By Ambrose Evans-Pritchard
Chinese leader Xi Jinping is to unveil sweeping economic reforms at the Party's Third Plenum next month, with an assault on the state behemoths and the Party patronage machine (really?).
Yet he also wants to tighten the grip of the one-party, one-ideology, authoritarian state.
Here's a good account this morning from Wiang Xiangwei at the South China Morning Post.
The Development Research Centre has published its road map of reform measures.
It is being taken very seriously since it is written by none other than reformer Liu Wei and by President Xi's right-hand man on economic affairs, Liu He.
The problem is that these proposals skirt over/contradict the core finding of a joint DRC-World Bank report last year.
It said China would not succeed in jumping to the next stage of economic development and would languish in the the "middle income trap" unless it embraces the whole package of modern free thinking.
It did not quite say democracy, but that is what it meant.
The 2012 report warned that China risks hitting an invisible ceiling just like Latin America and the Middle East after their catch-up growth spurts in the 1960s and 1970s, failing to join the rarer "breakout" states such as Japan and Korea.
"If countries cannot increase productivity through innovation, they find themselves trapped. China does not have to endure this fate," it said.
All the arguments are by now well known.
China is running out of cheap labour from the countryside.
The DRC report said it faces a "wrenching demographic change" as the old-age dependency ratio doubles to north European levels within 20 years.
It then went on to say that China has picked the low-hanging fruit of cheap-labour, investment-led, export-led, catch-up growth.
It can longer rely on imported technology to keep growth humming. (It has averaged just under 10pc since Deng Xiaoping began to throw open the economy in 1978.)
"China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for," it said.
As I reported at the time, the DRC said China’s growth will slow to 7pc later this decade and 5pc by the late 2020s even if China embraces deep reform.
Stagnation lies in wait if it clings to the dirigiste model.
"The forces supporting China’s continued rapid progress are gradually fading. The government’s dominance in key sectors, while earlier an advantage, is in the future likely to act as a constraint on creativity," it said. "The role of the private sector is critical because innovation at the technology frontier is quite different in nature from catching up technologically. It is not something that can be achieved through government planning."
Xi Jinping seems to think he can dispense with half of this, cherry-picking the bits of reform that he thinks will generate growth while clamping down on the press, the internet, free science, and reviving Maoist "self-criticism" sessions to tighten control over the party.
The Leninist reflexes are plain to see.
This week's treatment of the Guangzhou Express journalist – made to utter absurdities in a staged-TV confession with police watching, and the judicial process be damned – has Cultural Revolution all over it.
Surely something must give: either the Party gives up more social and political control to let that "creativity" flourish; or the reforms will degenerate into meaningless incantations and rhetoric, leaving China in the middle income trap.
We are at the moment when China has to decide.
Watch the Third Plenum very closely.
It is being taken very seriously since it is written by none other than reformer Liu Wei and by President Xi's right-hand man on economic affairs, Liu He.
The problem is that these proposals skirt over/contradict the core finding of a joint DRC-World Bank report last year.
It said China would not succeed in jumping to the next stage of economic development and would languish in the the "middle income trap" unless it embraces the whole package of modern free thinking.
It did not quite say democracy, but that is what it meant.
The 2012 report warned that China risks hitting an invisible ceiling just like Latin America and the Middle East after their catch-up growth spurts in the 1960s and 1970s, failing to join the rarer "breakout" states such as Japan and Korea.
"If countries cannot increase productivity through innovation, they find themselves trapped. China does not have to endure this fate," it said.
All the arguments are by now well known.
China is running out of cheap labour from the countryside.
The DRC report said it faces a "wrenching demographic change" as the old-age dependency ratio doubles to north European levels within 20 years.
It then went on to say that China has picked the low-hanging fruit of cheap-labour, investment-led, export-led, catch-up growth.
It can longer rely on imported technology to keep growth humming. (It has averaged just under 10pc since Deng Xiaoping began to throw open the economy in 1978.)
"China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for," it said.
As I reported at the time, the DRC said China’s growth will slow to 7pc later this decade and 5pc by the late 2020s even if China embraces deep reform.
Stagnation lies in wait if it clings to the dirigiste model.
"The forces supporting China’s continued rapid progress are gradually fading. The government’s dominance in key sectors, while earlier an advantage, is in the future likely to act as a constraint on creativity," it said. "The role of the private sector is critical because innovation at the technology frontier is quite different in nature from catching up technologically. It is not something that can be achieved through government planning."
Xi Jinping seems to think he can dispense with half of this, cherry-picking the bits of reform that he thinks will generate growth while clamping down on the press, the internet, free science, and reviving Maoist "self-criticism" sessions to tighten control over the party.
The Leninist reflexes are plain to see.
This week's treatment of the Guangzhou Express journalist – made to utter absurdities in a staged-TV confession with police watching, and the judicial process be damned – has Cultural Revolution all over it.
Surely something must give: either the Party gives up more social and political control to let that "creativity" flourish; or the reforms will degenerate into meaningless incantations and rhetoric, leaving China in the middle income trap.
We are at the moment when China has to decide.
Watch the Third Plenum very closely.
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