Page 154 - 2017 White Paper
P. 154
7 White Paper on the Business Environment in China
1.8 Suggestions and 2017 Outlook
Continue with Reform – Urgently with the Renmin University School of Economics, that the
report’s proposals are“well-intentioned”but are“doomed
It is now obvious to any China-watcher that the to fail”, because “they don’t strike at the underlying
country under President Xi Jinping’s leadership is reason” why China’s reforms will stall: “opposition from
continuing its ambitious reform program. The question local governments and SOEs”. Mr. Tao says that breaking
most pundits are pondering is, are these reforms going up the monopoly control by local governments and
to be sufficient at this time in order for President Xi’s SOEs of key sectors of the economy, should first be the
administration to achieve its stated goals by 2020, or, keystone of reforms. Currently, local government units
in view of the sharp slowing down of China’s economic and SOEs are the main beneficiaries of China’s investment
engine, will it be a case of too little, too late? and industry-driven growth model, and Mr. Tao says, they
pose “the main barriers to reform”. China’s reform, said Mr.
As early as February 2012, the Wall Street Journal Tao, should start by breaking up the local governments’
had previewed “China 2030”, a report co-authored by monopoly of the land market and allowing farmers
the World Bank and the Development Research Center to develop land on their own. That would take local
(DRC)—a Chinese government think tank that reports to governments out of the real estate game and reduce their
the State Council and which counts among its members, incentive to support the status quo. He also proposed that
Liu He, a senior adviser to the Politburo Standing private players should be allowed a stake in monopoly
Committee, and said that the report calls urgently for industries such as telecoms and utilities to encourage
the implementation of “deep reforms, including scaling competition. But the crucial point Mr. Tao makes is “it’s
back its vast state-owned enterprises and making them the monopoly power of local governments and SOEs that
operate more like commercial firms”. The report also gives them an effective veto on crucial economic reforms.
“recommends that state-owned firms be overseen by Breaking the monopolies breaks the power of the anti-
asset-management firms” and “urges China to overhaul reform coalition”. This, according to Mr. Tao, would pave
local government finances and promote competition the way to other necessary reforms like market-based
and entrepreneurship”. The report also recommends a interest rates, a floating yuan, higher dividend payments
sharp increase in the dividends that state companies by SOEs, and more (Qi and Orlik 2012).
pay to the government, boosting government revenue
and helping to pay for new social programs. The report Yes, there are incredible, painful challenges ahead
urges that Chinese social expenditures be funded more in the ongoing road to reform for China’s leadership
by dividends from state-owned firms and by property, but we as the writers of this paper are confident and
corporate and other taxes. The report was quite adamant believe, much like Daniel Rosen, author of the 2014
about pressing its case for the urgency of reforms to be Asia Society report produced in collaboration with the
implemented, stating unequivocally that if reforms are Rhodium Group, that China knows these reforms are for
not carried out – by 2030, China faces“an economic crisis”, the benefit of its own national interest and, therefore,
the Wall Street Journal said. In a statement to announce must be achieved. Since it laid out its reform agenda in
the report’s release, World Bank President Robert the Decisions at the 2013 Third Plenum of the Chinese
Zoellick said, “The report lays out recommendations for a Communist Party, we believe, along with Daniel Rosen,
development growth path for the medium term, helping that China’s leadership is making “real headway” in its
China make the transition to become a high-income bold program to overhaul and liberalize its economy and
society” (Davis 2012). that, if President Xi’s administration succeeds in carrying
out its tasks, China will be on track in maintaining “a
In a subsequent interview with the Wall Street Journal respectable 6% growth rate” by 2020 (Casey 2014).
following the release of “China 2030”, Tao Ran, a professor
154
1.8 Suggestions and 2017 Outlook
Continue with Reform – Urgently with the Renmin University School of Economics, that the
report’s proposals are“well-intentioned”but are“doomed
It is now obvious to any China-watcher that the to fail”, because “they don’t strike at the underlying
country under President Xi Jinping’s leadership is reason” why China’s reforms will stall: “opposition from
continuing its ambitious reform program. The question local governments and SOEs”. Mr. Tao says that breaking
most pundits are pondering is, are these reforms going up the monopoly control by local governments and
to be sufficient at this time in order for President Xi’s SOEs of key sectors of the economy, should first be the
administration to achieve its stated goals by 2020, or, keystone of reforms. Currently, local government units
in view of the sharp slowing down of China’s economic and SOEs are the main beneficiaries of China’s investment
engine, will it be a case of too little, too late? and industry-driven growth model, and Mr. Tao says, they
pose “the main barriers to reform”. China’s reform, said Mr.
As early as February 2012, the Wall Street Journal Tao, should start by breaking up the local governments’
had previewed “China 2030”, a report co-authored by monopoly of the land market and allowing farmers
the World Bank and the Development Research Center to develop land on their own. That would take local
(DRC)—a Chinese government think tank that reports to governments out of the real estate game and reduce their
the State Council and which counts among its members, incentive to support the status quo. He also proposed that
Liu He, a senior adviser to the Politburo Standing private players should be allowed a stake in monopoly
Committee, and said that the report calls urgently for industries such as telecoms and utilities to encourage
the implementation of “deep reforms, including scaling competition. But the crucial point Mr. Tao makes is “it’s
back its vast state-owned enterprises and making them the monopoly power of local governments and SOEs that
operate more like commercial firms”. The report also gives them an effective veto on crucial economic reforms.
“recommends that state-owned firms be overseen by Breaking the monopolies breaks the power of the anti-
asset-management firms” and “urges China to overhaul reform coalition”. This, according to Mr. Tao, would pave
local government finances and promote competition the way to other necessary reforms like market-based
and entrepreneurship”. The report also recommends a interest rates, a floating yuan, higher dividend payments
sharp increase in the dividends that state companies by SOEs, and more (Qi and Orlik 2012).
pay to the government, boosting government revenue
and helping to pay for new social programs. The report Yes, there are incredible, painful challenges ahead
urges that Chinese social expenditures be funded more in the ongoing road to reform for China’s leadership
by dividends from state-owned firms and by property, but we as the writers of this paper are confident and
corporate and other taxes. The report was quite adamant believe, much like Daniel Rosen, author of the 2014
about pressing its case for the urgency of reforms to be Asia Society report produced in collaboration with the
implemented, stating unequivocally that if reforms are Rhodium Group, that China knows these reforms are for
not carried out – by 2030, China faces“an economic crisis”, the benefit of its own national interest and, therefore,
the Wall Street Journal said. In a statement to announce must be achieved. Since it laid out its reform agenda in
the report’s release, World Bank President Robert the Decisions at the 2013 Third Plenum of the Chinese
Zoellick said, “The report lays out recommendations for a Communist Party, we believe, along with Daniel Rosen,
development growth path for the medium term, helping that China’s leadership is making “real headway” in its
China make the transition to become a high-income bold program to overhaul and liberalize its economy and
society” (Davis 2012). that, if President Xi’s administration succeeds in carrying
out its tasks, China will be on track in maintaining “a
In a subsequent interview with the Wall Street Journal respectable 6% growth rate” by 2020 (Casey 2014).
following the release of “China 2030”, Tao Ran, a professor
154
