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Contributors to The Wall Street Journal’s Chinese-language site see stark choices about China’s future as Chinese leaders hold an important policy meeting. Here are three excerpted takes.

Wei Sen, a professor of economics at Fudan University in Shanghai, writes that serious market reforms will necessarily involve political reforms (Chinese here).

China’s current economic and social setup determines that any step taken to further deepen the market reforms will have to deal with the underlying issue of reforming the system of government and the political structure. Take the example of fiscal system reform that many ordinary Chinese and government officials pay close attention to. The reform will have to face the issue of allocating interests between the central and local governments…  Even with this one single agenda for reform, it will trigger a bargaining game between the central and local government, more specifically the State Council, the Ministry of Finance and local governments. Therefore, naturally it’s extremely difficult to reach a consensus and carry out substantial reforms.

To summarize this, China’s reform version 4.0 won’t be able to circumvent the central issue of reforming the political system reform. China’s next step in the market-oriented reforms will no longer be about giving the enterprises and market more freedom to operate and more opportunities. It will be about how to establish a system of checks and balances against the government power in a country that has established a market economy. Only when the power of government at various levels is subject to real systematic constraints and balances, only when power is locked in the “cage” of a system, will China have a market economy that is standardized, fair, orderly and harmonious.

Larry X. Wu, an independent investment advisor, writes on the fate of the private sector under policies that are “politically left, economically right” (Chinese here).

China’s current political roadmap looks more and more like one of “tightening the political grip and loosening economic control,” or “politically left, economically right.” This means an authoritarian approach to strengthen the ruling party’s power combined with a market approach to broaden economic freedom. This mix-up of two seemingly contradictory approaches may not necessarily fail. There are a few precedents for “success” as far as economic growth is concerned. But even the success of such a roadmap will likely paint a bitter scenario for entrepreneurs in the private sector.

All those countries and regions that have made economic achievements pursuing an approach of “tightening the political grip and loosening economic control” have something in common. They all, with perhaps one exception, made economic progress as a colony or a client state, and the sovereign state or the state in control were always advanced democracies with strong free-market traditions. Pinochet’s Chile was under the influence of the United States. Fast-growing South Korea had a military regime but was guarded by US troops. Hong Kong made its prosperity as a non-democracy while ruled by the United Kingdom. In these cases, the governments’ power was not reined by its own people, but was nevertheless under the scrutiny of an outside democratic power. The existence of an outside influence, which was neutral to local economic interests, helped lay the ground for fair competition and therefore encouraged entrepreneurship.

The only exception, namely Singapore, which upholds its national pride and scorns Western influence from time to time, also practices free-market economics under a heavy-handed government. But its domestic economy is dominated by government-linked companies, and its private sector is limited in its success. Government power, lacking either internal checks or outside scrutiny, became inevitably a factor in doing business. Similar to Singapore’s case, I am afraid that China, in implementing the “tightening the political grip and loosening economic control” strategy, will leave most benefits of a less-regulated market to companies that are linked to a less-checked government power and thus will hurt the real private sector.

Ha Jiming, chief investment strategist for Goldman Sachs China, offers advice on how to judge the Chinese leadership’s intentions on reform (Chinese here)

What kind of reforms does China need? This writer believes China needs two types of reforms: one is to improve productivity while the other is to transform the pattern of economic growth pattern. Simply put, it’s to improve the efficiency of growth and adjust the economic structure.

This writer believes that in the current Chinese economic cycle a simple but effective quantitative indicator to evaluate whether there will be substantial reform is the economic growth target for next year. Adjusting down the growth rate doesn’t necessarily point to reform. But if the growth target is still set at 7.5% or higher, it will be hard to believe that there will be important reforms in short term. That’s because the current economic cycle requires reforms for deleveraging, slowing down investment speed, cleaning up and digesting overcapacity and curbing the real estate bubble. All these necessary adjustments would lead to a slowdown of short-term investment growth and definitely a slowdown of overall economic growth. Consumption and exports won’t be able to grow substantially in the short term to compensate for the impact of an investment slowdown. Suppose China has succeeded in rebalancing its economy through reforms and gradually lowered the percentage of investment in GDP to 40% in 2020. Its economic growth should slow to below 7%. Otherwise, the rate of investment would go up, the economy would go on being imbalanced, overcapacity would continue and risks would keep piling up.




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