China's New Age of Reform

Beijing Plans to Reduce the State’s Role in the Economy

On Friday, the Chinese government also issued a set of policy proposals that appeared to be intended to show that Mr. Li and other leaders were serious about reducing government intervention in the marketplace and giving competition among private businesses a bigger role in investment decisions and setting prices. The overhauls, if successful, could also make China an even stronger competitor on the global stage by encouraging innovation and expanding the middle class.

Whether Beijing can restructure an economy that is thoroughly addicted to state credit and government directives is unclear. But analysts see such announcements as the strongest signs yet that top policy makers are very serious about revamping the nation’s growth model.

“This is radical stuff, really,” said Stephen Green, an economist at the British bank Standard Chartered and an expert on the Chinese economy. “People have talked about this for a long time, but now we’re getting a clearly spoken reform agenda from the top.”

IF you click the Li Keqiang tag on this post you will see that none of this is a surprise. Li Keqiang was expected to be the successor to Wen Jiabao years ago, and he has been writing and speaking about economic reform the entire time.

Behind Mr. Li and President Xi Jinping is a group of pro-market bureaucrats who seem to have gained in the leadership shuffle this year, including the central bank chief, Zhou Xiaochuan; Finance Minister Lou Jiwei; and Liu He, who is a vice chairman of the National Development and Reform Commission and director of the Office of the Central Leading Group on Financial and Economic Affairs, a body that advises party leaders on the economy. Mr. Liu is part of a team working on proposals for economic changes that could be announced in the autumn at a meeting of the Communist Party Central Committee.

In Socionomics Watch—The battle for China, I looked at the succession battle that ended with the removal of Bo Xilai. The path was cleared for the reformers and while they didn't get as many top leadership spots as they wanted, they did win key posts critical to the reform agenda.