Reform agenda

Does Li Keqiang’s speech signal reformist path?

Reform agenda

State media leaked Li’s speech

According to the BBC, He Hongqing is China’s fastest ‘face-changer’. It’s a compliment rather than a criticism. An expert in Sichuan Opera, He’s bewildering slight of hand means that he can switch between performing masks at lightning speed. And a similar skill comes to mind when watching China’s top leadership. The question here: what mask are leaders wearing today (i.e. are they reformist/ statist/ leftist/ nationalist)? And will they be wearing the same mask this time next year?

So it raised considerable interest when Xinhua published an article last week that stressed Li Keqiang’s enthusiasm for economic reform. Li – who is expected to become prime minister next March and ranks second in the Politburo Standing Committee – told cadres: “To let the people live a better life, we must rely on reform and opening up.”

Li was speaking at a closed-door conference held by the State Council and it was unusual that the content of his speech should reach the public domain. Xinhua suggested that Zhongnanhai (the name of the compound that houses Party leaders in Beijing) was deliberately releasing a “message of reform” to let the outside world know that change was afoot.

“The core of Li’s speech at the meeting could be summarised in one word ‘reform’; in two words ‘reform, reform’; and in three words ‘ reform, reform and reform’,” the state news agency went on, making sure that its readers didn’t miss the point.

So what did Li actually say? “Reform is like rowing upstream, not to advance is to drop back. The Chinese nation has been suffering a lot over the past century and now we are only a few steps from the national revival. There is a heavy responsibility on us. We must go forward, dare to try… we might make mistakes, but we should bear the historical responsibility.”

Li – who will have responsibility for steering the Chinese economy – said he didn’t believe that China’s demographic dividend had disappeared as the country will still have a workforce of 900 million by 2030. But he also acknowledged labour costs are increasing.

So what makes him optimistic that China still enjoys advantages? “Reform is still the big bonus,” Li declared.

“It is difficult to maintain permanent double-digit growth, but as long as we maintain an increase of 7% it is entirely possible to achieve a well-off society by 2020. And what shall we rely on to achieve this goal? We will rely on reform. The space and potential of reform is still huge,” he added.

In another remark, Li told his audience that the government must “pay more attention to fair rights, fair opportunity and fair rules, so that everyone gets their due benefits through their own efforts”.

Li’s style at the event also sent out a message. Xinhua reports that when other officials were making their own reports, Li would interrupt with well-informed and often pointed questions. Unaccustomed to this, a number of the cadres became flustered, the news agency said, having no “ready answers”.

Does Li have the answers himself, though? And will his speech be remembered as a turning point, signalling a change in policy? Similar statements have been made by a host of Chinese leaders before, of course. WiC has also reported on the ups and downs of the reformists all year (see issue 140), and the challenges they face in taking on vested interests. But Li’s latest speech is notable in its repeat references to his reforming mission.

In the pages that follow we look at two alternative views on the prospects for economic reform in the months and years ahead. Harvard historian and Chinese Communist Party expert Roderick MacFarquhar suggests efforts will be stymied and that the new leaders will attempt to “muddle through”, relying on an increasingly flawed economic model. But HSBC’s Qu Hongbin has a more bullish view, especially in forecasting sweeping financial sector reforms in the coming three to five years.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.