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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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  • KremlinKryptonite

    This is because large elements of the state “media” are controlled by the opposition faction – Jiang Zemin’s faction.
    Far from acting secure, the unelected Xi and his faction are acutely sensitive to things said in the state media.
    For example, Caixin, a relatively independent financial news outlet, was censored when it published an interview in which a CPPCC delegate called for greater press freedom. Caixin followed with an article noting that its previous article had been censored.

  • Dhako

    I think you really have a deep intellectual blind spot about China, even when you have this kind report, you still fail, and failed miserably, as to how to interpret it. In other words, the issue in China, was never about to reform or not reform the public-sector and state-owned enterprises (SOEs). But rather, the issue is who should do the reform and who they should report to. Which means, the issue that was bedeviling previous president Hu, was that, there was a vested interests in each sector that needed to implement this reform, was also “staffed” to the eye-balls by same the folks career officials who are likely to be the casualty of that reform process. Furthermore, it became obvious in the calculation of President Xi that, he has two term on the pillar, and therefore, the only way to turn the tanker that is the Chinese economy is to use the first 5 year term (2012 – 2017) to “prune” and flush out (a root-and-branch reform) of the folks who will have to implement this reform.

    And, once that is done along with anti-corruption crusade to slim the vested interests that had stymied the previous attempt to reform the economical system under President Hu, then use the second term tenure (2017 – 2022) to actually carry out the reform, that has been long deliberately stalled by those who are likely to be on the financial losing end of the proposed reform. Hence, once, this year big do is out of the way in October for China, and President Xi second term begins, you will see early January next year (2018) the economical reform taking shape with much gusto, with, hopefully, a new Prime-Minister, since, the current Prime-Minister, Mr Li Keqiang, seems to be rather soft kind of a leader to move the heavy lift this reform will require. So lets see how your tendentious reading of China will square with that reality.

    • Tom

      In other words–“Everything is fine, folks, nothing to see here, the fact that you cannot breathe properly is not a sign of trouble.”

      • Spencer

        Having said that, it’s interesting to note how relatively measured and well-informed this comment is compared to most of his barely-readable, spittle-flecked screeds. This is not to say it’s more believable, just less hallucinatory.

        • Tom

          I think it helps that it’s about Communist party internal politics, and something tells me that said politics are one of the few things Dhako actually knows something about.

    • Angel Martin

      Like every other communist country in history: “this five year plan was a failure, but the next five year plan is a guaranteed success…”

    • ——————————

      Dhako, how much does the PRC pay you to write all this fake news?…or you just extremely bored?…or insecure….

  • Jacksonian_Libertarian

    The Government Monopoly lacks both the Information and Motivation to efficiently allocate resources as the Free Market does automatically. So, saying that Xi’s reforms aren’t working is foolish, as Monopolies lack the ability to make things better. It needs to be recognized that the Chinese Communist Party isn’t responsible for the so called “Chinese Economic Miracle”. It was the Foreign Investors looking to take advantage of cheap Chinese labor and potential 1.3 billion new consumers that owns the “Chinese Economic Miracle”. But that’s over, with the smart money already gone, and the desperate money now engaged in “Capital Flight”, like rats leaving a sinking ship. China had over 40 years to make market based reforms to their economy, they failed to do anything. Now they’re left with an economy that doesn’t include a single world class brand name like: Sony, Toyota, Kia, Samsung, Microsoft, Apple, Intel, etc… But, does include thousands of inefficient, and uncompetitive State Owned Enterprises that have been looted by the corrupt Politicians, their families, and friends.

    China is now hitting the wall, and it’s going to be bloody. Chinese rebellions are bloody and brutal, and fear of this is what drives the Chinese Communist Party.

    • GS

      Well, and why shouldn’t they be hitting the wall? Let them, by all means. The more trouble they have at home, the less energy and resources they will have left to cause trouble abroad.

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