China's ex-premier leaves an unfinished reform legacy
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[October 27, 2023]
By Kevin Yao
BEIJING (Reuters) - When China's Communist Party released the names of
its 205-person Central Committee a year ago, there was a glaring
omission: Li Keqiang, the premier.
The exclusion of Li, who died of a heart attack on Friday at the age of
68, seemed to confirm what many long assumed - that his brand of
economic reform had been officially scrapped in favor of President Xi
Jinping's state-led approach to the economy.
Reform is once again on the minds of China's policy makers and analysts
as it struggles to revive flagging consumer demand and fend off
Japan-style economic stagnation.
But rather than push changes advocated by many economists, such as
renewed urbanization and more space for private enterprise, China under
Xi has put more power in the hands of the state.
"It’s not an exaggeration to say that an era is over – an era when
reforms could be steadily pushed forward," said a government policy
adviser who declined to be identified.
Li retired in March after a decade as China's second most senior leader
and an advocate for private business but his power had been limited
after Xi made himself China's most powerful leader in decades and
tightened control over the economy and society.
The English-speaking premier, who held a PhD in economics from the elite
Peking University, focused on improving conditions for entrepreneurs,
wooing foreign investors, cutting red tape and boosting incomes for the
poor.
But ambitious market-based reforms Beijing unveiled in 2013 quickly ran
into trouble, including a 2015 stock market crash following a botched
currency reform. Under Xi's leadership, the world's second-largest
economy gradually turned back to old policies that have added to China's
debt pile and industrial overcapacity.
"The scope for Li's policymaking and implementation had became more
subordinated under President Xi Jinping, who had unabashedly dominated
in politics and policy making, relegating Li to playing second fiddle,"
said Dali Yang, a politics professor at University of Chicago.
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China's Premier Li Keqiang arrives for a news conference after the
closing ceremony of China's National People's Congress (NPC) at the
Great Hall of the People in Beijing, China, March 15, 2017. REUTERS/Damir
Sagolj/File Photo
ALLIES
China's economic miracle started in 1978 when Deng Xiaoping launched
historic reforms, allowing more private enterprises and opening the
economy to foreign investment.
Li was not the only pro-reform leader who ended up out of the
picture. Former economic tsar Liu He, former banking regulator Guo
Shuqing, and former central bank chief Yi Gang, have all left
government.
Xi has instead packed the government with his allies, mostly
officials with limited international or financial experience.
Beijing is unleashing a round of stimulus in a bid to shore up the
economic recovery but economists warn China could be headed for a
long-period of deflation and stagnant growth that fails to lift
living standards for its 1.4 billion people.
Some government advisers have been beating the drum for reforms,
focusing on spurring urbanization and household spending power,
reducing reliance on investment and leveling the playing field
between state-owned enterprises and private firms.
A Communist Party plenum, expected in November and which has
traditionally focused on reforms, could disappoint those awaiting
big changes.
"I don't expect any breakthroughs on reforms," said the government
policy adviser.
(Reporting by Kevin Yao, additional reporting by Laurie Chen and Yew
Lun Tian; editing by Don Durfee, Robert Birsel)
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