Current Political Economy Regime in China’s Mainland Combination of liberalization and authoritarianism

Political economy regime Combination of economic liberalization and political authoritarianism regime of political economy public policy profile market-oriented reforms and political grip political and economic institutions strong reformist state retreats from economy socioeconomic coalition base co-optation of newly-emerged social sectors

“Reforms & opening up” Deng Xiaoping’s reforms since 1978 economic liberalization break the monopoly of state sector “socialist market economy” political authoritarianism the “four basic principles” last one is the key: “leadership of the CCP” allow no organized opposition to the party

Deng’s handpicked successors First two were selected as economic reformers were purged for political liberalization Hu Yaobang CCP General Secretary from 1978-87 Zhao Ziyang CCP General Secretary from 1987-89

Deng’s handpicked successors Last two were selected as technocrats politically “reliable” economic reformers Jiang Zemin CCP General Secretary 1989-2002 Hu Jintao CCP General Secretary 2002-2012

From Jiang Zemin to Hu Jintao CCP General Secretary (2002) 16th National Party Congress Hu Jintao replaced Jiang Zemin PRC State President (2003) 10th National People’s Congress Hu Jintao replace Jiang Zemin the first peaceful and orderly leadership succession in PRC history

Crack down political dissidents CCP has allowed no organized opposition to the Party leadership Waves of pro-democracy movements late 1970s: “democracy wall” movement late 1980s: Tian’anmen Square protests late 1990s: China Democracy Party late 2000s: Charter ’08 and Liu Xiaobo each followed immediately by suppression

Broader programs of reform Separate Party from government halted after 1989 Tian’anmen Separate state from economy market mechanism de facto privatization

Broader programs of reform Separate government from enterprises reinforced after 2001 WTO introduce competition deregulate industries increase role for law limit corruption

Price adjusted by market Economic liberalization accelerated since 1990s More than 97% of prices of commodities and services are now determined by market rather than by government

State management of economy break down bureaucratic interests that have fostered economic paternalism 1998: industrial ministries were reorganized as bureaus 2000: industrial bureaus were eliminated 2003: State Development Planning Commission was reorganized as the State Development and Reforms Commission

State management of economy Further restructuring of state institutions 2003: State Economic and Trade Commission was eliminated 2003: the Ministry of Foreign Trade and Economic Cooperation and the Ministry of Internal Trade were merged into the new Ministry of Commerce foster professionalism within government

Competition and deregulation Introduction of competition into formerly monopolized industries telecommunications industry electric power industry railway industry airline industry break down bureaucratic interests that have fostered economic paternalism

State retreats from economy State sector continues to shrink downsized, privatized, or go bankrupt non-state sector continues to grow

Potential challenges Potential challenges to the current regime of political economy globalization demographic changes political instability

China Joined WTO in 2001 Culmination of 15 years of the PRC government’s efforts

Impact of WTO Expansion of trade & foreign investment trade volume $0.6 trillion for 2002 22% increase from 2001 direct investment US$55 billion for 2002 13% increase from 2001 Economists estimate WTO membership would add 1.5% to China’s annual growth rate after 5 years

Impact of WTO weed out inefficient SOEs erode local protectionism curtail industrial monopolies urban-rural divide regional differences unemployment social unrest

International Covenants In October 1997, PRC government signed the International Covenant on Economic Social and Cultural Rights In October 1998, PRC government signed the International Covenant on Civil and Political Rights