Reform, and especially financial reform is slowly taking off in China. But the main questions is, writes political analyst Arthur Kroeber in ChinaFile, whether the government will allow fundamental changes in its economy, including competition.
China is a large and complex country; it should not surprise us that the pace of reform has been uneven. We should also remember that many of the reforms outlined in the Party’s policy agenda, the Third Plenum decision of November 2013, set 2020 as their target completion date. Restructuring the world’s second-biggest economy is an intricate task. Even now it is a little early to jump to judgment about the success or failure of the reform agenda. On the whole, it is probably fair to say that China has achieved more substantive economic reform in the past two years than either Japan or India under their ostensibly reformist leaders Shinzo Abe and Narendra Modi.
My main question about the reform program has less to do with results in particular areas than with general orientation. The first three decades of Reform and Opening were successful mainly because there was steady progress toward making markets more competitive. This enabled a high rate of economic growth even though there was relatively little privatization and the state retained direct control over vast swathes of assets. China’s leaders have made clear that systematic privatization of state assets is still off the table. Therefore the future growth outlook depends heavily on whether the government is committed to increasing competition. So far the record is uninspiring: barriers to entry in over-regulated service sectors have not been lowered, and the attitude toward foreign companies has been hostile. Until we see strong affirmation from Beijing that it favors more vigorous competition throughout the economy, and specific measures to break down anti-competitive practices and structures, we should expect that China’s growth rate will continue to slow.
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