The Chinese leadership’s 60-point reform plan announced two days after the close of the Communist Party of China’s third plenum on Nov. 15 went way beyond most expectations. It proposes sweeping changes across broad swathes of the economy, dealing with all of the critical issues and challenges facing China as it reaches for the next stage of development.
The plan’s overarching goals hit all the right reformist notes: “The core issue is to handle the relationship between government and the market”; “In allocating resources the market must play a decisive role”; China “must actively and steadily push forward the breadth and depth of market-oriented reforms,” and “vigorously develop a mixed-ownership economy” (meaning the private sector along with state-owned), says the document, formally called the “Decision on major issues concerning comprehensively deepening reforms.”
The optimists, who have long said the new leadership would meet their lofty expectations and deliver a new vision at the plenum, clearly have been vindicated. The plenum also shows that the new leaders, and Party Secretary Xi Jinping in particular, have decided that major reform is necessary for the continued growth of the Chinese economy. (We already knew that’s where Premier Li Keqiang’s allegiances were.) Good news indeed.
This, however, doesn’t change what has always been true: Defining what specific policies will be adopted to carry out these sweeping reforms, and even more, implementing them, will be extremely difficult. Each of the reforms will have costs for, and adversely affect powerful players in, the Chinese system. The party leaders have set the year 2020 as a target for implementing all of this, presumably in a nod to how tough it will be. And, of course, there’s no guarantee that these reforms won’t be delayed or even abandoned, as the scale of the obstacles ahead becomes more and more apparent.
Very quickly the reforms will come head to head with vested interests that stand to lose huge power. Those include state enterprises, local governments, banks, well-connected princelings, security authorities, and ultimately the party itself.
That is the central paradox of what has been proposed: On the one hand, China can’t continue growing the way it has, and indeed risks social and economic fracture if these reforms aren’t carried out. On the other hand, by pursuing these reforms the party is diluting its control in multiple ways: its privileged role controlling the purse strings, if more and more lending is to go through non-state banks; its leading position guiding the economy’s development, if the private sector starts to move into areas long controlled by state enterprises; and increasingly its sway over the people, as the party loosens the hukou and allows migrants to move more freely where they want, and as it gives farmers more power over the land they occupy. (All with the associated possibility of greater social unrest if huge new numbers of people flow into the cities and feel less inclined to be quiet when they feel the state has mistreated them.)
CHINDIA ALERT: You'll be living in their world, very soon 