Economic Policy

The ‘Decision’ released by the Third Plenum of the Eighteenth CC (November 2013) is a remarkable document that critiques the reform approach to date and proposes a significant shift in the relationship between the role of government and that of the market. It is all the more remarkable given that the economy grew at over 10 per cent per annum under Hu Jintao and Wen Jiabao’s leadership (2002–2012). Yet even Wen had declared the current growth model to be ‘unbalanced, unstable, uncoordinated, and unsustainable’. Indeed, the priorities of Hu and Wen were remarkably similar to those of Xi Jinping and Li Keqiang: increase the role of the market in resource allocations, reform the state-owned enterprises, stimulate the non-state sector, cut the red tape and corruption, and reform the financial system so that investment will be allocated more efficiently. Yet on the economic front not much happened in terms of reform and the strength of ‘vested interests’ grew to frustrate further reform and many began to think of the Hu period as a lost decade.