Date
16 October 2017
Economic reforms designed to break the monopoly hold of state firms in industries such as electricity are at the center of debate within the ruling party. Photo: Bloomberg
Economic reforms designed to break the monopoly hold of state firms in industries such as electricity are at the center of debate within the ruling party. Photo: Bloomberg

WEEKENDER: Xi looks left and right to make history

History is in the making as China’s leader, Xi Jinping, prepares to assemble the country’s ruling Communist Party elite in Beijing to map out strategies at a session beginning Saturday. On the agenda are what are widely tipped to be bold reforms for a market-driven economy and political and ideological controls aimed at re-engineering economic growth and maintaining stability.

The central theme of the four-day, closed-door session will be whether Xi, the party’s general secretary, can pursue the right economic path while flying the leftist political banner.

Nearly one year after Xi led the seven-strong Standing Committee to face the mainland and overseas media at the Great Hall of the People, the question of Xi’s political and economic character remains a subject of varied interpretations. If the choices are between seeing Xi as a reformist and a conservative, the question will go unanswered at the end of the session, officially known as the third plenum of the 18th Communist Party Central Committee.

This is simply because the first year of Xi’s leadership has been marked by mixed signals.

On the economic front, the launch of the Shanghai Pilot Free Trade Zone is a major step towards greater liberalization of China’s financial and monetary policy. The zone is widely expected to be a test site for deregulation of interest and exchange rates and liberalization of banking licenses. If these experiments succeed — as they ought to — the policy changes will be adopted in other parts of the country.

A preview of a possible master plan for China’s next phase of “deepening reform” was given last week when the State Council’s Development Research Center unveiled its “Plan 383”.

Although the blueprint contains certain drastic changes that may not be politically viable now given the resistance from vested interests, it does reflect a strong body of opinion within the central authorities in favor of overhauls of all-important systems such as land development.

There are good reasons to believe, however, that Xi and China’s second-in-command, Premier Li Keqiang, are serious about remaking the economy amid clear signs that it will not grow in a steady, balanced and healthy manner if the bottlenecks to growth are allowed to persist.

Analysts say the Central Committee looks set to endorse broad policy objectives to loosen government controls over capital flows, interest rates, natural resources, the leasing and development of farmland and the settlement of people from villages to towns and cities.

Although details of the changes are not likely to be rolled out at or immediately after the plenum, the gathering is set to reaffirm the direction of economic reform towards further liberalization.

There are other signs, however, that Xi has no appetite for loosening government controls on political and ideological matters.

It is hardly coincidental that Xi made a high-profile inspection of a People’s Liberation Army base this week on the eve of the third plenum during which he reiterated the “absolute leadership” of the party over the troops. In an internal speech in August that was released online this week, he vowed to tighten the official grip over the internet to prevent it posing a threat to the party. His political sloganeering was reminiscent of the late chairman Mao Zedong and stoked fear of a revival of leftist thinking.

Some suggest that Xi is trying to take a political left turn to dilute opposition from conservatives opposed to his economic right leanings.

The tussle between the right and the left, conservatives and reformists, has been a persistent theme in Chinese politics since the Communist Party took power in 1949.

If political ideology and dogma were the dividing lines in the past between the reformist right and the conservatives, economic interests – or more accurately, the pace and scope of reform — have become so in recent years. The fault line now runs through the desire for bolder market-oriented reform aimed at breaking the monopoly of state-run firms in a range of sectors, including banking, energy, electricity and telecommunications.

It is therefore an interesting coincidence that another state firm has emerged as the latest target of the Xi-led anti-corruption drive. On Thursday, it was revealed that an executive director of shipping group China COSCO was under investigation by a “relevant regulatory body.”

Earlier, the party’s anti-graft team began investigating several senior executives at another state-run company, PetroChina.

The ongoing anti-corruption crackdown against state firms has been interpreted as part of Xi’s tactic to undercut the power of the conservative camp while boosting his own authority.

Quoting unnamed sources, Reuters news agency reported on Thursday that Xi was unable to push through some of his decisions because of resistance from some powerful forces within the party, citing Xi’s support for scrapping the labor camp system as an example.

Aside from setting the course of deepening economic reform, the upcoming plenum will be remembered for its special significance in history if it marks a milestone in Xi’s move to cement his power and authority as China’s new architect of reform.

Chris Yeung is deputy chief editor of the Hong Kong Economic Journal. This column appears every Friday.

– Contact the writer at [email protected]

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He was editor-at-large at the South China Morning Post and, more recently, deputy chief editor of the Hong Kong Economic Journal.

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