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6 White Paper on the Business Environment in China
On a more positive note, Mr. Rosen has added that Suggestions (in 2016)
his report has identified a pattern in most regulatory areas
that “evidence of follow-through was apparent in 2014.” In Like fictional British spy James Bond’s martini, reforms in
an interview with the Wall Street Journal, Mr. Rosen said China need to be shaken, not stirred.
he viewed the anti-corruption campaign orchestrated by
President Xi Jinping as “a sign of a serious commitment to This will require an effort by China’s leaders on three sig-
shake up an inefficient and privileged bureaucracy”. That nificant fronts, according to The Economist: first, speeding up
and the other political reforms “set the stage for a more financial liberalization so that credit goes to the most dynamic
comprehensive overhaul that’s needed to shift the economy firms, not the best-connected; second, establishing and en-
from its current, unsustainable dependence on investment-led forcing the rule of law so that all firms, state-owed or private,
growth to a more consumer-focused model,” Mr. Rosen said.3 domestic or foreign, are treated equally; and third, trimming
bloated SOEs and encouraging competition and innovation
So, the Chinese Communist Party leadership has commit- across the economy by encouraging the private sector.
ted to economic reform at the Third Plenum in 2013 and to
legal reform at the Fourth Plenum in 2014. As Mr. Rosen An outline of a market-based financial sector is now
stipulates, the anti-corruption campaign and other political emerging and much more needs to be done. Last year, China’s
reforms form the backdrop for the framework of overall re- leadership agreed on the importance of “comprehensively
form and transformation of the economy. A critical question advancing the rule of law” but progress on the rule of law has
confronts the leadership at this stage: Can President Xi Jin- been sluggish. 5 Caixin ran a compelling editorial back in June
ping and his administration continue to press forward in ag- 2015, arguing that, despite official promises, the private sector
gressively tackling corruption while also fiercely undertaking still suffers legal discrimination in market access, finance and
economic reforms? investment. China needs “a transformation” to become more
innovative and efficient, it said, which “requires a break from
Our conclusion is, they must – they have to – and they the old practices of a planned economy”. 6
should.
As proven by successes such as Alibaba, Xiaomi, Tencent,
President Xi’s anti-corruption drive has removed high- Baidu, Lenovo and many more to mention, China can be a
ranking figures such as Bo Xilai and Zhou Yongkang, the powerhouse of innovation. If the country is to sustain strong
former security chief, along with Liu Tienan, deputy head growth in the future, it must rely on fresh waves of entrepre-
of the National Development and Reform Commission, neurialism and innovation. For this to happen, though, the
the principal agency for setting and carrying out economic government must continue ahead with difficult reforms to
policy. According to the Wall Street Journal, Mr. Liu had curb the power of the state and improve the rule of law. It must
been regarded by some foreign observers as “one of the people expose state firms to the discipline of genuine market competi-
standing in the way of much-needed economic reforms.” The tion and the scrutiny of independent antitrust regulators.
Chinese Communist Party’s latest move is to place permanent
anti-graft investigators and embed them inside key national In a report on China’s economy published in August 2015,
government bodies like the cabinet and legislature. Resident the IMF noted that the country is making progress on struc-
supervisors will, for the first time, be stationed within tural reforms while it transitions to a “new normal” of ” slower
the management office of the State Council cabinet in the yet safer and more sustainable growth” but warned that a huge
National People’s Congress, in key central party offices, and amount of work in China’s unfinished reform remains to be
“altogether in all 140 party and government offices”, according done. 7
to Xinhua. 4
We encourage China’s leaders to “keep on keeping on” –
It remains to be seen whether these political changes will until they’ve achieved their goals.
help clear the way for the extensive and ambitious economic
reforms to which President Xi’s government has committed.
Li Chengyan, head of the Research Center for Clean
Governance at Peking University, sums it up best in the
Wall Street Journal: “Comprehensively deepening reform
cannot move forward without adequately cracking down on
corruption….The two sides of the approach complement and
reinforce each other and cannot be separated.”4
104
On a more positive note, Mr. Rosen has added that Suggestions (in 2016)
his report has identified a pattern in most regulatory areas
that “evidence of follow-through was apparent in 2014.” In Like fictional British spy James Bond’s martini, reforms in
an interview with the Wall Street Journal, Mr. Rosen said China need to be shaken, not stirred.
he viewed the anti-corruption campaign orchestrated by
President Xi Jinping as “a sign of a serious commitment to This will require an effort by China’s leaders on three sig-
shake up an inefficient and privileged bureaucracy”. That nificant fronts, according to The Economist: first, speeding up
and the other political reforms “set the stage for a more financial liberalization so that credit goes to the most dynamic
comprehensive overhaul that’s needed to shift the economy firms, not the best-connected; second, establishing and en-
from its current, unsustainable dependence on investment-led forcing the rule of law so that all firms, state-owed or private,
growth to a more consumer-focused model,” Mr. Rosen said.3 domestic or foreign, are treated equally; and third, trimming
bloated SOEs and encouraging competition and innovation
So, the Chinese Communist Party leadership has commit- across the economy by encouraging the private sector.
ted to economic reform at the Third Plenum in 2013 and to
legal reform at the Fourth Plenum in 2014. As Mr. Rosen An outline of a market-based financial sector is now
stipulates, the anti-corruption campaign and other political emerging and much more needs to be done. Last year, China’s
reforms form the backdrop for the framework of overall re- leadership agreed on the importance of “comprehensively
form and transformation of the economy. A critical question advancing the rule of law” but progress on the rule of law has
confronts the leadership at this stage: Can President Xi Jin- been sluggish. 5 Caixin ran a compelling editorial back in June
ping and his administration continue to press forward in ag- 2015, arguing that, despite official promises, the private sector
gressively tackling corruption while also fiercely undertaking still suffers legal discrimination in market access, finance and
economic reforms? investment. China needs “a transformation” to become more
innovative and efficient, it said, which “requires a break from
Our conclusion is, they must – they have to – and they the old practices of a planned economy”. 6
should.
As proven by successes such as Alibaba, Xiaomi, Tencent,
President Xi’s anti-corruption drive has removed high- Baidu, Lenovo and many more to mention, China can be a
ranking figures such as Bo Xilai and Zhou Yongkang, the powerhouse of innovation. If the country is to sustain strong
former security chief, along with Liu Tienan, deputy head growth in the future, it must rely on fresh waves of entrepre-
of the National Development and Reform Commission, neurialism and innovation. For this to happen, though, the
the principal agency for setting and carrying out economic government must continue ahead with difficult reforms to
policy. According to the Wall Street Journal, Mr. Liu had curb the power of the state and improve the rule of law. It must
been regarded by some foreign observers as “one of the people expose state firms to the discipline of genuine market competi-
standing in the way of much-needed economic reforms.” The tion and the scrutiny of independent antitrust regulators.
Chinese Communist Party’s latest move is to place permanent
anti-graft investigators and embed them inside key national In a report on China’s economy published in August 2015,
government bodies like the cabinet and legislature. Resident the IMF noted that the country is making progress on struc-
supervisors will, for the first time, be stationed within tural reforms while it transitions to a “new normal” of ” slower
the management office of the State Council cabinet in the yet safer and more sustainable growth” but warned that a huge
National People’s Congress, in key central party offices, and amount of work in China’s unfinished reform remains to be
“altogether in all 140 party and government offices”, according done. 7
to Xinhua. 4
We encourage China’s leaders to “keep on keeping on” –
It remains to be seen whether these political changes will until they’ve achieved their goals.
help clear the way for the extensive and ambitious economic
reforms to which President Xi’s government has committed.
Li Chengyan, head of the Research Center for Clean
Governance at Peking University, sums it up best in the
Wall Street Journal: “Comprehensively deepening reform
cannot move forward without adequately cracking down on
corruption….The two sides of the approach complement and
reinforce each other and cannot be separated.”4
104
