What happened to 'Likonomics?' Look in Xi's shadow
MASAHIRO OKOSHI, Nikkei staff writer
BEIJING -- A year into his turn as head of the Communist Party, Chinese President Xi Jinping seems to have seized the banner of reform from Premier Li Keqiang.
That reform is a priority for China's leaders was clear from the communique issued at the close of the recent party plenum, the third under Xi's leadership. Giving markets a bigger role in the economy forms only part of "comprehensively deepening reform," a slippery bit of jargon that also encompasses population policy, the judicial system, national security and other areas. Xi's priorities seem to be eclipsing Li's.
A "Leading Small Group" is to take charge of "general planning of reform, comprehensive coordination, overall direction, and supervision of implementation." In China, such party appendages become de facto decision-making bodies. It is fair to say that the party, and ultimately Xi, will call the shots on reform, not the State Council, i.e., the government, headed by Li.
A senior executive at a state-owned company offered a glimpse into the workings of the party's economic policy shortly before the plenum. He said that Liu He, a Harvard-educated economist wielding considerable influence on the reform debate in Xi's inner circle, was said to be recruiting bureaucrats recently returned from overseas studies, with the aim of doubling or tripling his staff at the party's Central Leading Group on Financial and Economic Affairs. Since then, rumor holds that this group and others like it are to be disbanded and merged with the new reform team. If so, Liu may have been rounding up more hands to do Xi's bidding in the reforms to come.
Another way of looking at the post-plenum scene is that Xi and Li are now speaking from the same script. To Li's credit, the party endorsed some of what he has advocated, notably faster creation of free trade zones and the "transformation of government functions." And the various arms of the government will certainly be responsible for fleshing out and implementing all these policies. Even so, Xi appears to have put his stamp all over the reform movement itself.
"Likonomics," a term coined by Barclays Capital and taken up enthusiastically by the Chinese media, is hardly mentioned now. China has not veered from the core principles of Li's economic thinking: reject short-term economic stimulus, restrain credit risk, and restructure the economy by cutting excess corporate capacity and so forth. But they have apparently been subsumed under the heading of "comprehensively deepening reform."
China is now facing its third major dip in economic growth in the 35 years since Deng Xiaoping put the country on a path to reform and openness to the world. The first came in the late 1980s and reached its lowest point after the 1989 Tiananmen Square protests. Deng responded to this slump by renewing his call for reform in a series of speeches during a 1992 tour of Shenzhen, home to a pioneering special economic zone. Growth flagged again at the end of the '90s as bad loans imperiled banks. Again, China avoided a crash by turning outward, joining the World Trade Organization in 2001. Now the world's second-largest economy, China appears to be nearing the end of its peak growing years, slowed by an aging society and other problems. At the recent plenum , China's leaders tried to respond to the need for structural reforms to ensure a transition to stable, sustainable growth.
But "Xiconomics," if there is such a thing, is as difficult to grasp as it is to pronounce. The reforms put forward by the party this time read like a laundry list of chores that past leaders put off. What Xi needs is the ability to follow through, coupled with a sense of urgency.
In the past, the party took a week to release the full text of decisions made at third plenums, issuing only a communique on the final day. This time, it "deliberately moved up the release" to three days after the meeting, a source says. Party leaders no doubt watched stocks slide in disappointment on the day after the latest communique. But the timing of party statements matters less than the speed of reforms. Will Li shine as the leading man in this transformation, or will he remain under Xi's shadow?