Mar 28, 2012 06:25 PM

Let Good Ideas Prevail over Ideology

A good piece of reform advice is causing a great deal of rhetorical fire in China.

The spark was the "China 2030: Building a Modern, Harmonious and Creative High-Income Society" report jointly published by the State Council's Development Research Center and the World Bank. The Ministry of Finance contributed research.

The report looks at China's reform and developmental needs over the next 18 years and has drawn criticism for suggesting state-owned enterprises (SOEs) change the way they operate.

These suggestions include bettering modern corporate governance practices within SOEs, reassessing their access to public resources and lowering entry barriers for all sectors.

 There are two main objectives behind the proposals. One is to make SOEs more competitive and efficient by making them players in a fairer marketplace.

The other goal is to allow state capital to benefit the people better by, for example, capitalizing state assets for greater liquidity and transferring state-owned assets or state-owned shares to social security funds. Given their scale and strength, SOEs can greatly improve national pensions, social security, medical provisions and other types of welfare. In this way, the reform of SOEs can contribute to greater public wealth.

The general demand for this kind of reform is rising all the time, but the volume of criticism against these proposals – even before the text has been released in Chinese – shows just how rocky the road to change will be.

 The critics seem to share a consistent view. In their eyes, the report is a poisonous brew prepared for China by a U.S. cabal to undermine the basic economic system of Chinese socialism and to divert China's economic reform into "a mire of privatization."

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