Economist Wu Jinglian is known as the 'spiritual leader' of the pro-market reform camp in China. Photo: AFP

Wu Jinglian is regarded as China’s most celebrated economist. At the ripe old age of 89, he is considered the “spiritual leader” of the pro-market reform camp.

Last month, in a video address delivered at a seminar run by the liberal think tank, the Hongfan Institute of Legal and Economic Studies, he warned of the dangers of “crony capitalism.”

“It’s inconsistent with our reforms,” he said in a 20-minute speech. “We have made it clear that we will pursue a market economy … rather than state control of the national economy.”

His comments and the remarks he made at the annual meeting of the Chinese Economist 50 Forum in Beijing at the weekend were not lost on a new breed of reformers.

In response to large-scale monetary easing to kickstart the world’s second-largest economy, he sounded a note of caution.

“If the two are compatible, in theory, economic policies should not be changed,” Wu, who is still closely linked to the influential State Council’s Development and Research Center, said.

“[But] in the past several years, we have used demand-boosting policies such as monetary injection to increase the actual growth and make it higher than the potential growth.”

His views were significant as they came just 24 hours after the latest round of trade talks between China and the United States concluded in Beijing.

They are due to resume in Washington later this week and that was probably why Forum co-founder and Vice-Premier Liu He was absent from the AGM at the Diaoyutai State Guesthouse.

Liu has always been a fan of “Market Wu,” as he is known among China’s academia, and his calls for less state intervention will not be lost on the pro-reformists.

Additional tariffs on Chinese imports worth at least US$200 billion could be rolled out if Washington and Beijing fail to reach an agreement by then.

Again, the timing was apt with US President Donald Trump reiterating that he could extend the March 1 deadline in a bid to hammer out a deal.

Additional tariffs on Chinese imports worth at least US$200 billion could be rolled out if Washington and Beijing fail to reach an agreement by then.

Since the economy was already in a precarious position before being engulfed by trade war fallout, resolving the dispute has become a priority.

Last month, the National Bureau of Statistics announced that GDP growth for 2018 slowed to what at first glance appeared a robust 6.6%. In reality, this was the slowest pace in nearly 30 years as manufacturing stalled and consumer spending dipped.

Smartphone shipments also dropped while car sales plunged 5.8% last year to 22.35 million vehicles, which was the first annual decline since 1990.

Still, the first real snapshot of 2019 came last week when the Ministry of Commerce and the statistics bureau reported that sales growth fell to its lowest levels for eight years during the Chinese New Year festive period.

“The medium- to long-term accumulated contradictions and risks throughout economic development are going to become more prominent in 2019,” Wang Bin, a Ministry of Commerce official, told a media briefing. “The pressure facing the consumer market will increase and consumption growth is very likely to slow further.”

In the past, Beijing has reverted to a massive program of spending, usually in state-run projects. A scaled-down version has been wheeled out this time along with tax cuts, and funding for small- and medium-sized enterprises.

During the past three years, the sector has been starved of investment with bankruptcies climbing in the last six months, fueling unemployment fears.

How this will affect the constant pledges on further reforms resemble a riddle contained in a mystery wrapped up in an enigma. But probably not to “Market Wu.”

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now. 

Leave a comment

Your email address will not be published. Required fields are marked *