear choice has come between suffering the pain of reform and flinching, Beijing has flinched.”

That judgment has only been borne out by the leadership’s actions in recent months. From the firing of his reformist finance minister to his heavy-handed clampdown on capital flight, Xi has shown a clear preference for propping up the economy with ad hoc state interventions rather than following through on market reforms that could upset the apple cart. Xi may prefer to blame stalled reforms on lower-level officials, but the real signals about China’s unwillingness to reform are coming from the very top.

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