China’s plan for economic self-reliance to offset rising geopolitical risk ‘requires structural reform’
- President Xi Jinping has in recent weeks called for greater economic self-reliance to offset global uncertainty
- But economists say Beijing needs to embark on deep – and perhaps unpalatable – reform for this to work
China’s plan to focus more on its huge domestic market to drive the economy amid rising protectionism and geopolitical risk will achieve little without further reform, economists say.
Faced with headwinds from the coronavirus pandemic and rising China-US tensions, Xi has said China needs to prepare itself against the “reverse currents” of anti-globalisation.
But shifting focus to the domestic market requires an increase in Chinese consumption and investment from the private sector. And to turn this into a reality, Beijing needs to overcome deep-rooted obstacles, from the unfair distribution of wealth to the large presence of the state in the economy, according to analysts.
After more than 10 years of trying, it’s clear that to pull it off will require more than another exhortation
Michael Pettis, a professor of finance at Peking University, said the idea of creating a vibrant domestic consumer market required changes the central government was reluctant to carry out.
“After more than 10 years of trying, it’s clear that to pull it off will require more than another exhortation,” Pettis said. “What Beijing hasn’t wanted to recognise is that this kind of reorientation of the economy requires a structural, and probably political, transformation of economic institutions, including large wealth transfers.”