After thirty-five years of unprecedented growth, China’s prevailing growth model is running out of steam. Predicated on investment in fixed assets, such as infrastructure, and, to a lesser extent, reliance on exports, the economy is delivering diminishing returns to the Chinese people. For this reason, establishing a new, and more sustainable, growth model is perhaps the most intense challenge now facing the eighteen month-old administration of President Xi Jinping.
In the following series of three essays, originally published in Foreign Affairs magazine over a one-year period, we dissect China’s reform ambitions from several angles.
The first piece, written nearly eight months before the Plenum, offered a cautiously optimistic case for significant and enduring economic reforms. In the second piece, published a month after the Plenum, we offered an interpretation of what these reforms will mean for China. Noting the CCP’s declaration that the market must henceforth play the “decisive” role in allocating resources, we argued that reshaping the state’s role will, in fact, be the central challenge facing the entire reform agenda. Finally, our third piece, published several months later, argued that not only must the state’s role be reshaped but the relationship between various levels of government in China—that is, whether the central or local governments perform precisely which functions—also needs to be rejiggered if reforms are to be executed effectively.
Taken together, these three essays are meant to offer a comprehensive look, albeit from a high level, at China’s economic reform opportunities and challenges.