China must push for all-round reform

Hu Shuli says its economy, now tied to the global system, faces structural problems that cannot be solved without political and social change

PUBLISHED : Thursday, 01 November, 2012, 12:00am
UPDATED : Thursday, 01 November, 2012, 12:42pm

On the eve of the 18th party congress, reform is the hot topic in the Chinese media. But unlike in the past, when discussion largely focused on the economy, the debate today is on reform in all areas - economic, social and political, particularly the last one.

All of this is raising hopes that the next stage of Chinese reform will bring fundamental changes. In particular, while political reform efforts will continue to be prudent, government leaders are expected to push harder and with more determination to strengthen the rule of law, improve transparency in governance and give people more of a voice in decision-making.

Why the focus on comprehensive reform? Because China needs it at this stage of its development, if it is to cope with an external environment that has changed drastically from the one 30 years ago when reforms first began. The next decade of Chinese development is crucial.

In China today, some basics of a market economy are in place; people's livelihoods have improved; the social structure has been transformed, and so has people's self-image.

The Chinese economy is inextricably linked now to the global economy, and this is placing new demands on China's political and economic systems. The competitive advantages that China once enjoyed are disappearing, but for changes to its economic structure to happen, China must also carry out political and social reforms. Multifaceted problems can only be tackled through comprehensive reforms.

In the first days of China's opening up in the 1980s, reformers targeted rural reform, and this included a recognition that political reform was crucial. At a Politburo meeting on August 18, 1980, Deng Xiaoping highlighted the need to check the problem of power concentrated in the hands of a few. This was seen as the cause of China's recurring political upheavals since 1949, and the persistent influence of radical leftist views that led to the tragedy of the Cultural Revolution.

On July 1, 1987, in the run-up to the 13th party congress, Deng's speech on the checks on political power was reprinted in the People's Daily. It's clear that reformers of the time believed that political and economic development must go hand in hand, as American economist Douglass North had argued.

But for various reasons, political reform has stagnated since, even as China transformed its planned economy into a market economy. The lack of political progress has become China's weakest link, impeding its social and other reforms.

Economic and political reforms must go together. Too often, the heavy hand of government in the market and the dominance of state monopolies stifle competition, distort the market and allow rent-seeking and corruption to thrive. Calls within the market for institutional controls on unchecked powers have not been heeded. As a result, power abuses have wreaked havoc in society, causing political divisions, the income gap to widen and animosity between government and people.

The polarisation and fragmentation in society is deeply worrying. As Bo Xilai's case shows, if reformers don't check the abuse of power and push for political reform, China could easily lose its development gains so far.

Political reform also holds the key to the continuing growth of its economy. Chinese people today are especially sensitive to issues of social justice and the income gap - the cause of much public resentment. Thus, fiscal and tax reform is now more urgent than ever. But to tackle these budget and tax problems, Beijing must also sort out these issues: the share of power between the central authorities and local governments; the need for sunshine rules for government budgets; and the extent of public participation in decision-making. These, of course, are political issues.

Another example is social security reform. A stumbling block in the healthy urbanisation of Chinese society is the household registration system. This system is tied, in turn, to social welfare. China needs to build a truly national social welfare system, one that doesn't tie a person to his or her place of birth. This requires changes in its economy, social management and - because it involves the share of power between the central and local governments - political system.

The government must find the resolve to push on. Over the past 10 years, the country has made significant progress in building a socialist market economy, but trial programmes in political, social and cultural reforms are only slowly being rolled out. Today, the support for comprehensive reforms is strong and growing, and government leaders are also clearer about the priorities and risks of reform.

The government must take a pragmatic approach to reform. It is no longer fashionable in today's China to place politics on a pedestal. Instead, the mainstream view in society is that steady, prudent reforms are necessary and cannot wait. With public support, government leaders should draw up comprehensive plans on how to implement these reforms.

The stage is set for change. With boldness in vision, meticulous planning and careful implementation, the government can push past the hurdles to political, cultural and social reform, even as it presses on with economic reform. It's worth remembering Deng's caution to set a date for reform, for it cannot wait too long.

This article is provided by Caixin Media, and the Chinese version of it was first published in Century Weekly magazine.