China’s Three Challenges in 2014

CLAREMONT, CALIFORNIA – Since ascending to the Chinese Communist Party’s top post in November 2012, Xi Jinping has confounded observers. While his political strategy has entailed tightening the CCP’s control over ideology, cracking down on official corruption, repressing dissent, and championing a more nationalistic foreign policy, he has announced an unusually bold economic-reform blueprint.

The world will soon find out whether Xi’s politically conservative course is intended to facilitate his pro-market economic reforms. Having spent 2013 consolidating his position and formulating his agenda, this year Xi will have to begin delivering on his promises and demonstrating that he is as capable of applying power as he is at accumulating it. His success will depend on how he addresses three major challenges.

The first challenge confronting Xi in 2014 is undoubtedly implementation of his economic-reform package, which has aroused both excitement and skepticism since it was unveiled in mid-November. Optimists point to the package’s ambitious goals as evidence of Xi’s commitment to reform, while critics cite its vagueness and lack of a specific timetable as grounds for caution.

In order to prove the skeptics wrong, Xi must translate rhetoric into policy, and policies into concrete, measurable results. This means starting the new year by implementing reforms that require only administrative action, such as granting licenses to private banks, increasing competition by removing barriers to entry for private firms, liberalizing interest and exchange rates, and extending residency rights to migrant laborers in small cities and towns.