Should-Read: Evan A. Feigenbaum: A Chinese Puzzle: Why Economic “Reform” in Xi’s China Has More Meanings than Market Liberalization: “What is going on that produces such a gaping disconnect between Beijing’s story about reform and the views of so many in the markets?…

…Or to put that point as bluntly as possible: are Chinese politicians and bureaucrats, as some international observers would have it, uniquely dissembling? I’d like to argue that a major part of this disconnect stems from a yawning gap in the definition of what actually constitutes “reform” in the Chinese political context of today. To put it as directly as I can, “reform” simply does not have the same meaning in China today that it does to many of us, and especially to a lot of market observers. Unsurprisingly, we tend to focus on market liberalization, to the exclusion of most else. But economic “reform” in Xi Jinping’s China has at least two additional meanings—and these can actually contradict and undermine market goals.

To Beijing, “reform” means:

  • market liberalization;
  • administrative measures to increase bureaucratic and operational efficiencies; and
  • a rebalancing of authorities and decision powers among central and local levels of government.

Viewed in those broadened terms, there is actually quite a lot of “reform” happening in China today. But so much of that reform simply does not implicate the market. And even more important, these three distinct Xi-era “reform” goals can flatly contradict each other. That, in turn, leaves Beijing often trading off one kind of reform in pursuit of another. And more often than not, it is market liberalization that slips to a (distant) third priority between administrative reform and changes to Chinese-style “federalism.”… Xi Jinping has put a very clear premium on political aims, not economic goals…. Whatever [economic] rebalancing has taken place has mostly happened organically rather than by policy intervention or design. And this means that the Chinese president’s top three priorities—a cleaner CCP, a more disciplined CCP, and a stronger and more enduring CCP—have yielded a deeper connection between political goals and economic policy outcomes than China has witnessed in a generation. Inevitably, this leads to an overemphasis on the administrative aspects of reform….

Here are the three big things I take away from the fact that debates about “reform” in China are now much broader than the one we are having outside its borders: One takeaway is that reform is, quite simply, about Beijing’s priorities, not ours…. Second, Beijing is not nearly as attuned to foreign firms as it used to be. That means the reforms American and European multinationals want are just not going to happen without a lot of backstopping from their home governments…. Third, reform in China will, for at least the next five years, be viewed almost exclusively through a domestic lens.

When Xi Jinping and his colleagues toss and turn at night, I suspect their major policy nightmares and preoccupations are entirely homegrown: (1) how to stay in power and overcome dissent; (2) how to create some 12 million new jobs each year; (3) how to maintain sufficient growth to support those employment goals; (4) how to manage the demographic challenges of an aging country through welfare and “entitlement” reforms; and (5) how to mitigate pollution and environmental challenges. These five priority agendas implicate reform in all three of the senses I outlined above. But they do not all implicate market liberalization equally, and some of them not very much at all…. Xi Jinping is going be leading the country for a very long time to come. Like it or not, this is what I suspect “reform” is going to mean in China for a long time to come as well.