Pace of reform too sluggish, says state think-tank

BEIJING • China's ambitious plan to revamp its economy has been bogged down. Flabby state conglomerates have thwarted attempts to whip them into commercial shape. Rules that treat millions of city- dwelling rural migrants like second-class citizens have barely budged.

Such criticisms are common from sceptical foreign economists who have long argued that President Xi Jinping's efforts to remake China's economy and fix pernicious social problems have been too slow and tepid. But these withering findings on China's reforms come from a startling place - within the government itself.

Just as striking, this unflattering report card from a Chinese state think-tank - published this month with little fanfare - faults misconceived "top-level design" in policies, as well as local bureaucrats and state managers reluctant to change.

The 217-page study - titled The Reform Obstruction Phenomenon - was written by researchers from the Economic System and Management Institute of China's National Development and Reform Commission, which steers policy on industry, energy and many other sectors.

The head of the commission, Mr He Lifeng, and his deputy, Mr Liu He, both have ties to President Xi. But nothing in the report suggests it had their blessing. The authors declined to be interviewed.

The report comes before a Communist Party leadership shake-up later this year that is likely to further solidify Mr Xi's hold on power.

The report credits the government with some progress, including trimming red tape and abolishing the "one-child" policy that has limited most urban families. But the researchers found that changes announced at the top often delivered less on the ground.

While the few mentions of Mr Xi in the report are laudatory, the paper may add to arguments that he needs to move faster to fix economic problems.

Recently, President Xi himself also bristled with impatience. Leading officials "must shoulder the burden of reforms and have the courage to pound the table on key issues", a policy group on reform led by Mr Xi said after a meeting last Friday, according to state media.

"Those who don't shoulder responsibility, who shirk the burden and go through the motions, must be held accountable," it said.

The report credits the government with some progress, including trimming red tape and abolishing the "one-child" policy that has limited most urban families. But the researchers also found that changes announced at the top often delivered less on the ground.

Efforts to redefine how different levels of government spend and tax have become mired in bureaucratic feuding. Local governments fear losing revenue from selling off land while they must pay for growing demands for services.

Personal income and property tax changes have been discussed, "but ultimately it's brought loud thunder but little rain", the report said.

Repeated attempts to make hospital care less expensive and more accessible have been frustrated by bureaucratic rivalries and a failure to take on monopolistic hospitals and train more doctors, the report added.

The result, it said, is that "seeing a doctor has become even more difficult".

China's hundreds of millions of migrant workers, who leave their farms and villages for jobs in the cities, usually do not qualify for urban benefits like healthcare or education for their children.

Experts have called on China to ease up on the limits to help turn migrant workers into bigger consumers. But many cities have created point systems that still exclude them, the report said.

State companies - many of which suffer from overcapacity and heavy debt, burdening the broader economy - have resisted plans to rein them in while rival agencies have bickered over the direction of change.

"Overall, progress in every reform of state-owned firms has been quite sluggish," it said.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on March 29, 2017, with the headline 'Pace of reform too sluggish, says state think-tank'. Print Edition | Subscribe