Xi Jinping and China's new era of reform

Xi Jinping has announced a new era. It won’t be an era of reform in the Western sense

China

For years, supporters of Xi Jinping have urged people who complain about the country’s slow progress ­towards market reform to be patient. Change is being stifled by the bureaucracy, they say. Just wait until Mr Xi gets his people into top jobs. Then you’ll see.

Now that the Communist Party’s congress of October is over, 2018 will be the year that tests the proposition. At the congress (the most important event in China’s political calendar, which takes place only every five years), Mr Xi declared that his country had entered a new era. The first stage of this, he said, would ensure that “socialist modernisation would be basically realised” by 2025. There would be a new round of economic reforms. And to underpin the change, Mr Xi has secured himself an exceptional degree of personal authority.

In 2018 he will bestride the apparatus of government like a colossus. Even before the congress he was Communist Party chief, president, commander-in-chief, head of the security council and chairman of many influential, shadowy “leading small groups”, which set policy on everything from Taiwan to the economy. After it he has a majority of allies and dependents on the ­Central Committee—the 400 or so highest-ranking party members. The inner sanctum of power, the Politburo’s seven-member standing committee, is largely of his choosing, as are all the leaders of China’s provinces and most of the top brass of the armed forces. 

To cap it all, the congress conferred on him an extraordinary level of ideological authority by revising the party’s constitution to include a reference to “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era”. This is the first time a living leader has been written into the party’s core document since Mao Zedong. No one can have more authority. It even makes the question of who succeeds Mr Xi moot (in theory, his term as ­president and party leader runs only till 2022), because, so long as he is alive, to oppose him is be to oppose the party. 

Mr Xi constantly complains that his reform agenda is not being implemented properly because people lower down the bureaucracy adopt the Chinese at­titude that “whatever policy the government adopts, we will deal with it” (that is, we will twist it to serve our interests). In 2018, given his new powers and considering how much lip service he has always devoted to economic reform, it seems reasonable to expect a new round of ­economic changes in 2018. The question is, what kind?

In 2013 Mr Xi promised to give the market “a dec­isive role” in the economy and approved a list of 60 or so reforms to implement that idea. At the congress he returned to the theme of “ensuring the market-based allocation of resources”. A burst of this sort of liberalisation cannot be entirely ruled out. But in the past three years the politics of reform has moved strongly against the idea. 

Almost everything Mr Xi has done in the economic sphere—­as in the media, military and most other areas of life—has boosted the power of the Communist Party. Party groups within state-owned enterprises (SOEs), for example, have been encouraged to demand a say in investment decisions. Economic growth depends heavily on local-government (meaning party) financing of urban infrastructure. The party is talking about acquiring stakes in China’s internet giants—Alibaba, Tencent and Weibo­—in 2018. Gen­uine market reform would therefore reduce the party’s ­influence, and in the short term might hurt growth. 

China reformed the SOEs in 2017 but the measure stopped short of allowing private firms to compete directly with them in more sectors. This contradicts the claim that Mr Xi’s pro-market instincts are being ­stifled by others. In this case, he himself pushed through changes that protected insiders. The idea that he will be freed by his success in the congress to do what he could not do before looks dubious. 

Those expecting radical liberalisation, then, will be disappointed. Leaders do not tend to switch from being a reflexive statist in their first term into a free-marketeer in the second. A new round of “reform with ­Chinese characteristics” will therefore mean more party control over companies, more state-directed industrial subsidies, the merger and transformation of SOEs into national champions and tighter supervision of the online economy. Whether this is good for the economy as a whole in the coming decade is doubtful. But Mr 
Xi thinks it will be good for the party—and that is 
his priority.

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