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5 White Paper on the Business Environment in China
1.8 Suggestions
Continue with Reform – Urgently China’s reform, said Mr. Tao, should start by breaking up
the local governments’ monopoly of the land market and
IT IS NOW obvious to any China-watcher that the country allowing farmers to develop land on their own. at would
under President Xi Jinping’s leadership is continuing its take local governments out of the real estate game and reduce
ambitious reform program. e question most pundits are their incentive to support the status quo. He also proposed
pondering is, are these reforms going to be su cient at this that private players should be allowed a stake in monopoly
time in order for President Xi’s administration to achieve its industries such as telecoms and utilities to encourage
stated goals by 2020, or, in view of the sharp slowing down of competition. But the crucial point Mr. Tao makes is “it’s
China’s economic engine, will it be a case of too little, too late? the monopoly power of local governments and SOEs that
gives them an e ective veto on crucial economic reforms.
As early as February 2012, the Wall Street Journal had Breaking the monopolies breaks the power of the anti-reform
previewed “China 2030”, a report co-authored by the World coalition.” is, according to Mr. Tao, would pave the way
Bank and the Development Research Center (DRC)—a to other necessary reforms like market-based interest rates, a
Chinese government think tank that reports to the State
Council and which counts among its members, Liu He, oating yuan, higher dividend payments by SOEs, and more.2
a senior adviser to the Politburo Standing Committee, and Yes, there are incredible, painful challenges ahead in the
said that the report calls urgently for the implementation of
“deep reforms, including scaling back its vast state-owned ongoing road to reform for China’s leadership but we as
enterprises and making them operate more like commercial the writers of this paper are con dent and believe, much
like Daniel Rosen, author of the 2014 Asia Society report
rms.” e report also “recommends that state-owned rms produced in collaboration with the Rhodium Group, that
be overseen by asset-management rms” and “urges China to China knows these reforms are for the bene t of its own national
overhaul local government nances and promote competition interest and, therefore, must be achieved. Since it laid out its
and entrepreneurship.” e report also recommends a sharp reform agenda in the Decisions at the 2013 ird Plenum of
increase in the dividends that state companies pay to the the Chinese Communist Party, we believe, along with Daniel
government, boosting government revenue and helping to Rosen, that China’s leadership is making “real headway” in
pay for new social programs. e report urges that Chinese its bold program to overhaul and liberalize its economy and
social expenditures be funded more by dividends from state- that, if President Xi’s administration succeeds in carrying out
owned rms and by property, corporate and other taxes. its tasks, China will be on track in maintaining “a respectable
6% growth rate” by 2020.3
e report was quite adamant about pressing its case for the
urgency of reforms to be implemented, stating unequivocally In coming up with a 6% forecast - if all reforms are fully
that if reforms are not carried out – by 2030, China faces “an implemented — Mr. Rosen’s report focuses on nine “clusters”
economic crisis,” the Wall Street Journal said. In a statement to of economic and political reform aimed broadly at reducing
announce the report’s release, World Bank President Robert centralized control over the Chinese economy and opening it
Zoellick said, “ e report lays out recommendations for up to more market in uence. In all, Mr. Rosen’s analysis nds
a development growth path for the medium term, helping that “quiet progress is being made in some politically sensitive
China make the transition to become a high-income society.”1 areas of reform.” Much like Mr. Tao before him, Mr. Rosen
said the starting point for the reform agenda is “a more funda-
In a subsequent interview with the Wall Street Journal mental overhaul of the scal relationship between the central
following the release of “China 2030”, Tao Ran, a professor government and the provinces.” e current arrangement has
with the Renmin University School of Economics, that the allowed “an imbalanced division of power and responsibility
report’s proposals are “well-intentioned” but are “doomed to between central and local authorities [which] has given rise to
fail”, because “they don’t strike at the underlying reason” why pressing misallocations of resources and provincial resistance
China’s reforms will stall: “opposition from local governments to central reforms,” Mr. Rosen wrote.3
and SOEs.” Mr. Tao says that breaking up the monopoly
control by local governments and SOEs of key sectors of the On a more positive note, Mr. Rosen has added that
economy, should rst be the keystone of reforms. Currently, his report has identi ed a pattern in most regulatory areas
local government units and SOEs are the main bene ciaries that “evidence of follow-through was apparent in 2014.” In
of China’s investment and industry-driven growth model, an interview with the Wall Street Journal, Mr. Rosen said
and Mr. Tao says, they pose “the main barriers to reform.” he viewed the anti-corruption campaign orchestrated by
88
1.8 Suggestions
Continue with Reform – Urgently China’s reform, said Mr. Tao, should start by breaking up
the local governments’ monopoly of the land market and
IT IS NOW obvious to any China-watcher that the country allowing farmers to develop land on their own. at would
under President Xi Jinping’s leadership is continuing its take local governments out of the real estate game and reduce
ambitious reform program. e question most pundits are their incentive to support the status quo. He also proposed
pondering is, are these reforms going to be su cient at this that private players should be allowed a stake in monopoly
time in order for President Xi’s administration to achieve its industries such as telecoms and utilities to encourage
stated goals by 2020, or, in view of the sharp slowing down of competition. But the crucial point Mr. Tao makes is “it’s
China’s economic engine, will it be a case of too little, too late? the monopoly power of local governments and SOEs that
gives them an e ective veto on crucial economic reforms.
As early as February 2012, the Wall Street Journal had Breaking the monopolies breaks the power of the anti-reform
previewed “China 2030”, a report co-authored by the World coalition.” is, according to Mr. Tao, would pave the way
Bank and the Development Research Center (DRC)—a to other necessary reforms like market-based interest rates, a
Chinese government think tank that reports to the State
Council and which counts among its members, Liu He, oating yuan, higher dividend payments by SOEs, and more.2
a senior adviser to the Politburo Standing Committee, and Yes, there are incredible, painful challenges ahead in the
said that the report calls urgently for the implementation of
“deep reforms, including scaling back its vast state-owned ongoing road to reform for China’s leadership but we as
enterprises and making them operate more like commercial the writers of this paper are con dent and believe, much
like Daniel Rosen, author of the 2014 Asia Society report
rms.” e report also “recommends that state-owned rms produced in collaboration with the Rhodium Group, that
be overseen by asset-management rms” and “urges China to China knows these reforms are for the bene t of its own national
overhaul local government nances and promote competition interest and, therefore, must be achieved. Since it laid out its
and entrepreneurship.” e report also recommends a sharp reform agenda in the Decisions at the 2013 ird Plenum of
increase in the dividends that state companies pay to the the Chinese Communist Party, we believe, along with Daniel
government, boosting government revenue and helping to Rosen, that China’s leadership is making “real headway” in
pay for new social programs. e report urges that Chinese its bold program to overhaul and liberalize its economy and
social expenditures be funded more by dividends from state- that, if President Xi’s administration succeeds in carrying out
owned rms and by property, corporate and other taxes. its tasks, China will be on track in maintaining “a respectable
6% growth rate” by 2020.3
e report was quite adamant about pressing its case for the
urgency of reforms to be implemented, stating unequivocally In coming up with a 6% forecast - if all reforms are fully
that if reforms are not carried out – by 2030, China faces “an implemented — Mr. Rosen’s report focuses on nine “clusters”
economic crisis,” the Wall Street Journal said. In a statement to of economic and political reform aimed broadly at reducing
announce the report’s release, World Bank President Robert centralized control over the Chinese economy and opening it
Zoellick said, “ e report lays out recommendations for up to more market in uence. In all, Mr. Rosen’s analysis nds
a development growth path for the medium term, helping that “quiet progress is being made in some politically sensitive
China make the transition to become a high-income society.”1 areas of reform.” Much like Mr. Tao before him, Mr. Rosen
said the starting point for the reform agenda is “a more funda-
In a subsequent interview with the Wall Street Journal mental overhaul of the scal relationship between the central
following the release of “China 2030”, Tao Ran, a professor government and the provinces.” e current arrangement has
with the Renmin University School of Economics, that the allowed “an imbalanced division of power and responsibility
report’s proposals are “well-intentioned” but are “doomed to between central and local authorities [which] has given rise to
fail”, because “they don’t strike at the underlying reason” why pressing misallocations of resources and provincial resistance
China’s reforms will stall: “opposition from local governments to central reforms,” Mr. Rosen wrote.3
and SOEs.” Mr. Tao says that breaking up the monopoly
control by local governments and SOEs of key sectors of the On a more positive note, Mr. Rosen has added that
economy, should rst be the keystone of reforms. Currently, his report has identi ed a pattern in most regulatory areas
local government units and SOEs are the main bene ciaries that “evidence of follow-through was apparent in 2014.” In
of China’s investment and industry-driven growth model, an interview with the Wall Street Journal, Mr. Rosen said
and Mr. Tao says, they pose “the main barriers to reform.” he viewed the anti-corruption campaign orchestrated by
88
