Reform in China: Crossing the River on a Bridge of Slogans
December 19, 2012
by DANIEL POON
Stay a length of time in China, or study some Chinese, and you quickly learn the indispensable role proverbs and idioms play in the language. This certainly isn’t something unique to Chinese by any means, but it may be a key feature of the country’s policy-making processes you won’t see anywhere else.
For over 30 years, the Communist Party of China could be said to have one overarching idiom — “crossing the river by feeling the stones” — that embodied its gradual and selective approach to economic reforms. With the 18th Party Congress and the composition of the top leaders finalized, the burning question now is whether the new team will stick with this old saying, or coin a bold new one for the times.
The signals have been mixed, but the post-Mao Party has been particularly adept at finding its own way to blend continuity with change.
Many foreign commentators have speculated about President Xi Jinping’s possible inclination toward a more liberal reform agenda. If the speculation is accurate, we’ve yet to see any hints of a new token Party jingle to foreshadow a sudden policy shift. Indeed, just weeks after becoming the new Communist Party leader and making his first official trip outside Beijing to Shenzhen and Guangzhou, two cities in southern Guangdong province, Xi is already borrowing from the reform path of former leader Deng Xiaoping.
That China’s so-called Fifth Generation leaders are harking back symbolically to ghosts of China’s reform past could be telling. At this critical juncture in China’s catch-up modernization, such decisions will have enormous significance for the changing contours of China Inc.’s growth model, its domestic performance, and the weight of China in global affairs for the decade to come and beyond.
To be sure, all political slogans are works in progress, but they are still used as handy devices to publicly signal a new policy direction, or to lay the ideological groundwork for deeper economic, social and political reforms. For instance, former President Hu Jintao’s first term in 2003 coincided with the inception of China’s “peaceful rise” concept, which was later complemented with terms like “scientific development” and “harmonious society” as Chinese leaders sought to counter the ‘China-threat’ discourse in foreign capitals, while also stressing the quality of growth after decades of mainly prioritizing its quantity.
A conference hosted by the China Institute for Reform and Development (CIRD) in Haikou the week before last month’s Party Congress squarely focused on these issues and China’s future growth path, as well as the challenges facing other emerging economies. Organized in partnership with the German Development Cooperation (GIZ) and the UN Development Programme (UNDP), the goal was to promote a wider degree of policy discussion on what many see as a watershed moment — where China will rely more on the domestic market to drive slower, but more sustainable, growth.
Chang Xiuze, a deputy director at a research institute under the National Development and Reform Commission (NDRC), perhaps described China’s reform predicament best by suggesting that having achieved relative success over three decades, support for more reform is splintering. While some want to take steps forward in “crossing the river”, others are clamouring for a stand-still in the reform process for fear of pushing too many changes too quickly. Other members of the old guard are calling for backward steps to return to a kind of Communist orthodoxy.
Mr. Chang’s own reformist impulses became apparent when he argued that “you can’t cross the same river twice”, and then asked (rhetorically), “How long have we spent feeling the stones?” Such views were echoed by others, such as Chi Fulin, President of CIRD, who advocated a transformation in the structure of national investment by actively expanding the purchasing power of household consumption. According to Mr. Chi, promoting consumption-led development and speeding up urbanization could support an economic growth rate of 7 to 8 per cent for many years to come.
These sentiments run parallel to the sweeping reform program proposed by a joint research report by the Development Research Centre (DRC) of the State Council and the World Bank, released in February of this year. For China to move from applying technologies from abroad to creating new technologies, the report calls for the fundamental restructuring of the role of the state vis-à-vis the private sector and allowing greater space for competition and market decisions to allocate resources in land, labour and finance.
To achieve a “modern, harmonious, and creative high-income society” by 2030, the report argues for a shift to a consumption-led growth model and a dismantling of policy measures used to tilt the Chinese economy towards high rates of investment.
To conclude, however, that there is an emerging consensus among government policy-makers would be an exaggeration. For example, former World Bank chief economist Justin Lin dismisses the notion of a straight-line transition to consumption-led growth as “bad International Monetary Fund policy advice”. He suggests that China can and needs to continue with its high investment policy for some time as it continues to play catch-up with advanced industrialized countries.
In a recent interview in Caijing, a Beijing financial magazine, Mr. Lin asserts that market mechanisms are important, but “the market is by no means omnipotent”, which he offers as justification for an active guiding role for the state, particularly in industrial upgrading.
The lack of a standalone Xi-sponsored political idiom or slogan may perhaps reflect the difficulties thus far in forging consensus among a diversity of domestic views on China’s future. So far, Xi’s mention of the “China dream” and emphasis on the “great revival of the Chinese nation” signal nationalist affinities rather than a clear economic agenda.
The closest thing available may be what Mr. Lin conveniently calls development economics “version 3.0”, a hybrid of Washington Consensus (version 2.0) and state-planning (version 1.0) policy frameworks — the product of China’s own decades-long exercise of calibrating continuity with necessary change.