Boao Edition 2013: China’s Reform Agenda

 

In three days of debate, across countless official sessions, press conferences, interviews and private meetings, the delegates of the Boao Forum for Asia 2013 (BFA) have addressed many thorny problems. But perhaps the main concern was the issue of Chinese reform.

 

The Global Times held the latest edition of its Global Times Leader RoundTable, in cooperation with CCTV News, to seek predictions on the path the Chinese reform agenda will take. CCTV host Yang Rui, who moderated proceedings, opened up the debate by pointing out that after decades of growth China had seen a
string of disappointments last year. This had exposed vulnerabilities and planted seeds of doubt as to whether
the country was truly capable of meeting the challenges in ensuring its political and economic reform. He then turned to the panel to discuss the major challenges awaiting China’s new leadership.

For former US Trade Representative Charlene Barshefsky, there are two major challenges facing China. First, the gains seen from the first generation of reforms and from rural-urban migration have largely dissipated. New economic models of growth now sorely need to be put in place. However, the second challenge is the process by which the Standing Committee of the Political Bureau of the CPC Central Committee makes decisions. In Barshefsky’s eyes, this process must become far more effective if reforms are truly to take place. Wang Yijiang, professor of human resource management and economics at Cheung Kong Graduate School of Business, picked up on Barshefsky’s statement and asked how the Chinese government could improve their decision-making process and how the people could have their views heard within this process.

Justin Lin Yifu, former chief economist for the World Bank, said the government has recognized the need to engage the public in the decision-making process. New social media such as microblogs are part of that and Lin
expressed his hope that the government would use this to push ahead with reform in a progressive way.

 

LSE professor and author Martin Jacques pointed out that China’s debates on foreign policy were far more interesting than those in the UK as British people feel powerless and see little meaningful debate. However, Chinese assets such as microblogs have empowered the Chinese public.

 

Fan Gang, director of China’s National Economic Research Institute, made the point that fair competition must be ensured for everyone. The steps to ensure this must include breaking the monopolies of SOEs and shackling banks’ excessive power. This would allow for a deeper pool of talent to help generate new ideas, put these into practice and help China move forward into the next stage of development. Jacques also said that solving deep-seated inequality was of paramount importance, but Yang asked whether Fan’s desire to see the power of SOEs and banks reined in was too optimistic.

 

Barshefsky noted that any achievements would simply depend on the scope and extent of reform.She stated confidently that if the reforms are significant enough, China can continue its 8 percent growth for decades to come, but that to do so would prove complicated and controversial. The subject of continued 8 percent annual GDP growth for China proved a divisive one.

 

Fan proved the most optimistic, saying that the resources were there for China to use, and that all that remained was how to use them and do so efficiently. He echoed Barshefsky in saying that China had the potential to grow at 8 percent for 20-30 years to come but went further in saying that itneeded to do so. Fan pointed out that 35 percent of Chinese people are still living as farmers and that the only way to relocate them was to create jobs for them in cities, and that continued fast growth was crucial to seeing this process through.

 

 

Lawrence Brahm, a political economist and author of China’s Century, challenged Fan on his 8 percent prediction, asking why this figure was still seen as iron-clad since former Premier Zhu Rongji set it as a target in 1998. For Brahm, the real priority was for China to move from quantitative to qualitative growth, and make such targets less important. Fan asked whether China would be happy with 3 percent growth, and questioned whether a slower rate would allow China to catch up with the developed world in 30 years.

 

He said that quantity matters as much as quality since 8 percent growth still only translates to about 5 million new jobs a year for migrant workers. Brahm countered by saying that blind growth would only bring inflation, bankruptcy and unemployment, adding that China was suffering from inefficient growth. Barshefsky stepped in to move the debate toward the composition of GDP in China. With a shrinking workforce, the output and export
model of the Chinese economy is no longer going to be sustainable, she said.

 

The percentage of GDP accounted for by consumption is currently only 35 percent, still very low and this must be enhanced to achieve the next stage of development, Barshefsky noted. Perhaps the largest obstacle remains the hukou, the household registration system, which locks out 300 million people from being consumers and fully productive members of the labor pool. Their children will also be disenfranchised,Barshefsky warned. It was Jacques who struck perhaps the most penetrating note of caution, saying that anyone who expects a significant change in ratios of investment to consumption in China will be disappointed.

 

For Jacques, this is going to take a long time. Whether or not 8 percent growth is realistic will simply depend on how China reacts to its current problems. The last decade brought its share of great challenges and achievements, said Jacques, but the current income disparity must be solved for further progress to be made.