China’s New Premier Promises to Reduce State’s Role

Li Keqiang echoes his predecessor’s words in urging economic and political reform.

China’s new premier promised on Sunday to launch a “self-imposed revolution” to relax the state’s heavy grip on the management of world’s second largest economy which should also reduce corruption on the part of public-sector workers.

Speaking in Beijing, Li Keqiang admitted that the process will be difficult. “Nowadays, stirring up vested interests is more difficult than stirring up one’s soul,” he said.

But no matter how deep the water is, we must wade through because we don’t have other options. It’s our nation’s fate and future that are at stake.

Li made few concrete commitments beyond reducing regulations by a third but the words echoed those uttered by his predecessor, Wen Jiabao, who called for continued “reform and opening up” of the economy in his final policy address to the National People’s Congress on Tuesday.

China’s new president and paramount leader Xi Jinping similarly warned earlier this month, “Only if the capabilities of all party members unceasingly continue to strengthen can the goal of ‘two one hundred years’ and the dream of the great rejuvenation of the Chinese people be realized” — interpreted as a jab at corruption which is endemic across China’s government.

Li and Xi are expected to continue the gradual liberalization of China’s economy and democratization of its political system but will likely be hamstrung, like their predecessors were, from reforming the present system too thoroughly for fear of weakening state-owned enterprises and jeopardizing the Communist Party’s monopoly on power.

Several hundreds of billions of dollars in stimulus spending in recent years has not preventing Chinese growth from slowing. The party has continually recognized that it must increase domestic demand to maintain high growth rates but if China’s middle class continues to expand, it may no longer tolerate the lack of political freedoms which it has so far been willing to sacrifice in favor of rising prosperity.

The main impediment to economic development is the Chinese state’s heavy hand in industry. Behemoth national enterprises, central planning, a weak judiciary, insufficient protection of private property and intellectual copyrights stand in the way of a freer market economy which the party seems unable to decide if it really wants.

The most efficient way for the Xi-Li Administration to simultaneously improve the accountability of Chinese politicians and the country’s long-term economic growth prospects is further liberalization, including privatizations, but that is a political, not to mention ideological, challenge that could take them years to mount.