For the first time in more than 25 years, China does not have a growth target. FMTNews China
Back in 2013, the Chinese government laid out a policy agenda that promised real reforms to an economy laden with debt and distorted by the influence of the country’s large state-owned enterprise sector.
The Chinese government’s failure to deliver on its promise of a more open economy has undermined its credibility, and fueled the growing global backlash that it is experiencing today. Even before Covid-19 arrived, the lack of reform had sapped China’s economic performance and made it persistently over-reliant on debt, leaving its domestic private sector increasingly disheartened.
Faced with these limitations, China’s government has put reform back on the agenda. On April 9, it issued a plan to improve the “market-based allocation of factors of production.” At the same time, private Chinese firms are holding back on further capital expenditures. If these business shifts continue, China’s ability to recover from the crisis will be hampered.
The coming months will be crucial. If China wants to prove that its reform intentions are serious this time, it could privatise or break up some SOEs.
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