Return to state planning or boost for market’s role: which interpretation of China’s supply-side economic reform is right?
Xi Jinping is talking about a very different model than the one pursued by Reagan and Thatcher
President Xi Jinping’s hallmark “supply-side reform” has been confusing and controversial since its advent in November, with some seeing it as a copy of Western liberal economic policy and others viewing it as a return to Stalinist state planning.
That is why state media and Xi himself had been at pains to correct “confusion” and “misunderstanding”, analysts said.
On one hand, the government is pushing for capacity cuts. On the other, it is still handing out subsidies to steel producers
Western-style supply-side economic theory was developed by economists at the University of Chicago in the 1970s and implemented by US president Ronald Reagan and British prime minister Margaret Thatcher in the 1980s. A response to the heavy state intervention called for by Keynesian economic theory, it advocated the deregulation of economic activities, tax cuts and the privatisation of state-owned enterprises.
Xi’s version has become a catchphrase in numerous articles published by mainland China’s state-controlled media and it has been given prominence at recent meetings of economic policymakers.
However, its thrust is less clear, with some hoping it signals the revival of stalled market reform, and others suspecting it will strengthen the government’s hand in the economy.
