A Chinese reformation is underway

13 Nov 2013

Another day dawns in China. The ebb and flow of oriental life goes on, mixed in with the melée of rapid urban growth and political infighting. Roughly 400 million people will travel somewhere by bicycle and 19 million tonnes of Carbon Dioxide will be emitted. Oh, and 300,000 tonnes of rice will be eaten.

To an outsider, it looks like a fairly normal day. But of course, China never has a normal day. Something is always happening, something big, something important, something influential. And today is no different.  Today marks the last day of President Xi Jingping’s “Third Plenary Session of the 18th Central Communist Committee”. And this is a monumental occasion.


Let me explain. Each leader of the Chinese communist party will, at various points in their rule, hold “plenums” – otherwise known as big meetings. In this they will debate and discuss various topics in China at the time – such as major social or political issues. Past meetings have been particularly important – the 1978 plenum held under Deng Xiaoping turned the country on its head - as Deng sought to end the farming commune system implemented by Mao, and liberalise much of China’s secluded economy. The 1993 plenum under Jiang Zemin took action over inefficient State Owned Enterprises (SOEs), either merging or destroying them and culling 40 million jobs in the process.

These plenums don’t happen often – the most important one, the “third plenary session”, happens only once in a ruler’s lifespan (which usually only lasts 10 years). And President Xi Jingping’s is ending as I write. Leading up to the meeting, President Xi was proclaiming this was to be the most important plenum since Deng in 1978, and sweeping reforms could potentially ensue.

My word, China needs reforming. The country’s growth has reached tipping point. Yes, it still measures at just under 8% a year, but there are serious underlying problems. Two of these have to be addressed by Mr Xi immediately – the problem of countryside property rights and the need for further economic reform.

The problem of countryside property rights is a rather simple one. The citizens themselves don’t own them. The actual land in the countryside is, in the majority of cases, owned by the state - and people are mercilessly moved around or thrown off it at the discretion of local party bosses. If people don’t own their land, they can’t sell it – and if they can’t sell it, they can’t move. And with a declining working-age population in the cities, and dwindling incomes for rural workers, many of these farmers need to move towards urban territory.  If China is to continue developing, the same needs to happen in the countryside as happened in the cities 10 years ago – people need to have the property rights to their land, and thus do what they wish with it. And it gets worse – around 270 million people are, at the moment, held in ‘limbo’; that is they have successfully moved to the cities, but still have their hukou (household registration) recorded in the countryside. This restricts them from buying property in the city, or being entitled to many welfare benefits, healthcare or education opportunities. 

This is obviously unfair. People aren’t allowed to sell land in the countryside and thus can’t buy land in the city. The government though is trialling methods to overcome this issue. In areas such as Chongqing, a major municipality, the local government is allowing around 30 million people to mortgage their homes; and is observing the results. This is a small step towards property rights, but Mr Xi must allow measures such as this to be implemented throughout the country, and at the same time remove many of the hukou restrictions placed on both urban and rural citizens. Local governments are scared of handing over property rights to countryside folk; not only can they gain money from it by selling plots of land to greedy, rich and seemingly endless property investors, but the control they wield over the people is the basic olden-day socialist ideology that countries such as Russia used to enact. If China modernises its rural property system, then it is stepping yet further away from the ideology it proclaims to follow – yet it will also be allowing its people to become richer and will be (partially) solving the issue of a declining urban workforce.

The second major problem faced by Mr Xi is that of the need for further reform in the economy. At the moment, the Chinese economy is a complex muddle. Many, many areas of it need drastic overhaul. In short, the principle underlying China’s rise over the last 20 years has been that of constant investment, building more resources, machinery and paving the way for future production. Local governments, desperate for funding from the bureaus in Beijing, focus on industrial production - as this is the steadfast way to exhibit economic growth and high productivity. Though of course this leads to pollution, surpluses, and extreme levels of debt.

The aim for Mr Xi will be to steer China towards a more consumption-based economy - that is, to get Chinese citizens to settle down and buy all the many extravagant goods the economy now has to offer. He must also seek to provide incentives for local governments, to provide public goods such as clean air and better utilities which will benefit China in the future. And there are still many problems with the inefficient SOEs; providing sub-standard service in areas such as electricity and gas.  But although they are inefficient, there are profitable – and if they are profitable, they’re here to stay. Mr Xi must find a way to get around this.

The list goes on, both with issues related to the economy and issues that aren’t. It is a big task for Xi Jingping and his team of Politburo officials to overcome these. Not only will he have to be brave to implement the necessary radical reforms, but he will face opposition from the stalwart Maoists still present within the communist hierarchy. But again, Mr Xi must override them. China needs reform. And fast. As with past plenums, we are unlikely to hear or see the results of the meeting for many months to come. But that’s not the point. Over the past few days in China, behind closed doors, the upper echelons of the party have been deciding how to fix this ailing superpower – and how to remould the country into a better, more sustainable model for the future. Let’s just hope they’re successful. 

By Alex McKenzie

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