• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Market Reform in China: Should We Believe It?

    The first step in solving a problem is admitting it. For years, the Chinese government and their defenders overseas insisted first that China was still reforming, then that state-led economic development was superior to market-led development. Evidence to the contrary came as news to many.

    There has always been a reform camp in China; it just happened to lose every major political battle in the past nine years. Now the reform camp is trying again.

    They’re not going to succeed this year or next, but they at least have a chance—for the first time in a decade.

    The current Chinese government, led by Communist Party General Secretary Hu Jintao, took office in late 2002. At that time, China had been pursuing genuine market reform for 23 years, was growing at a sustainable 8–9 percent, and had a balanced economy. At some disputable point under Hu’s regime, but no later than 2006, the market was shunted aside in favor of the state. Chinese growth actually became a bit more rapid but also wildly imbalanced and, with the financial crisis, dependent on unsustainable levels of stimulus.


    It took some time for this to be recognized as a problem, but that was actually the easy part. The hard part will be actual change. Hu Jintao’s government took China off the market-reform path; fine words aside, this government is not going to reverse nine years of policy choices and return to the market in 2012. No chance.

    But this year marks a political transition for the PRC: In the fall, a new Communist Party leadership will be selected, and a new government takes over in February/March 2013. That’s why the reform camp, including senior economic decision makers, is chirping louder now. They’re hoping that incoming Communist Party Secretary Xi Jinping and his cabinet will be ready to listen in a way Hu Jintao’s cabinet never was.

    Unfortunately, Xi Jinping comes from a group, known as princelings, benefiting greatly from the state’s leading role in the economy—for example, by being named CEOs of giant state enterprises. The safe bet is therefore that the state will remain preeminent.

    But it’s at least possible that, given time in office, Xi will come to accept that China is off course. Not today, not tomorrow, but (perhaps) soon. This is what the reform camp is aiming at. The rest of the world should remain skeptical, but it should be cheering them on.

    Posted in Economics [slideshow_deploy]

    Comments are closed.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×