China’s Bold, Contradictory Reform
Call it policy presentation with Chinese characteristics. After the meeting of its leadership last week, China’s Communist Party issued a muddled communique that aroused no great excitement. Then, on the weekend, well ahead of the usual schedule for such announcements, the party released a longer follow-up statement worth getting excited about.
It’s radical stuff -- in principle, if not (yet) in policy. Maybe China’s new president, Xi Jinping, aspires to be another Deng Xiaoping after all.
The “Decision on Major Issues Concerning Comprehensively Deepening Reforms” was nothing if not wide-ranging. Tucked inside it were the biggest headlines, so far as many foreign observers are concerned: China’s notorious one-child policy is to be softened, and the system of arbitrary confinement to “re-education” in labor camps, a tool of political repression, is to be ended.
Most of the statement, though, is devoted to a comprehensive list of economic and financial reforms. This emphasis is deliberate: “The reform of the economic system is the focus of all the efforts to deepen the all-round reform.” Many of the proposals echo the long-standing recommendations of pro-market advocates at home and abroad.
The statement calls for China’s financial sector to be liberalized. There will be new private banks, as well as further moves toward exchange-rate flexibility, market-determined interest rates and capital-account convertibility. The blueprint calls for price reforms in water, energy, transportation and telecommunications. Farmers will be given new property rights, including the right of succession and the ability to sell shares in their land or use it as collateral. The system of household registration, which controls workers’ movement from countryside to city, will be eased (though curbs on migration to the biggest cities will remain).
The document promises far-reaching reform of state-owned enterprises. There’ll be more financial disclosure, and managers will be made more accountable. Where possible, it says, such enterprises will be exposed to competition. Mixed forms of public and private ownership will be encouraged. Needless regulation will be dismantled.
There is one caveat, however, and it’s a doozy: This “Decision” remains mostly a statement of intentions rather than a declaration of specific policy changes. And the leadership, by Western standards, is in no great hurry: The plan calls for results by 2020. Putting the ideas into effect will involve every level of government and multiple layers of China’s labyrinthine bureaucracy. Liberalization threatens vested interests and will be met with resistance. Good results are by no means guaranteed.
Another reason to withhold judgment is that the party statement undoubtedly envisions a more market-based economy -- yet not what one might call a normal country with a normal system of government. Its statement is rife with the contradictions that flow from this.
The Communist Party frowns on what it calls contradictions, and it constantly dedicates itself to eliminating them more boldly -- but the anomalies it has in mind are labor disputes, street protests and “emergencies on the Internet.” The jarring tensions between state and liberty, state and market, and one-party rule and democracy are barely noted in the document, much less confronted or resolved.
As a result, even allowing for losses in translation, the statement is full of bizarre disjunctions: “Cultural reform must evolve around the socialist core value system.” On the other hand: “Perfect the market exit mechanism to promote the survival of the fittest.” Karl Marx meets Friedrich Hayek. Perhaps to ensure that these confusing imperatives are responsibly reported: “Institutionalize the government information release system and standardize the vocational qualifications of journalists.” It’s both a radically pro-reform document and proof that the Communist Party still doesn’t get it.
The changes to the one-child policy perfectly illustrate the problem: The plan would allow couples in which one parent is an only child to have two children.
The rest of the world may celebrate this as the loosening of an odious infringement of liberty. For the Communist Party, the issue never even arises. It seeks only to fine-tune the rules for demographic purposes: China needs more children -- but not too many. (The change is listed alongside another technocratic tweak: “Allow doctors to have a license to work in more than one hospital.”) A step forward for human liberty, no doubt -- in a system that still doesn’t understand what liberty means.
To an extent that few would have dared to predict, the Chinese Communist Party has maintained its grip on political power even as its economic reforms have unleashed the most astonishing surge of economic growth the world has ever seen. How much longer can that go on? Xi, it seems, is intent on a bold new phase of economic reform, rightly understanding that this is necessary to extend China’s miraculous run. But if the “Decision” is any guide, the political reform that China also needs is not yet fit for public discussion.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.