Reform, Ahoy? A Newspaper Heralds New Horizons for the Chinese Ship of State

NOVEMBER 8, 2013, 4:29 AM

Reform, Ahoy? A Newspaper Heralds New Horizons for the Chinese Ship of State

By DIDI KIRSTEN TATLOW

A leading Beijing newspaper has published a hefty, 96-page report titled “Reform: Setting Off Again” the day before hundreds of China’s Communist leaders were to begin a four-day meeting to discuss the country’s future. In an image freighted with symbolism, the cover of the supplement in The Beijing News on Friday showed a fully-rigged tall ship in choppy waters sailing straight into the future. To its left are rocks, threateningly close. The only way it can safely turn is right, or it could put distance between itself and the rocks by forging ahead, a set of choices that left some wondering if this was a political message. The Beijing News didn’t return calls seeking an interview with the artist or comment from the newspaper.It all seemed to express the hopes of many Chinese for the widely anticipated meeting, the Third Plenum of the Communist Party’s 18th Central Committee, to open the way for significant economic and political liberalization, about a year after President Xi Jinping assumed the position of party leader and after a decade of what some regard as stagnation under the leadership of the former president, Hu Jintao.

Gaige (pronounced gai-ger), or reform, is an iconic word in China. Since the late-1970s the party has pushed economic reform, following the virtual impoverishment of the nation under the leadership of Mao Zedong, who died in 1976. China has since become the second largest economy in the world.

At the meeting, leaders are expected to lay out at least some of their vision for the future. Mr. Xi and Prime Minister Li Keqiang may signal a turn toward greater market competition, financial liberalization and an economy that places less emphasis on government investment and more on domestic consumption. Many observers, however, are skeptical of real political change.

The Beijing News represents a liberal wing of Chinese politics, but also a voice of the wealthy. The supplement is packed with advertisements for upscale real estate, automobiles and art that is well beyond the reach of most Chinese. In the first ad, which takes up all of page three, Brad Pitt promotes the Cadillac XTS.

The newspaper lists 12 areas where reform needs to “crash through a barrier.” First on the list is “land transfers” (currently the government owns all land and merely leases it, including to farmers, creating a very complex system of contracts and subcontracts), followed by “social welfare” (there is pressure for more). Other items are the Soviet-style “household registration” system, which restricted people’s movements for decades and still restricts access to social welfare benefits; finance and taxes; and the distribution of wealth.

The closest items to political reform — always a sensitive subject — seem to be in numbers four and seven on the list.

Number four is “administrative authorization,” which the paper explains means that “reform must once again simplify politics and decentralize power.” Number seven is the “social system,” which it says means that “reform must ease the restrictions on social organizations,” or civil society, which is currently severely circumscribed.

The supplement also features interviews with both well-known and ordinary Chinese discussing their hopes for the meeting, including former full or alternative members of previous Central Committees. Chen Fuhan, a former Central Committee member and train conductor who drove a locomotive named the “Mao Zedong,” according to multiple Chinese news media reports, called for the anticorruption drive initiated by President Xi to “persist to the end.”

“Reform is entering deep waters, let’s not cross by feeling the stones,” it quotes Li Youwei, a former Central Committee alternative member, as saying. The phrase refers to Deng Xiaoping’s dictum that China should “cross the river by feeling the stones” as it moved away from Maoism, an approach some now consider outdated. Reform requires clearer, more predictable rules, they say.

“The crucial time for reform is in the next five years,” it quotes Xu Guanhua, a former minister of science and technology and also a former Central Committee member, as saying.

It was 35 years ago, at the Third Plenum of an earlier Central Committee, that China and Deng unleashed economic reform, Ren Jiantao, a professor at Renmin University of China, reminded readers in the supplement’s lead article: “Born in Revolution, Succeeding in Reform.”

People’s expectations are running high, Mr. Ren said. They hope that the meeting “will be able to heal the wounds between left and right, let the natural resources of reform converge, respond to social demands, correct the imbalances of development, restart deep reform, give prominence to the value of justice, resolve the system’s bottlenecks, begin sustainable development, and move toward a beautiful future.”

Frank Ye contributed research.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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