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China's ex-premier leaves an unfinished reform legacy

Beijing: WhenChina’s Communist Party released the names of its 205-person Central Committee a year ago, there was a glaring omission: Li Keqiang, thepremier.

The exclusion of Li, who died of a heart attack on Friday at the age of 68, seemed to confirm what many long assumed – that his brand of economicreformhad been officially scrapped in favor of President Xi Jinping’s state-led approach to the economy.

Reformis once again on the minds ofChina’s policy makers and analysts as it struggles to revive flagging consumer demand and fend off Japan-style economic stagnation.

But rather than push changes advocated by many economists, such as renewed urbanisation and more space for private enterprise,Chinaunder Xi has put more power in the hands of the state.

“It’s notanexaggeration to say thatanera is over –anera whenreformscould be steadily pushed forward,” said a government policy adviser who declined to be identified.

Li retired in March after a decade asChina’s second most senior leader andanadvocate for private business but his power had been limited after Xi made himselfChina’s most powerful leader in decades and tightened control over the economy and society.

The English-speakingpremier, who held a PhD in economics from the elite Peking University, focused on improving conditions for entrepreneurs, wooing foreign investors, cutting red tape and boosting incomes for the poor.

But ambitious market-basedreformsBeijing unveiled in 2013 quickly ran into trouble, including a 2015 stock market crash following a botched currencyreform. Under Xi’s leadership, the world’s second-largest economy gradually turned back to old policies that have added toChina’s debt pile and industrial overcapacity.

“The scope for Li’s policymaking and implementation had became more subordinated under President Xi Jinping, who had unabashedly dominated in politics and policy making, relegating Li to playing second fiddle,” said Dali Yang, a politics professor at University of Chicago.

Allies

China’s economic miracle started in 1978 when Deng Xiaoping launched historicreforms, allowing more private enterprises and opening the economy to foreign investment.

Li was not the only pro-reformleader who ended up out of the picture. Former economic tsar Liu He, former banking regulator Guo Shuqing, and former central bank chief Yi Gang, have all left government.

Xi has instead packed the government with his allies, mostly officials with limited international or financial experience.

Beijing is unleashing a round of stimulus in a bid to shore up the economic recovery but economists warnChinacould be headed for a long-period of deflation and stagnant growth that fails to lift living standards for its 1.4 billion people.

Some government advisers have been beating the drum forreforms, focusing on spurring urbanisation and household spending power, reducing reliance on investment and leveling the playing field between state-owned enterprises and private firms.

A Communist Party plenum, expected in November and which has traditionally focused onreforms, could disappoint those awaiting big changes.

“I don’t expect any breakthroughs onreforms,” said the government policy adviser.

(Published 27 October 2023, 12:28 IST)

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