NEW YORK – When it comes to economic reform, China’s leaders no longer believe that time is on their side. With a new sense of urgency, President Xi Jinping and his inner circle are attempting one of the most ambitious economic and social-policy reform plans in history.
But in any authoritarian country, change creates risk. Consider the scale of the proposed plans. For China to reach the next stage of its development, a much larger share of Chinese-made products now destined for Europe, America, and Japan must be sold to consumers inside China. This shift will require a big increase in local purchasing power – and, therefore, an enormous transfer of wealth from large domestic companies to Chinese households.
In addition, China’s leaders appear to be on the verge of approving 12 new regional free-trade zones, which will drive competition and efficiency on a new scale in many economic sectors. They also recognize the need for further liberalization of the country’s financial system, a move that will require tolerance for outright defaults on bad loans – and the anxiety and anger that comes with them.
Here, as in other areas of the reform plan, change is dangerous; but Xi has come to believe that pressing ahead is vitally important if China is to take the next crucial steps toward building a middle-class, digital-age economy. Moreover, the reforms are crucial for the Chinese Communist Party’s long-term hold on power.