The Paradox of China's Reform | Asia Society Skip to main content

Unsupported Browser Detected.
It seems the web browser you're using doesn't support some of the features of this site. For the best experience, we recommend using a modern browser that supports the features of this website. We recommend Google Chrome, Mozilla Firefox, or Microsoft Edge

  • Policy
    • Asia Society Policy Institute
      • Center for China Analysis
      • Topics
      • Countries & Regions
      • Publications
      • Initiatives
      • Watch & Listen
      • Events
      • About
      • Support Us
    • Center on U.S.-China Relations
      • Home
      • About
      • Projects
      • Events
      • Reports
      • COAL + ICE
      • ChinaFile
  • Arts
    • Asia Society Museum
      • Visit
      • Exhibitions
      • Programs
      • Collection
      • Asia Society Triennial
      • The Asia Arts and Museum Network
      • Learn
      • Support
    • Asia Arts Game Changer Awards
      • About
      • Honorees
      • Ceremonies
      • Photos
      • Support
    • Creative Voices of Muslim Asia
      • Resources
      • Exhibitions
      • Videos
    • Film
    • Literature
    • Performing Arts
  • Education
    • Chinese Language Learning
    • Global Competency Resources
    • About
  • Initiatives
    • Arts
      • Arts & Museum Summit
      • Asia Arts Game Changer Awards
      • Asia Society Museum: The Asia Arts & Museum Network
      • Creative Voices of Muslim Asia
      • U.S.-China Museum Summit
      • U.S.-Asia Entertainment Summit
    • Education
      • Chinese Language Learning
      • About
    • Leadership
      • Asia Game Changer Awards
      • Asia 21 Young Leaders Initiative
      • Diversity Leadership Initiatives
      • U.S.-China Dialogue
    • Policy
      • Asia Society Policy Institute
      • Center on U.S.-China Relations
    • Sustainability
      • Asia Society Policy Institute
      • Coal + Ice
  • Countries & Regions
    • Column One
      • Afghanistan
      • American Samoa
      • Armenia
      • Australia
      • Azerbaijan
      • Bahrain
      • Bangladesh
      • Bhutan
      • Brunei
      • Cambodia
      • Central Asia
      • China
      • Cook Islands

      • Cyprus
      • East Asia
      • East Timor
      • Fiji
      • French Polynesia
      • Georgia
      • Guam
    • Column Two
      • Hong Kong
      • India
      • Indonesia
      • Iran
      • Iraq
      • Israel
      • Japan
      • Jordan
      • Kazakhstan
      • Kiribati
      • Kuwait
      • Kyrgyzstan
      • Laos
      • Lebanon
      • Macau
      • Malaysia
      • Maldives
      • Marshall Islands
      • Micronesia
      • Mongolia
    • Column Three
      • Myanmar
      • Nauru
      • Nepal
      • New Caledonia
      • New Zealand
      • Niue
      • North Korea
      • Northern Marianas
      • Oceania
      • Oman
      • Pakistan
      • Palau
      • Palestine
      • Papua New Guinea
      • Philippines
      • Qatar
      • Samoa
      • Saudi Arabia
      • Singapore
      • Solomon Islands
    • Column Four
      • South Asia
      • Southeast Asia
      • South Korea
      • Sri Lanka
      • Syria
      • Taiwan
      • Tajikistan
      • Thailand
      • Tibet
      • Tokelau
      • Tonga
      • Turkey
      • Turkmenistan
      • Tuvalu
      • United Arab Emirates
      • Uzbekistan
      • Vanuatu
      • Vietnam
      • Wallis and Futuna
      • West Asia
      • Yemen
  • Current Affairs
    • Topics
      • Business
      • Climate Change
      • Governance
    • Programming
      • Beyond the Headlines
      • Business of Asia
    • Center on U.S.-China Relations
      • Home
      • About
      • Projects
      • Reports
      • Past Events
      • ChinaFile
  • Look & Listen
    • Asia Society Magazine
    • ChinaFile
    • Podcasts
    • Video Gallery
  • Events
    • Upcoming Events
    • Past Events
  • Visit
    • Visit Us
      • Hong Kong
      • New York
      • Texas
    • Global Network
      • Australia
      • France
      • India
      • Japan
      • Korea
      • Northern California
      • Philippines
      • Southern California
      • Switzerland
      • Washington, D.C.
  • About
    • About Asia Society
    • Inclusion & Diversity
    • Background & History
    • Board of Trustees
    • Senior Leadership
    • Global Staff
    • Global Council
    • Careers
    • Interns and Volunteers
    • Financial Statements
    • For the Media
      • Press Releases
  • Support
    • The Campaign for Asia Society
    • Corporate Engagement
      • Business Council
      • Technology and Innovation Council
      • Global Talent and Diversity Council
      • Rising Executives Network
      • Enhancements to Membership
      • Corporate Membership
      • Global Corporate Leaders
    • Membership
    • Donate
    • Donor Privacy Statement
ASIABLOG
Subscribe
Search
  • Policy
    • Asia Society Policy Institute
      • Center for China Analysis
      • Topics
      • Countries & Regions
      • Publications
      • Initiatives
      • Watch & Listen
      • Events
      • About
      • Support Us
    • Center on U.S.-China Relations
      • Home
      • About
      • Projects
      • Events
      • Reports
      • COAL + ICE
      • ChinaFile
  • Arts
    • Asia Society Museum
      • Visit
      • Exhibitions
      • Programs
      • Collection
      • Asia Society Triennial
      • The Asia Arts and Museum Network
      • Learn
      • Support
    • Asia Arts Game Changer Awards
      • About
      • Honorees
      • Ceremonies
      • Photos
      • Support
    • Creative Voices of Muslim Asia
      • Resources
      • Exhibitions
      • Videos
    • Film
    • Literature
    • Performing Arts
  • Education
    • Chinese Language Learning
    • Global Competency Resources
    • About
  • Initiatives
    • Arts
      • Arts & Museum Summit
      • Asia Arts Game Changer Awards
      • Asia Society Museum: The Asia Arts & Museum Network
      • Creative Voices of Muslim Asia
      • U.S.-China Museum Summit
      • U.S.-Asia Entertainment Summit
    • Education
      • Chinese Language Learning
      • About
    • Leadership
      • Asia Game Changer Awards
      • Asia 21 Young Leaders Initiative
      • Diversity Leadership Initiatives
      • U.S.-China Dialogue
    • Policy
      • Asia Society Policy Institute
      • Center on U.S.-China Relations
    • Sustainability
      • Asia Society Policy Institute
      • Coal + Ice
  • Countries & Regions
    • Column One
      • Afghanistan
      • American Samoa
      • Armenia
      • Australia
      • Azerbaijan
      • Bahrain
      • Bangladesh
      • Bhutan
      • Brunei
      • Cambodia
      • Central Asia
      • China
      • Cook Islands

      • Cyprus
      • East Asia
      • East Timor
      • Fiji
      • French Polynesia
      • Georgia
      • Guam
    • Column Two
      • Hong Kong
      • India
      • Indonesia
      • Iran
      • Iraq
      • Israel
      • Japan
      • Jordan
      • Kazakhstan
      • Kiribati
      • Kuwait
      • Kyrgyzstan
      • Laos
      • Lebanon
      • Macau
      • Malaysia
      • Maldives
      • Marshall Islands
      • Micronesia
      • Mongolia
    • Column Three
      • Myanmar
      • Nauru
      • Nepal
      • New Caledonia
      • New Zealand
      • Niue
      • North Korea
      • Northern Marianas
      • Oceania
      • Oman
      • Pakistan
      • Palau
      • Palestine
      • Papua New Guinea
      • Philippines
      • Qatar
      • Samoa
      • Saudi Arabia
      • Singapore
      • Solomon Islands
    • Column Four
      • South Asia
      • Southeast Asia
      • South Korea
      • Sri Lanka
      • Syria
      • Taiwan
      • Tajikistan
      • Thailand
      • Tibet
      • Tokelau
      • Tonga
      • Turkey
      • Turkmenistan
      • Tuvalu
      • United Arab Emirates
      • Uzbekistan
      • Vanuatu
      • Vietnam
      • Wallis and Futuna
      • West Asia
      • Yemen
  • Current Affairs
    • Topics
      • Business
      • Climate Change
      • Governance
    • Programming
      • Beyond the Headlines
      • Business of Asia
    • Center on U.S.-China Relations
      • Home
      • About
      • Projects
      • Reports
      • Past Events
      • ChinaFile
  • Look & Listen
    • Asia Society Magazine
    • ChinaFile
    • Podcasts
    • Video Gallery
  • Events
    • Upcoming Events
    • Past Events
  • Visit
    • Visit Us
      • Hong Kong
      • New York
      • Texas
    • Global Network
      • Australia
      • France
      • India
      • Japan
      • Korea
      • Northern California
      • Philippines
      • Southern California
      • Switzerland
      • Washington, D.C.
  • About
    • About Asia Society
    • Inclusion & Diversity
    • Background & History
    • Board of Trustees
    • Senior Leadership
    • Global Staff
    • Global Council
    • Careers
    • Interns and Volunteers
    • Financial Statements
    • For the Media
      • Press Releases
  • Support
    • The Campaign for Asia Society
    • Corporate Engagement
      • Business Council
      • Technology and Innovation Council
      • Global Talent and Diversity Council
      • Rising Executives Network
      • Enhancements to Membership
      • Corporate Membership
      • Global Corporate Leaders
    • Membership
    • Donate
    • Donor Privacy Statement

The Paradox of China's Reform

May 22nd, 2012
A man begs on a street as a woman passes by in Shanghai on May 9, 2012. China could face an economic crisis in the next 20 years if it does not quickly overhaul its development model, World Bank and Chinese government researchers warned recently. (Peter Parks/AFP/GettyImages)

The compelling drama of former Chongqing Communist Party chief Bo Xilai’s ouster amid allegations of corruption and murder, and of blind Chinese human-rights advocate Chen Guangcheng’s dash to safety in the U.S. Embassy in Beijing (and subsequent flight to New York), are more than just fascinating narratives of venality and courage. Unless China can purge the thousands of corrupt party leaders like Bo, and empower people — like those Chen represents — who have been left behind or harmed by rapid growth, its economy will increasingly suffer.

Like the Asian Tiger economies before it, China has excelled in the first phase of capitalist economic growth, benefiting from massive infusions of capital, low-cost labor, intellectual-property theft, and centralized planning. And, like many of them, China is now facing a “middle-income trap”: as wages rise, its low-end manufacturing is losing global competitiveness while government policies, endemic corruption, and dominant state-owned enterprises are stifling the type of private-sector innovation that China needs most to generate products and services with higher added value.

China’s leaders understand this, which is why the government’s 12th Five-Year Plan calls for a gradual opening up of the Chinese economy. Likewise, a Chinese government think tank worked with the World Bank to produce the China 2030 report, which outlines the structural reforms needed to strengthen the foundations of the country’s market-based economy and create a climate of open innovation.

But if China’s national imperative today is reform, the greatest threat to that goal is the massive influence and institutionalized corruption of the country’s entrenched elites. For years, senior Chinese officials and their families have received a cut of countless major investments throughout China. They and their families have become multimillionaires by exploiting the close association of business and politics, as well their strong links with China’s state-owned enterprises.

The resulting rise in inequality has been exacerbated by China’s capital controls and mandated low interest rates on savings. For lack of other options, poor people put their money in banks which then lend to more privileged people to fund state-owned enterprises or much higher-yielding real-estate investments.

This system worked to drive overall economic growth and financial rewards in the first phase of China’s post-reform growth, but the incomes of ordinary Chinese have stagnated over the past decade, their interests have been neglected, capital has been misallocated, and major negative environmental and social side effects have emerged. Now those who have benefited most from the current system are blocking badly needed reforms.

For example, years of imbalanced incentives have led China to overbuild premium residential real-estate, which should cause prices to fall dramatically. But, although the government is trying to take some of the air out of the market, the authorities cannot easily take the more aggressive action that is required, because Chinese officials and other elites store so much of their wealth in real estate, which also comprises much of the collateral of state-connected banks, Similarly, although state-owned enterprises are sucking too much oxygen out of China’s economy, reforming them would require taking on China’s most powerful business and government leaders.

This is why the Chinese government’s dance around the Bo scandal has been so complicated. Bo may have lost an internal political struggle, and may have crossed a line after the murder of British businessman Neil Heywood, for which Bo’s wife is under arrest, but vilifying him is a double-edged sword for the government. On one hand, the authorities need to pursue him aggressively to justify the purge of someone who was so recently lauded. On the other hand, many of the accusations against Bo could be leveled at an extremely large number of senior officials across China who, like Bo, have amassed multimillion-dollar family fortunes.

In highlighting Bo’s misdeeds, the party is trying to demonstrate that it alone can and should be responsible for addressing official corruption. But given that the people who have benefited so much from the current system are unlikely to clean it up, the only other way to generate reform would be to empower the people getting the short end of the stick — people like Chen and those he has helped.

The crackdown on Chen for representing villagers who have been abused by the authorities follows the same pattern as the silencing of parents who protested shoddy school construction after the 2008 Sichuan earthquake, and of opponents of the environmentally damaging Three Gorges Dam. If China is serious about reform, it will need armies of people like these, fighting for their rights, in order to balance the overwhelming political power of its entrenched elites.

China’s reform process can succeed only if it is pushed from the top and the bottom. The party needs to find every possible way to get rid of the Bos in its midst. Instead of threatening people like Chen, the party should give them recognition and support. None of this will be easy, but the future of China’s economy depends on it.

This story was originally published by Project Syndicate.

Related Links

  • More Asia Society coverage of Bo Xilai
  • More Asia Society coverage of Chen Guangcheng
bo xilai
chen guangcheng
china
corruption
economics
jamie metzl
politics
reform
policy
asiablog
east asia

About the Author

Profile picture for user Jamie Metzl
Jamie Metzl is a founding partner at the global investment holding company Cranemere LLC and a Senior Fellow at the Asia Society.
 @jamiemetzl
About
  • Mission & History
  • Our People
  • Become a Member
  • Career Opportunities
  • Corporate Involvement
visit us
  • Hong Kong
  • New York
  • Texas
global network
  • Australia
  • France
  • India
  • Japan
  • Korea
  • Northern California
  • Philippines
  • Southern California
  • Switzerland
  • Washington, D.C.
resources
  • Arts
  • Asia Society Magazine
  • ChinaFile
  • Current Affairs
  • Education
  • For Kids
  • Policy
  • Video
shop
  • AsiaStore
initiatives
  • Arts & Museum Summit
  • Asia 21 Young Leaders
  • Asia Arts Game Changer Awards
  • Asia Game Changer Awards
  • Asia Society Museum: The Asia Arts & Museum Network
  • Asia Society Policy Institute
  • Asian Women Empowered
  • Center on U.S.-China Relations
  • Coal + Ice
  • Creative Voices of Muslim Asia
  • Global Cities Education Network
  • Global Talent Initiatives
  • U.S.-Asia Entertainment Summit
  • U.S.-China Dialogue
  • U.S.-China Museum Summit
Connect
Email Signup For the media
Asia Society logo
©2023 Asia Society | Privacy Statement | Accessibility | Terms & Conditions | Sitemap | Contact

Asia Society takes no institutional position on policy issues and has no affiliation with any government.
The views expressed by Asia Society staff, fellows, experts, report authors, program speakers, board members, and other affiliates are solely their own. Learn more.

 

 

  • Visit Us
  • Hong Kong
  • New York
  • Texas
  • Global Network
  • Australia
  • France
  • India
  • Japan
  • Korea
  • Northern California
  • Philippines
  • Southern California
  • Switzerland
  • Washington, DC