Chinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020. The 60-point agenda was meant to fix an obsolete growth model better suited to less developed countries - however, most of those reforms have gone nowhere leaving the economy largely reliant on older policies that have only added to China's massive debt pile and industrial overcapacity. The failure to restructure the world's second-largest economy has raised critical questions about what comes next for China.
FILE PHOTO: People walk in the Central Business District on a rainy day, in BeijingBEIJING - Chinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020.
"Things always fail slowly until they suddenly break," said William Hurst, Chong Hua Professor of Chinese Development at University of Cambridge. Since then, the economy quadrupled in nominal terms while overall debt expanded nine times. To keep growth high, China in the 2010s doubled down on infrastructure and property investment, at the expense of household consumption.
One is a swift, painful crisis that writes off debt, curbs excess industrial capacity and deflates the property bubble. Another is a decades-long process in which China winds down these excesses gradually at the expense of growth. The third is switching to a consumer-led model with structural reforms that cause some near-term pain but help it re-emerge faster and stronger.
But given state control of many developers and banks and a tight capital account that limits outflows into assets abroad, that is a low risk scenario, many economists say.
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