Stuck midstream in the river of reform

Economic liberalisation requires more than taming administrative excess and allowing the private sector to assume some state functions

PUBLISHED : Monday, 16 September, 2013, 12:00am
UPDATED : Monday, 16 September, 2013, 5:19am

China's late paramount leader Deng Xiaoping once famously compared undertaking reforms to "crossing the river by feeling the stones".

The folksy phrase encapsulated the magnitude of challenges the nation initially faced as it began the painful transition from a planned economy to one driven more by market forces.

But after more than three decades of double-digit economic growth that propelled China's economy to become the world's second-largest, mainlanders have grown weary of Deng's famous phrase.

As one popular joke has it, most people long ago succeeded in crossing the river but it's the officials who are lagging behind, feeling the stones. Indeed, the joke sums up the biggest obstacle China faces today in pushing ahead with economic transformation - the bloated bureaucracy, the officials themselves.

Leaders decided to end political chaos and focus on economic development in December, 1978, at the third plenum of the Central Committee of the Communist Party's 11th congress. Since then, the leadership has used the third plenum of the ensuing congresses to set key economic guidelines to power the country forward.

In November, leaders will chair the third plenum of the 18th congress, from which the international community will be seeking clear signals of how China will steer its economic development for the next 10 years. With the nation at a crossroads, the significance of this meeting cannot be underestimated.

In the past, the government's role at the centre of the economy and its massive spending helped to buffer China against wider trends, allowing it to emerge largely unscathed from the Asian financial crisis in 1997 and the global one in 2008.

Influential liberal economist Wu Jinglian has laid out two directions the nation can take from here. In one, China continues reforms and restricts the role of the government in pursuit of a market economy grounded in the rule of law; in the other, an even greater empowered bureaucracy moves the nation into the troubled waters of elite-run capitalism.

Pro-reform analysts believe the upcoming meeting is the last major window to undertake serious change and put the country's economy onto a more sustainable path. They have echoed Wu's comments that the government must streamline itself, delegate power and share more wealth with ordinary mainlanders, as well as make a major push for the rule of law.

So it is interesting to learn some top officials have dropped strong hints that one of the key topics for the November session will be how to reduce the government's hand in the economy.

Last week, Premier Li Keqiang told foreign business leaders at the World Economic Forum meeting in Dalian the crux of the country's economic restructuring was to allow market forces to play a bigger role. Reducing state control in the allocation of resources will be of particular interest at the November session, Zhang Xiaoqiang, a deputy minister of the National Development and Reform Commission, has said.

In fact, Li's cabinet has already taken a few small steps in this direction - the recent decision, for example, to allow the private sector to develop certain social services such as elderly care, to one day allow the government to purchase them instead of manage them. But many mainlanders can be forgiven for being sceptical as previous efforts to shrink the role of the government and lessen its meddling in businesses didn't go far.

Even those state-owned enterprises that have benefited from a monopoly in strategic sectors and easier access to loans have complained about too much government influence.

Li Rongrong, the former top official in charge of the mainland's leading 100 state-owned conglomerates, told forum attendees last week his biggest concern was the state's excessive meddling had left the firms at a loss as to what to do.

But economic liberalisation requires more than just cutting down on the number of administrative approvals and allowing the private sector to take over certain functions from the government - as some mainland officials have argued.

Instead, it demands comprehensive reforms that push government transparency and accountability and the rule of law. More importantly, political reforms are needed to make Beijing truly beholden to the people, whose rights, such as freedom of expression and the ability to monitor the government, should be guaranteed and upheld.

But the crackdown on so-called rumour-mongering on the internet seems to suggest otherwise. This shows that officials are still reluctant to cross the river, despite repeated promises. Meanwhile, the nation's citizens standing on the other bank are growing increasingly impatient.