28 February, 2006

trapped transition

AsiaPundit has just returned from a Shanghai Foreign Correspondent’s club event featuring speaker Jerome Cohen. That means light blogging this evening. Cohen spoke of “China’s Impending Crisis of Administrative and Legal Institutions,” arguing that China’s legal reforms, while impressive on paper, have not taken hold in practice.

The government has been educating peasants on their rights and telling them to use the legal system to solve their problems. These could be good things, but as the legal system is biased and does not provide unbiased redress, it only adds extra frustration when cases fail to be heard or addressed in a just manner. To simplify one aspect of a 90-minute talk, China’s legal reforms are in a broad sense leading to more frustration rather than greater justice. Elites, who control the system, have little incentive to reform.

This Financial Times item reproduced by Howard French makes a similar argument but with a different focus. Reforms on state-owned companies have also failed to deliver. A full reading is recommended: ‘China is Stagnating in its Trapped Transition‘:

These two anomalies - faltering institutional reforms and political stagnation - are central to understanding a “trapped transition”, a transformative phase in which half-finished reforms have transferred power to new, affluent elites who know better than their Little Red Book-waving predecessors how to resuscitate moribund communism with crony capitalism. Partial reforms have thus created a hybrid, albeit state-centred, system that allows these elites to perpetuate their privileges. In China, mixing command and control with embryonic market forces enables the Communist party to tap efficiency gains from limited reforms to sustain the unreconstructed core of the old command economy - the economic foundation of its political supremacy.

In a “trapped transition”, the ruling elites have little interest in real reforms. They may pledge reforms, but most such pledges are lip service or tactical adjustments aimed at maintaining the status quo. In economic reform, after making an excellent start in de-collectivising agriculture and privatising small state-owned enterprises, momentum has stalled. The state still owns nearly 60 per cent of fixed assets and dominates vital industrial sectors, from financial services to energy. Today, Beijing’s guiding principle is not to exit these Leninist “commanding heights” but to reinforce them. The private sector remains hobbled by government restrictions and discrimination.

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by @ 12:13 am. Filed under China, Asia, East Asia, Northeast Asia

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