China's left turn

Significant new policies mean a decisive shift back towards state intervention. This is likely to have important implications for foreign investors and manufacturers and may lead to higher wage costs, stronger unions and stricter regulation...


Two new documents from the Chinese government, disclosed officially but little noticed abroad, left no doubt that 'leftist' factions have won the argument to rebalance economic policy after two decades of a dash for growth at any cost.

Even the state news agency, Xinhua, said the new policies responded to 'rampant pollution, growing wealth disparity and complaints about the high costs of education, housing and medical services'...

Reform has lifted hundreds of millions of Chinese out of poverty but now the party’s leaders want to tilt the scales towards equality....

Among the effects already felt by business are tighter controls on foreign investment, pressure to raise wages, official demands for union recognition in every foreign enterprise, state curbs to cool property prices, restrictions on foreign property ownership and a heavier hand of regulation over commercial activity.

Tax breaks for foreign investors could come under scrutiny next, while the government is already phasing out subsidies for exporters...

The reasons range from the Communist party’s fear of rising discontent to nationalism and the renaissance of 'New Left' theoreticians. 'China has now come to a critical moment in building a comprehensively well-off society,' said vice-premier Wu Yi, a veteran advocate of 'reform and opening up'.

The new generation of leaders has reacted to riots and protests with stern repression — but it also sees the need for pre-emptive concessions to stave off challenges...

One of the government documents summarised the proceedings at an executive committee of the State Council headed by Wen Jiabao. It promised aid for farmers and said the state would intervene to stabilise grain and fertiliser prices.

It ordered local authorities to make sure private employers paid migrant workers on time. And it commanded them to curb soaring property prices by imposing controls over land supply, bank lending and market access...

The second document, which emerged from a meeting of the Communist party’s central committee, enshrined the theory that unites all these regulatory moves in a coherent doctrine.

This is Hu Jintao’s pursuit of a 'harmonious society' in which grievances are smoothed out under the party’s guidance.

The document called for 'co-ordinated development, social equity and justice'— a far cry from the great reformer Deng Xiaoping’s reported declaration three decades ago that 'to get rich is glorious'.

The new leaders called for 'transforming the economic growth pattern' and the premier stated unequivocally that the eradication of poverty was a top priority...

Commenting on a popular website, an economist named Jiang Hai said four things struck him about China’s shift to the left on his return after three years abroad.

First, he said dissatisfied young people were leaning to the left 'because they have no memories of starvation in Mao’s time'.

Second, ordinary citizens had turned left because they were sick of the bureaucratic corruption that had flourished under reform.

Third, Jiang argued, the barons of state-owned industries were hanging on to their power and trying to stop free-market reform.

And, finally, he said, Hu Jintao and his comrades were afraid of a complicated modern economy but familiar with orthodox ideology...