Five months after Chinese scholars and officials quietly grumbled about Xi Jinping’s unprecedented political power grab this year, an unusual and relatively open debate has emerged about the nature and direction of China’s economic reform programme.
Unlike the largely anonymous summer carping about Mr Xi’s elimination of term limits in March — which positioned him to be president for life if he chooses — in recent weeks economists have argued publicly whether the president’s rapid centralisation of power over the past six years would enhance or constrict China’s next phase of development.
Mr Xi will wade into the middle of this debate on Tuesday when he addresses the nation on the 40th anniversary of China’s era of “reform and opening”. Deng Xiaoping, the country’s former “paramount ruler”, is credited with launching the economic reforms that powered its remarkable rise at a meeting of the Communist party’s Central Committee that opened on December 18 1978.
“Chinese intellectuals are giving voice to enduring disagreements about substantive policy matters such as the balance of the state and market in the economy,” said Julian Gewirtz, a Harvard-based scholar and author of a book about the early years of Deng’s reforms. The fundamental question at the heart of this debate, he added, was whether “China developed because of the persistent rule of the state in the marketising economy — or despite that?”
Mr Xi appears to believe the former proposition — that a unique “China model” characterised by a powerful party-state has been the foundation of the country’s economic success over the past 40 years.
Speaking at the October 2017 congress that marked the beginning of his second five-year term as party general secretary, Mr Xi said that China’s experience “offered a new option for countries that want to speed up their development while preserving their independence”. He added: “Government, military, society and schools — north, south, east, west and centre — the party is ruler of all.”
Despite the most repressive political climate in Beijing since the 1989 Tiananmen Square massacre put Deng’s reforms on hold for three years, an increasing number of Chinese economists have dared to disagree openly with policies associated with Mr Xi.
Most have, however, been careful not to criticise the president directly. Their voices are also useful for powerful officials, such as Vice Premier Liu He, who do worry about market distortions and trade frictions caused by powerful state-owned enterprises and rigid industrial polices
“China’s rapid growth over the past 40 years has come from marketisation, entrepreneurship and technological [learning] from the west rather than the so-called ‘China model’,” Zhang Weiying, an economics professor at Peking University said in a speech in October.
“Emphasising a China model will lead to strengthened state-owned enterprises, expanded government power and reliance on industrial policies, reversing the reform process. The economy will eventually descend into stagnation,” he added.
Copies of Mr Zhang’s speech were posted online only to be taken down by censors. Other liberal economists were last month prevented from travelling to a Harvard forum about Chinese economic reform.
But the debate has nonetheless continued over recent weeks in reform-anniversary seminars held across Beijing’s university district. At one such event last week Justin Yifu Lin, a Peking University professor and China model enthusiast, advised African economists present that “[in] a hostile environment, it’s better to follow your own economic development policies” rather than western ones.
But Xiaodong Zhu from the University of Toronto countered that “it’s dangerous for professors to admire governments too much — our African friends should be careful”.
Edmund Phelps, a Columbia professor and 2006 Nobel Prize winner for economics, added: “China needs broad innovation from ordinary people and the government can’t help much with that.”
Such arguments have seemingly been bolstered by slower economic growth in China and Donald Trump’s punitive tariffs on Chinese exports, which have depressed market sentiment and business confidence. As China’s stock markets declined a further 8 per cent over the past three months, falling share prices forced many private sector companies to sell shares pledged as collateral against state bank loans.
The shares were often snapped up by state-owned rivals or government-controlled lenders, adding to the malaise now hanging over China’s private sector.
Many Chinese economists now hope that Mr Xi will use Tuesday’s anniversary to finally embrace a vision of reform closer to that originally articulated by Deng. But similar hopes were dashed at two equally hyped speeches this year — at the Chinese government’s Boao Forum in April and its “inaugural export fair” in October.
If Mr Xi delivers another address that is long on rhetoric and short on substance, chances are the economic debate will quickly fade away as the party braces itself for a series of sensitive commemorations next year, including the 30th anniversary of Tiananmen.
“Experts who voice their worries about the enormous challenges facing China’s economy are taking a significant risk,” says Mr Gewirtz. “We should pay attention to their warnings. [Otherwise] China’s leadership may make mistakes that more vigorous and open debate could have helped to avoid.”
Additional reporting by Xinning Liu
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