Beijing’s backsliding on market reforms is sparking a viral debate on the economic agenda

Beijing's backsliding on market reforms is sparking a viral debate on the economic agenda
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Deng Xiaoping brought capitalism to Communist China with his famous aphorism: “Let some get rich first.” After four decades, Xi Jinping decides “how rich is too rich”?

demon years of growth in investment and exports are set to come to an abrupt end. The slowdown is exacerbated by the controversial zero-Covid policy, the snowballing property sector crisis and the Biden administration’s stranglehold on access to vital technologies.

As growth slows, expectations are growing that Xi will increase his focus on redistribution to improve living standards for the majority of the country’s 1.4 billion people.

In his opening address to the Chinese Communist Party’s five-year congress on Sunday, Xi vowed to rein in the “means of wealth accumulation” and “excessive incomes” and blasted the party elite for “hedonism” and “extravagance”.

The remarks reignited sensitive debate over the wisdom of Xi’s economic policies and the uneasy relationship between the ruling party and the businesses that fuel growth in the world’s second-largest economy.

Xi Jinping arrives for the opening ceremony of the Chinese Communist Party congress on Sunday
Xi Jinping is about to begin an unprecedented third term as China’s leader © Mark Schiefelbein/AP

Controversial questions include whether China is pursuing a “people-oriented economy,” meaning a state-run, self-reliant and patriotic economy, while Xi’s broad vision of “common prosperity” aims to reduce social inequality and overcome cultural handicaps. such as curbing big business and the excesses of China’s ultra-wealthy.

“Can China’s problem be solved only by relying on theories imported from the West? I’m afraid not. But can only Chinese theories solve China’s problems? This will be a bigger mistake,” said Wang Xiaolu, deputy director of the National Economic Research Institute, an independent Beijing-based think tank, in a recent interview with Chinese financial media.

“People-oriented” and “people first” appear more frequently in official statements, including those of the People’s Bank of China and the finance ministry. This phrase, which took root among Chinese scholars and the party leadership in the early 1950s, describes a development path different from that of Western capitalist systems.

A few weeks before the party congress, Wen Tiejun, 71, an agricultural economist at Renmin University, promoted the concept. Wen proposed that China’s economy should serve sovereignty, develop independently, and be promoted by state-led conglomerates.

Transcripts of Wen’s remarks were widely circulated through WeChat messaging groups, China’s largest social media platform, until censors removed the content days before the congress.

However, the comments fueled concern that market-oriented reforms may be shelved as Xi embarks on a job. An unprecedented third term as China’s leader.

“Marketing is an inevitable process of human development. We should value technological wealth, ideological wealth and institutional wealth shared among mankind, but not resist it,” Wang said.

Xiang Songzuo, head of the Shenzhen-based Greater Bay Area Financial Research Institute, said Wen’s promotion of a “people-oriented” theory “doesn’t match the historical development of other countries, nor China’s reform experience.” opening for the last 40 years”.

He said of Wen’s theory: “It’s really deceiving people in the name of the people.

On Sunday, Xi reaffirmed that economic development is a priority for China. But he also targeted security and “people first” agenda.

He reiterated that both public and private business were vital and that the party should show “unwavering” support for the latter, striking a more balanced tone than many analysts expected.

Still, his use of the phrase “people-oriented” caused consternation among reformers as concerns grew over the massive economic challenges facing the president and his economic planners.

Xiang warned that the popularity of Wen’s statement reflected a “psychosocial imbalance” caused by “hatred of the rich” between different social camps.

“Respect for individual rights, especially private property rights, has not yet been formed in the nation. . . The more difficulties China’s economy faces, the more courage we must use to promote “reform and opening up,” he said, referring to Deng’s landmark policies that transformed China.

Among the more important areas of the party congress are Xi’s plans to strengthen industrial policy with more financial support and subsidies, to become self-sufficient. focuses more on national security and the centralization of the role of the state in the economy, analyzed by Natixis.

“This suggests that the role of private companies may be declining,” said Alicia Garcia Herrero, the French bank’s chief Asia-Pacific economist. He added that state-owned companies should also do more and earn less to fulfill their social responsibilities.

Christopher Marquis, an expert on the Chinese economy at Cambridge Judge Business School, said the “mechanisms” to achieve wealth distribution should be carefully considered so that “the highly productive and innovative part of the economy is not killed by wealth.” redistribution”.

“The principle of trying to spread China’s economic success over the past 40 years to less developed cities and rural areas is a good strategy in theory,” Marquis added. “But the way I see it implemented, it’s very heavily against the wealthy.”

Additional reporting by William Langley in Hong Kong

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