slowdown in reform efforts under attack

PUBLISHED : Monday, 03 October, 2011, 12:00am
UPDATED : Monday, 03 October, 2011, 12:00am


Amid increasing signs of rising anxiety among the public, the mainland's most revered economist has published the strongest criticism yet, from within Beijing's academic circles and government think tanks, of the recent slowdown in the nation's economic reform efforts.

The article, which appeared in Economic Information Daily last week, goes so far as to criticise Beijing for back-pedalling by allowing the state sector to overwhelm the private sector.

Wu Jinglian, 81, who has been advising the mainland's top leaders since the beginning of the market-oriented economic reform, also called for the breaking away from old ideologies and for the continued reform of state-owned enterprises.

Wu is a researcher with the Development Research Centre of the State Council and a member of the Chinese People's Political Consultative Conference's national committee, a top political advisory body of the government.

With more public figures chiming in on the reform issue, opinions have been fermenting in the run-up to the Communist Party's transition of power set for autumn next year, and the consensus is showing a rising dissatisfaction with the slow progress in recent years.

Even Premier Wen Jiabao, in his speech two weeks ago in Dalian at the annual World Economic Forum, called for a systematic political reform to put more restrictions on the Communist Party's use of power.

Wu noted that state-owned enterprises had been rapidly expanding their monopolistic power as a result of the administrative protection they received, as well as from the massive credit support from the state-owned banking system in recent years.

The veteran economist said the strengthening of the state sector's dominance would affect the long-term health of the mainland economy. He also said the internal management of state-owned firms, as plenty of research by Chinese and foreign economists had proven, was in no position to compete with management at private enterprises, particularly in terms of efficiency.

Wu quoted official data indicating that state-owned enterprises still maintain 'absolute dominance' in industries dealing with defence, electricity generation and power grids, petroleum and petrochemicals, telecommunications, coal, civil aviation, and shipping.

He said 'strong control' was maintained by those state-owned firms in several areas, including machinery manufacturing, carmaking, electronics, chemicals, civil engineering and general developments in science and technology.

In an attempt to mitigate the impact of the global financial crisis, the state banking system in 2009 provided as much as one trillion yuan (HK$1.2 trillion) worth of credit to maintain the continued growth of the economy. Most of that money, Wu said, was given to state-owned enterprises and local governments.

This helped state-owned corporations significantly increase their assets, which Wu said rose by 120 per cent from 2001 to 2009.

He also warned that whether the growing dominance by state-owned corporations was potentially beneficiary or hazardous for the mainland should not be measured by their short-term profits.

Common prosperity and stability would not be possible if the back-pedalling was not halted, he said. He said the 'only way out' was to go back to the principles that Beijing adopted in the past three decades or so, but which it had yet to put into full practice because of resistance from special interest groups and fears of those who clung to old ideologies.

First, he said, state-owned enterprises should avoid all competitive industries. And in the process, part of the existing state-owned assets should be used to replenish the national social security fund.

Secondly, with the exception of only a few necessary monopolies, state-owned corporations should practise joint-stock ownership and all should independently bear the full consequences of their operational decisions.

Thirdly, there should be equal property rights and equal competition between state and private ownership.

In a separate article, published online on September 22 by the weekly Economic Observer newspaper, Professor Ma Guangyuan of Peking University also strongly criticised the state of the economy.

Ma said that because of what he called incomplete reform, most enterprises were making money either by clinging to their monopolistic status, lending money to other companies or investing in real estate projects.

The deterioration of the macro-economic environment, a euphemism for inappropriate government policies, had resulted in a growing number of private entrepreneurs losing their interest in industrial endeavours, Ma said.

Wu has been one of the leading critics of the slowdown in reform in recent years. In one of his articles published last year on, an online forum for the mainland's liberal scholars, he said the most daunting task facing reform now was to challenge 'crony capitalism'.


The proportion that state owned firms increased their assets by from 2001 to 2009