Reforms Hit Stiff Resistance

Back when the country started running a tight monetary policy and refused to ease, I said a crisis could be a good thing for reformers, since the way through may be to reform faster. Now the rubber is hitting the road with the 13th 5-year plan being formulated and the battle lines drawn between the reform (PBOC) and status quo (MoF) camps. It appears Xi and Li don't have the support needed to ram their reform agenda through, but to this point, the anti-reform camp doesn't have much to show in the way of victories unless the recent yuan depreciation counts.

SCMP: Xi Jinping's reforms encounter 'unimaginably fierce resistance', Chinese state media says in 'furious' commentary
"The in-depth reform touches the basic issue of reconfiguring the lifeblood of this enormous economy and is aimed at making it healthier," the article said. "The scale of the resistance is beyond what could have been imagined."

The commentary was attributed to "Guoping", an apparent pen name used by state media to comment on major state and Communist Party issues. It appeared in state media including the websites of CCTV and Guangming Daily.

Observers said the commentary suggested the reforms had not achieved the desired results and were opposed by various factions.

...Beijing-based political commentator Zhang Lifan said the commentary signalled that "things are not going well".

"Obviously they did not reach any consensus at the political activities in Beidaihe. Different groups are pursuing their own ways," he said. "This is a test of the leadership's ability to execute its mission."

Zhang said the goal of having the market play a decisive role in the "allocation of resources" was one case of a target that was still a long way off.
This next article was translated and posted at the top of iFeng's finance page. (外媒:中国高层对经济改革倾向减弱 因两个因素导致)

WSJ: China’s Resistance to Reform May Grow With IMF Rebuff
“After many years of feeling the waters ourselves and observing the U.S. subprime crisis and problems in Greece, there’s a sense there’s no particular checklist for what a market economy is,” said Zha Daojiong, an economics professor at Peking University. “Given the recent experience with stock markets in Shanghai and Shenzhen, there’s a growing feeling we need to be cautious on market reform.”

A strong sign of where China aims to pivot its economy is expected as soon as October with the initial draft of the government’s next five-year plan, due to be approved at the legislature’s annual gathering in March.

In many cases Beijing has sought to adjust the international order rather than adapt to it, such as in creating its own development bank and pushing bilateral currency agreements with trading partners rather than working through multinational groups.
The anti-reform camp wants to print money and depreciate the currency, but I repeat myself. This could put China on a path to confrontation with the U.S., where nationalist policies are being discussed for the first time in 20 years. Wait and see what the 13th 5-year plan cooks up, but the risk of negative developments outweighs the odds of positive developments at this point, particularly if the economy or stock market, or both, continue deteriorating.

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