But at the national level, many of the 336 pro-market tasks outlined in leadership’s broader 2013 reform document, which was then regarded as a key means of unleashing the country’s long-term growth potential, have progressed more slowly than the market expected.

“It’s high time for us to reflect on the actual implementation of the hundreds of tasks outlined in the 2013 plenum,” said Wu Jinglian, an outspoken and respected economist who helped chart China’s reform path from the era of former paramount leader Deng Xiaoping.

“At this juncture, we must identify unfulfilled tasks, hone in on the root cause and finish them in earnest,” Wu, 94, said in an article in the March issue of the Exploration and Free Views academic journal.

Progress and unfinished reforms

However, many economists have questioned sustainability, as GDP growth has slowed significantly in recent years and growth prospects remain dim when factoring in a rapidly ageing population, high debt mountain and external headwinds.

Meanwhile, the national debt has accumulated to such a level that an immediate deployment of reforms, rather than further government loosening, could be on the cards.

Although Beijing has said that more than 2,000 measures were taken in the past decade, many economists and market watchers have attributed the current economic doldrums partly to Beijing’s incomplete pro-market reforms.

“The reform work [from 2013] remains the best benchmark for China’s ability to attain its growth potential,” said Camille Boullenois, an associate director with American consultancy Rhodium Group’s China Projects team, which tracks reform progress.

“But [reform progress] is not nearly as much as the 2013 agenda had outlined, and far behind leading market economies.”

Boullenois said China’s framework to overhaul the lumbering state-owned-enterprise (SOE) sector, announced in 2015 and featuring an added emphasis on party oversight, marked a departure from the pro-market stance declared two years earlier.

“Beijing found it was not ready to pay the painful price to soldier on when there are entrenched interests that are hard to fight: SOEs and local governments have an incentive to slow down reforms,” she said.

Such moves to further entrench, not reduce, state controls have become more common and impactful since the pandemic. From 2021-23, the share of SOEs among China’s top-100 listed firms – by aggregate market capitalisation – increased from 31.2 per cent to 50 per cent. The growth in state ownership was more pronounced in the financial and tech sectors.

Beijing’s pledges to open up China’s financial sectors have seen limited progress when compared with its lofty goals set around 2013, when it vowed to make the yuan much more international and convertible while opening up capital accounts.

Why reforms remain unrealised

Open and public discussions about pro-market reforms have died down in recent years, despite more economic challenges arising from the pandemic and a domestic slowdown, as well as trade disputes with the West.

A Beijing-based specialist in how public policy is created and implemented, speaking on condition of anonymity, said that while China’s reform efforts have not been without progress since 2013, the tenor of policymaking has generally become more interventionist.

“The economy’s structural changes are predominantly controlled by the government,” the academic said.

China had attempted to solve some deep-seated problems through a supply-side structural reform from 2015. Emphasis was put on curbing overcapacity, shedding inventory and deleveraging, while coal, steel and cement were among the industries being most intervened in – signalling a strong government approach.

“Beijing’s need for market reform requires itself to reduce interference. However, it also has needs to address – social equality, security and elimination of poverty – that call for a proactive government,” said Zhou Zheng, a senior analyst with Zurich-headquartered consultancy China Macro Group.

For its part, when announcing reforms a decade ago, Beijing did offer a caveat, comparing reforms to navigating deep and uncharted waters, and noting that it was imperative to coordinate development with security.

And more recently, external headwinds and competing priorities from politics to security appear to be further sapping Beijing of its resolve to see through some long-anticipated reforms.

Deglobalisation and the deterioration in China’s ties with the West, playing out on the trade and tech fronts, have heightened Beijing’s risk concerns to the point that it is elevating security and putting some reforms on the back burner as it marshals resources amid geopolitical rivalries.

The pandemic also upended plans, throwing many reforms into disarray and further complicating China’s external environment.

David Zweig, a professor emeritus of political sciences at the Hong Kong University of Science and Technology, argued that amid these shifts, Beijing has prioritised other strategies like Made in China 2025 for the tech catch-up, and that has led to stronger state intervention via fiscal and industrial policies.

“Manufacturing, tech and self-sufficiency are now at the heart of Beijing’s economic vision,” he said.

Zweig added that the success of the 2025 plan and China’s lead in EVs and green sectors has reinforced Beijing’s belief that a stronger government is better than reforms in upgrading industries and fighting against the West’s containment efforts.

“Beijing thinks this is essential for China to stay organised, to win this contest,” he said.

“There are scarring effects and a reform deficit … People and businesses need to be reassured,” said the Beijing-based academic.

And the veteran economic adviser, Wu, warned that some people still reject basic economic laws, and that we could see a creeping return of the decades-old debate over who – the government or the market – should lead the economy.

Now it is urgent for Beijing to recommit to reforms set out in 2013, he said.

“To begin with, we must build a unified, open, competitive market, which remains at the core of all reforms,” the reform advocate said. “We must also put in place and enforce competition policies.”

Catching up with the times

On Wednesday, the People’s Daily party mouthpiece ran a front-page editorial emphasising the resolve of leadership to deepen reforms.

“Taking comprehensive and in-depth reforms is the fundamental driving force for promoting Chinese-style modernisation,” it said. “Reform and opening up are an important means for China to catch up with the times.”

Beijing had mentioned in a late-April Politburo statement that reform would be a key topic at the upcoming third plenum, and the market has been rife with speculation as to what that might entail.

President Xi, China’s most powerful leader in decades, has also mentioned reforms on multiple occasions – including on his inspection of Shanghai last year, and in a face-to-face chat with economists and entrepreneurs last month.

The early June meeting of the Chinese People’s Political Consultative Conference, the top political body, provided some early signs, with proposals including tax and fiscal reforms; a unified national market; support for the private sector; opening up with free-trade zones; improving social welfare and medical coverage; and urban-rural development. Related discussions revolved around the theme of building a high-level socialist market economy system.

At the same meeting, former central banker Yi Gang touched on the necessity of economic-system reform, saying there was an urgent need to reduce restrictive measures that impair rights and fair competition, and that intervene or restrict consumption.

“The government should maintain a fair, competitive environment, abide by the law, accept public supervision, and only in the event when the market fails to function, can the government intervene,” Yi said.

For foreign observers, questions are swirling about whether market-oriented reforms are still on the cards.

“Reform doesn’t necessarily signal a change of direction,” said Mark Williams, chief Asia economist with London-based Capital Economics. “The leadership won’t countenance a further rollback of the state and party needed to unleash more economic dynamism.”

Williams said a modern industrial system; the governance of state and private firms; science and technology; and China’s fiscal and monetary policy could top the agenda in July, but he was not expecting any groundbreaking shifts.

“No third plenum this century has delivered significant economic change. The July meeting may conclude with a long list of pledges, with no hints about implementations or priorities. It will probably be several months before it is clear whether pledges amount to much,” he added.

Just like in 2013, there have also been new promises involving the Shanghai Free Trade Zone ahead of the new plenum: the zone will explore more reforms while serving as a stress test for China in its bid to join international trade pacts.

“The proof is in the pudding,” said HKUST’s Zweig. “We will see how any new big bang measures will be implemented to give a positive jolt to the economy.”