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Deng Undone

The Costs of Halting Market Reform in China

Courtesy Reuters

The year 2008 marked the 30th anniversary of the beginning of market reforms in China -- and perhaps the third anniversary of their ending. Since the present Chinese leadership took power, market-oriented liberalization has been minor. And as such policies have wound down, they have been supplanted by renewed state intervention: price controls, the reversal of privatization, the rollback of measures encouraging competition, and new barriers to investment.

Why would China, with a generation of successful market reform under its belt, move back toward state control? Because of politics run amok. When the administration of President Hu Jintao and Premier Wen Jiabao assumed control seven years ago, they acted like any new Chinese regime: they moved to solidify their power through economic stimulus. Only they did not stop. Soon after they took office, lending by state banks and investment by local and national state entities soared. Helped temporarily by very loose

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