Over the past decade, China has drifted away from its previous policy of free market reforms, toward a more statist economic model. Statism almost never works, and the recent Chinese experience is no exception. Now Bloomberg reports that China may be willing to move back toward a somewhat more market-oriented economic policy regime:
Chinese President Xi Jinping presided over a meeting with Alibaba co-founder Jack Ma and other prominent entrepreneurs on Monday, signaling Beijing’s endorsement for a long-marginalized private sector now considered key to reviving the world’s No. 2 economy. . . .
He promised to abolish unreasonable fees or fines against private firms and level the competitive playing field — a common complaint of entrepreneurs in a state-dominated system. On Monday, China’s parliament said it would review laws centered on promoting the private economy.
“It is necessary to resolutely remove all kinds of obstacles to the equal use of production factors and fair participation in market competition,” Xi told the entrepreneurs, according to Xinhua. Beijing should “continue to promote the fair opening of the competitive field of infrastructure to all kinds of business entities, and continue to make great efforts to solve the problem of difficult and expensive financing for private enterprises,” Xi said.
China’s stock market has responded to this policy shift with a significant rally:
This is not just good news for China’s investors; it’s also good for the broader Chinese public, and indeed for the entire world.
China’s move toward statist economic policies coincided with a more aggressively nationalistic foreign policy. Let’s hope this correlation works in the other direction as well. On average, countries that embrace free markets tend to have a more internationalist outlook on foreign affairs. This is not always the case, but the correlation is quite strong. Compare North and South Korea, or the UAE and Iran, or Venezuela and Colombia. Again and again, we see the most statist countries being the ones that are most likely to try to antagonize their neighbors.
