Kevin Rudd, President of the Asia Society Policy Institute, said China’s leaders face a tough choice about economic reform: “Will they bite the bullet and allow [the state-owned enterprise sector] to contract and yield more space to private firms?”
“Or does that create too much of a political problem, because the state-owned sector of the economy becomes too small and their ability to affect decisions on the ground is reduced as a result?”
Rudd made his remarks during an interview with Charlie Rose that ran on PBS Wednesday night and will be broadcast again on Bloomberg TV on Thursday (7 PM EST). Their conversation took place at Asia Society New York on February 17.
Rudd’s interview aired at around the same time that Premier Li Keqiang of China delivered a speech in Beijing to the National People’s Congress, in which Li described the flaws in China’s economic growth model and outlined the government’s priorities for economic reform and other policy matters.
Li set this year’s economic growth target at “around 7 percent,” down from the 7.5 percent target that China set, and narrowly missed, in 2014.
“The Chinese have, in their planning, been absolutely fixated on how to transition from a rapidly-expanding developing economy into long-term sustainable growth as a developed economy, while avoiding what they call the middle-income trap in the middle,” Rudd said.
“What they’ve done historically to try and fill that gap is pump-prime, by engaging in massive capital projects,” said Rudd. “The big driver for growth which they hope will take place in the future is an emerging small business sector, a greater opportunity for private firms, and — if the reform goes according to plan — a contracting size of the state-owned enterprise sector relative to private firms.”
Watch the complete video of the Charlie Rose program with Kevin Rudd using the player above.