Navigating the Next Round of Reform in China

On Jan. 23, 2014, a distinguished panel of experts shared their views on the prospects of economic reform in China with an audience at UC San Diego. Among the panelists were IRPS Professors Barry Naughton, Susan Shirk, and Victor Shih, Professor Chen Zhimin of Fudan University, and Professor Wu Jinglian (吴敬琏) of the China State Council Development Research Center. Professor Wu is one of the most preeminent economists in China and a champion of free market reform.  He also served as advisor to former Premier Zhu Rongji and mentor to Zhou Xiaochuan (PBOC Governor) and Lou Jiwei (Minister of Finance). Professor Lei Guang presided as chair and translated for Professor Wu.


Reflecting on the Third Plenum of the 18th CCP Congress in November 2013, which presented a wide-ranging blueprint for reform, Professor Naughton expressed cautious optimism about the reform. Professor Wu interpreted the plenum as a conclusive end to a decade-long debate about the reform in China: the market (rather than the state) will now have a decisive role in resource allocation. After being pulled in two different directions by the expansion of market forces on the one hand and the growth of state power and crony capitalism on the other, the plenum charts a course towards an integrated, open, competitive and rule-based market economy. Though more hopeful now than he has been in over a decade, Professor Wu is not as optimistic as Professor Naughton. He sees major obstacles from entrenched interests.

Professor Shih, the latest addition to the 21st Century China Program's all-star-team and renowned scholar on the political economy of Chinese finance, echoed Professor Wu's concerns.  He faults the plenum for making too many vague promises, containing internal contradictions, and being disappointing on political reform.  He also discussed the persistent moral hazard problem in the banking sector and the difficulty of reforming the system without financial panic.

Professor Shirk noted that the obstacle to economic reform is always political because reformers must overcome vested interests that benefit from the existing system. Her own research illustrates how Deng Xiaoping was able to design an effective political strategy for Opening and Reform by playing to the provinces and building a new coalition for reform. She fears that contemporaries are drawing the wrong lessons from Deng's reform legacy.

A key question to ask is how reformers today can build such a winning coalition? Local governments and state-owned enterprises (SOEs) are the biggest losers in new blueprint for reform, Professor Wu pointed out. Professor Shirk speculated that the push for new free trade zones (FTZs) in Shanghai and 12 other sites might be a way to generate local support by offering the opportunity to grow the economy through liberalization and the accompanying windfall in revenues.

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Jack Zhang

Jiakun Jack Zhang is Assistant Professor of Political Science at the University of Kansas (KU). He received his Ph.D. from the Department of Political Science at UC San Diego. His dissertation examines when and why economically interdependent countries use military versus economic coercion in foreign policy disputes. In 2018-2019, he was a postdoctoral research fellow in the Niehaus Center for Globalization and Governance at Princeton University. Jack holds a bachelor's degree in political science and a certificate in East Asian studies from Duke University, where he served as the Editor-in-Chief of Duke East Asia Nexus and was a co-founder of the Duke-UNC China Leadership Summit. At UC San Diego, he served as the senior advisor to the 21st Century China Center’s China Focus Blog. Prior to coming to UC San Diego, Jack worked as a China researcher for the Eurasia Group in Washington, DC. Follow him on Twitter @HanFeiTzu.

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