China needs deep reform, not temporary fixes, to reanimate economy, former official says

A former senior official has expressed concern over the slow pace of China’s economic reforms, arguing the present combination of macroeconomic policies, monetary tweaks and expansionary fiscal moves will not be sufficient to revitalise the country’s growth prospects.

“The economy is the No 1 priority for the party and government, and matters have come to a point that only real reforms, not piecemeal adjustments, can secure future growth,” said Yang Weimin, a long-term aide to former economic tsar Liu He at the Office of the Central Financial and Economic Affairs Leading Group.

Yang served as deputy director of the office from 2011 to 2018, helping to draft the country’s development plans as well as the landmark 2013 reform document that called for letting the market play a decisive role in resource allocation.

Without meaningful growth via reforms, risks in finance and the property sector will precipitate

Yang Weimin

“Reforms are all about giving the market back its decisive role in allocating resources and curbing the government’s powers,” he said in an interview with mainland media outlet Caixin.

Yang, now deputy director general of the China Centre for International Economic Exchange, a government-affiliated think tank, said some hard reforms are yet to be carried out and others are so controversial that there are not yet any implementation plans for them. He added that, to the detriment of the market, government officials have become used to issuing directives to get things done amid administrative overreach.

The comments were one call for deeper reforms among many surfacing in the run-up to the third plenum of the Communist Party’s Central Committee, as China’s economy appears in need of a fresh motive force to entrench a comeback and shake off lingering issues like the property market and local government debt.

In the coming weekend, the chorus could get louder. More like-minded economists and former officials will gather in the southern island province of Hainan for this year’s China Reform Forum commemorating the 45th anniversary of China’s reform and opening-up policy.

There have been some positive changes in recent months. National gross domestic product (GDP) grew faster in the third quarter than the previous one and at a quicker rate than the year prior, making Beijing’s “around 5 per cent” growth goal for 2023 all but guaranteed.

But Yang said the rebound was a “shallow V-shaped one”, adding the prospects for next year continue to be haunted by a debt debacle trapping developers and local governments and faltering confidence from the private sector.

china needs deep reform not temporary fixes to reanimate economy former official says 1


China’s economy sees a resurgence in the third quarter, beating forecasts

China’s economy sees a resurgence in the third quarter, beating forecasts

“The biggest risks are to economic growth sustainability,” he said. “Because without meaningful growth via reforms, risks in finance and the property sector will precipitate.”

Reforms would ensure around 5 per cent annualised growth for the next 12 years, he argued, which would go far in making Beijing’s vision of bringing per-capita GDP to that of a moderately developed country by 2035 possible.

US think tank Rhodium Group, which has kept track of the progress made in fulfilling the 2013 document, noted in a report released in early October that a lack of major reforms could keep China’s economy in a weakened state next year. It argued structural threats to economic stability have never been greater.

“After so many setbacks, the market will pay greater attention to the underlying logic behind the Chinese economy and policies,” Beijing-based think tank Anbound wrote in a note last week. “That is, what road China will walk in the future and how it views ties with the rest of the world.”

The third plenum in 2013, it said, made clear the market should play a decisive role in resource allocation.

“Why is such a clear theory, disclosed 10 years ago, raising so many doubts? It’s a matter worth thinking about.”

‘New new normal’ warning for China’s economy as births fall and recovery falters

In spite of these questions, the country’s attitude toward economic problems has not been one of passivity. Beijing announced measures this summer to boost the confidence of private entrepreneurs, foreign investors and small businesses, and defuse financial risks in the property market.

The State Council, China’s cabinet headed by Premier Li Qiang, announced on Monday it would undertake an inspection tour of ministries and 16 provinces next month to identify deficiencies stifling private sector growth. The body emphasised the need for a nationwide market with equal access for all and unfettered flow of resources.

“Businesses and consumers need reassurances, reforms to convince them that as market entities they can have a say,” Yang said.

South China Morning Post

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