BEIJING – As a Xi Jinping has begun pushing a remedy that sounds less like Marx and Mao than Reagan and Thatcher., President
Mr. Xi is calling his next big economic initiative â€œsupply-side structural reform,â€ a deliberate echo of the nostrums of tax cuts and deregulation advocated by those conservative Western leaders in the 1980s.
The new slogan, expected to receive top billing when Chinaâ€™s legislature convenes Saturday, represents an effort to rejuvenate Mr. Xiâ€™s faltering plans to overhaul the Chinese economy. But he still faces widespread skepticism that he is committed to thorough restructuring, which would require cutting back bloated state enterprises, along with millions of jobs.
â€œThatcher and Reagan are highly regarded because it was proven that they made the right choices under heavy pressure,â€ said Jia Kang, an economist in the Ministry of Finance who is the most prominent advocate of the new policies. â€œTheir spirit was one of boldly taking on challenges and innovating, and thatâ€™s certainly worth Chinese people emulating.â€
The supply side Mr. Xi is referring to would, like Reaganomics, include lowering taxes and reducing the government burden on investors. Yet its main goal appears to be shutting or paring down mines and factories that produce far more coal, steel, cement and other industrial products than the market demands and reining in the credit and subsidies that feed that glut.
Some economists say the supply-side rubric is at least a step toward painful measures that could lead to healthier growth.
â€œIt is an important new initiative designed to reinvigorate the reform process,â€ Barry Naughton, a professor of economics at the University of California, San Diego, said by email. â€œPolicy-makers have stumbled repeatedly, and overall the achievements in market-oriented reform have been meager. Policy-makers needed to come up with another approach.â€
Mr. Xi has reorganized Chinaâ€™s military and orchestrated a scorching campaign against corruption. But similar breakthroughs in the economy have so far eluded him, a failure that many economists say has sapped business confidence in future growth.
On Wednesday, Moodyâ€™s Investor Service, the credit rating agency, lowered its outlook for China from stable to negative, citing â€œuncertainty about the authoritiesâ€™ capacity to implement reforms.â€
By Chris Buckley – Continue Reading….