[Just as striking, this unflattering report card from a Chinese state think tank — published this month with little fanfare — faults misconceived “top-level design” in policies, as well as local bureaucrats and state managers reluctant to change.]
By Chris Buckley
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Outside an employment
center in Yiwu, China, in Zhejiang Province.
Credit Kevin Frayer/Getty
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BEIJING
— China’s ambitious plan to
revamp its economy has bogged down. Flabby state conglomerates have thwarted
attempts to whip them into commercial shape. Rules that treat millions of
city-dwelling rural migrants like second-class citizens have barely budged.
Such criticisms are common from skeptical
foreign economists who have long argued that President Xi Jinping’s efforts to
remake China’s economy and fix pernicious social problems have been too slow
and tepid.
But these withering findings on China’s
reforms come from a startling place: from within the government itself.
Just as striking, this unflattering report
card from a Chinese state think tank — published this month with little fanfare
— faults misconceived “top-level design” in policies, as well as local
bureaucrats and state managers reluctant to change.
It concludes: “Reform has to some extent
fallen into stalemate.”
The report brings into focus a sharpening
debate in China about economic priorities. Experts inside and outside China say
the country’s economy needs to be overhauled to continue growing fast enough to
provide jobs and higher incomes for its people.
Blunt public warnings from Chinese government
institutes are uncommon, and fly in the face of rosy official propaganda. But
some officials have also recently argued that reform efforts are moving too
slowly.
Recently, Mr. Xi also bristled with
impatience. Leading officials “must shoulder the burden of reforms and have the
courage to pound the table on key issues,” a policy group on reform led by Mr.
Xi said after a meeting on Friday, according to state media. “Those who don’t
shoulder responsibility, who shirk the burden and go through the motions, must
be held accountable.”
The report comes ahead of a Communist Party
leadership shake-up later this year that is likely to further solidify Mr. Xi’s
hold on power. While the report’s few mentions of Mr. Xi are laudatory, it may
add to arguments that he needs to move faster to fix economic problems.
Most prescriptions call for China to ease
reliance on exports and government spending, nurture its growing ranks of
middle-class consumers and let companies make decisions based on market forces
instead of political mandates. Toward many of those ends, in 2013 Mr. Xi
unveiled a set of 60 main reform goals.
The new report, a 217-page study titled “The
Reform Obstruction Phenomenon,” was written by researchers from the Economic
System and Management Institute of China’s National Development and Reform Commission,
which steers policy on industry, energy and many other sectors. The head of the
commission, He Lifeng, and his deputy, Liu He, both have ties to Mr. Xi. But
nothing in the report suggests that it had their blessing. The authors declined
to be interviewed.
Chinese leaders say they have struck the
right balance between maintaining robust economic growth and jobs and fixing
problems threatening long-term growth, such as excessive dependence on state
investment. Their catchphrase is “progress through stability.”
But critics argue that the policy changes
have slowed or foundered. The report, together with recent comments from a
couple of senior officials, indicates that some government insiders agree.
“There must be more political courage and
wisdom,” the report said. Despite the vision laid out in 2013, it said, “it’s
been quite difficult to reach consensus on specific reform measures, and there
have even been policies at odds with this general direction.”
The report credits the government with some progress,
including trimming red tape and abolishing the “one-child” policy that limited
most urban families. But the researchers found that changes announced at the
top often delivered less on the ground.
Efforts to redefine how different levels of
government spend and tax have become mired in bureaucratic feuding. Local
governments fear losing revenue from selling off land while they must pay for
growing demands for services. Personal income and property tax changes have
been discussed, “but ultimately it’s brought loud thunder but little rain.”
Repeated attempts to make hospital care less
expensive and more accessible have been frustrated by bureaucratic rivalries
and a failure to take on monopolistic hospitals and train more doctors, the
report said. The result, it said, is that “seeing a doctor has become even more
difficult.”
China’s hundreds of millions of migrant
workers, who leave their farms and villages for jobs in the cities, usually
don’t qualify for urban benefits like health care or education for their
children. Experts have called on China to ease up on the limits in order to
help turn migrant workers into bigger consumers. But many cities have created
point systems that still exclude them, the report said.
State companies — many of which suffer from
overcapacity and heavy debt, burdening the broader economy — have resisted
plans to rein them in while rival agencies have bickered over the direction of
change.
“Over all, progress in every reform of
state-owned firms has been quite sluggish,” it said.
Above all, the report said, local officials
have been besieged by conflicting demands to be both cautious and courageous,
and have become allergic to taking risks that could end their careers or even
land them in detention on charges of violating party discipline.
“It’s an inescapable objective fact that the
enthusiasm of many local governments to get things done has fallen greatly,”
said the report. “The lack of vigor in implementing reform plans has become the
most pressing difficulty in our country’s efforts to comprehensively deepen reform
across the board.”
But the authors do not blame the sluggishness
just on foot-dragging cadres and state executives, an impression sometimes left
by state-run news media reports.
Instead, they say that the “top-level design”
of promised reforms in state-owned business and other areas has been marred
from inception by confusion, vagueness and unrealistic or conflicting demands.
“Currently, a bigger reason why reforms in
some of our country’s key sectors have had difficulty moving forward may lie in
the thinking behind the top-level design of these reforms,” the report said.
It added, “the source of the obstructions lies
in the policy making.”
For example, the report said, a rule that
slashed the salaries of managers at state-owned companies backfired. “This
undermined the enthusiasm of central state-owned enterprises, so they had even
less vigor and dynamism,” it said.
Some senior officials have also been making
the case for more urgency in overhauling the economy.
China’s former finance minister, Lou Jiwei,
said at a forum in Beijing this month that governments were using debt
sustained by lax monetary and financial policies to delay making difficult
changes. He didn’t name China but did not exclude it, either.
“This has made people unwilling to endure the
pain of reform,” said Mr. Lou, who stepped down from the ministry in November
and now runs the state agency that manages social security funds.
Mr. Xi said in 2015 that his reforms faced
“obstruction,” and the party has said that his elevation to “core” leader — a
vague but powerful title he received last year — was intended to help push
through difficult economic changes.
But the researchers also urge the government
to become more open and consultative in drawing up policy — something that may
not come easily to Mr. Xi, who has centralized power and warned officials
against bending orders.
“Give local officials more room to explore
and experiment,” the report said. “Don’t settle scores with them even if their
efforts fail.”
Adam Wu in Beijing contributed research.
