Federalism, Chinese Style

Inside Beijing's Rebalancing

A Chinese flag in central Beijing, February 28, 2013. Petar Kujundzic / Courtesy Reuters

More than a year into Chinese President Xi Jinping’s tenure, Beijing’s economic mantra has remained remarkably consistent and clear: China’s growth model is broken and needs to change.

The Chinese Communist Party enshrined that pledge in its economic reform agenda at last year’s Third Plenum, and then reaffirmed it in March at the annual session of China’s legislature, the National People’s Congress. But such clarity of purpose cannot obscure the fact that the actual execution of economic reforms will not succeed unless the Chinese state reshapes itself in far-reaching ways.

For one thing, as we argued last December, the scope of state power in China needs to be rolled back. The plenum’s most important policy decision was to announce that the market would now play a “decisive” role in allocating resources. If that is to be true, then many of the functions that

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