3 Center for American Progress | Assessing China’s Economic Reform Agenda
• Financial reorm and China’s “going ou” sraegy, which aims o inves Chinese capial abroad and o propel Chinese brands and companies o global prominenceOn many rons, China’s reorm agenda is aking he righ seps orward. Bu even i reorms are implemened ully someime afer 2020 or by he ime Presiden Xi and Premier Li hand over he manle a he end o heir 10-year erms, hese reorms seem unlikely o undamenally change he insiuional oundaions o China’s economy. Speciﬁcally, reorms will do litle o change he sae’s broad involvemen in ownership, ﬁnance, and auhoriy over key decisions and prices in China’s economy.
Party, state ownership, and transactional relationships
Undersanding how China’s economy works necessiaes an in-deph look a how is poliical sysem works, as well as a he inerwining poliical and personal relaionships ha permeae China’s economy. Even as China’s economic insiuions have evolved away rom cenralized economic planning since 1978, he poliical insiuions ha govern China’s economy endure and have calciﬁed.
Governance in China begins wih he Communis Pary, which exiss above he auhoriy o he sae and rules wih an unchecked monopoly on power. Te sae insiuions adminiser he pary’s rule and provide a veil or one-pary conrol. Economic reorms since 1978 have ransormed China’s economic landscape in ways ha would have been unimaginable o he prior generaion’s leaders; hese changes yielded an unprecedened sreak o economic developmen never beore seen in human hisory.
From an economic perspecive, wha maters mos or how China’s economy works is who holds conrol over he naion’s economic resources and wha incenives and consrains hey ace in making basic economic decisionsnamely, where and in wha o inves. Bu reorms underway do litle o change he exising sysem o exensive sae involvemen in direc and indirec conrol over China’s economy.
Social structure of China’s state ownership and economic governance
Te ormal insiuions ha comprise China’s governance srucure can ofen mask he underlying dynamics o poliical power.
Te reach o he pary’s organizaion ino China’s economic lie is exensive, including household decisions on reproducion and where people can live, work, and go o school; where and wha invesmens can be made; and pary work commitees and he managemen and boards o sae-owned and privae enerprises. Te pary also has conrol over seting prices or key economic inpus such as energy, as well as inermediae manuacured and oher inpus in indus-ries deemed sraegic or he naional economy, such as ﬁnance, seel, chemicals, renew-able energy, and he nearly 24 oher “commanding heighs” indusries China views as essenial o is naional economic securiy.