Chinese Prime Minister Li Keqiang in a recent speech that is being hailed by Nobel economist Gary Becker as “remarkable” argued in favor of private investment and free market forces.
"The market is the creator of social wealth and the wellspring of self-sustaining economic development,” Li said.
Considering the fact that this is China we’re talking about, Premier Li’s pro-free market remarks are, well, remarkable.
As Business Insider notes, the exact wording for the policy proposal in Premiere Li's speech, according to a directive The New York Times' David Barboza and Chris Buckley cite, is, “promote the effective entry of private capital into finance, energy, railways, telecommunications and other spheres.”
The directive goes on to state that the Party should allow the markets to determine banks interest rates.
It is widely believed that Li’s speech, unexpected as it is, is in response to China’s economic stagnation. In short, they’ve run out of other options and they have nowhere to turn.
But although the Premier himself says the Party should embrace free market forces, there will no doubt be blowback from state-run entities whose very existence is dependent on government protection from private competition.
China’s new leaders have now made clear that the country needs to rely much more on the creativity and resourcefulness of the private sector if it is to move beyond middle income status, and become a major economic power as measured not only by aggregate GDP, but also by per capita GDP.
It remains to be seen whether even the new leaders can overcome the strong opposition of SOEs and other special interest groups to the implementation of a major shift toward the private sector.
“Barboza and Buckley say foreign investors will now also have opportunities to invest in logistics and health care in addition to the above-mentioned sectors, but note the directive does not provide exact details,” Business Insider’s Rob Wile notes.
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