Will the “China Rising” Narrative run into the Reform Blues?

A recent post noted how well-connected state-owned enterprises in China were stymieing key economic reforms advocated by outgoing Premier Wen Jiabao and questioned whether the country’s new leader, Xi Jinping, would do any better given that the country’s 145,000 state-run companies are a gold mine of wealth and privilege for rent-seeking Communist Party elites.  Indeed, as media reports (here and here) about the extraordinary wealth accumulated by Wen’s and Xi’s own families demonstrate, the economic system is so riddled with nepotism that even these putative reformers are not without serious taint.

Amplifying this point is a just-published Bloomberg News report finding that the most influential families in the party’s power structure have amassed sizeable fortunes through their control of state firms.  According to the report, 26 members of these families ran or held top posts in state-owned enterprises that dominate the economy, and that three individuals either headed or still control companies with combined assets amounting to more than a fifth of the country’s annual economic output.

Reports like this make one wonder whether China’s new crop of leaders can ever muster the political will to reform the state-centric model of economic management that a new World Bank report warns will eventually derail the country’s high-flying trajectory.  Their success or failure will go a long way toward resolving the debate between those who contend that China’s hegemonic dominance is all but assured and those (like this blog — see here, here and here) who believe the sources of U.S. global power are more durable.  The coming decade or so will furnish some important tests about who’s right and who’s wrong in their predictions about the evolving world order.  Stay tuned.

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