Chinese Premier Li Qiang’s recent remarks at the World Economic Forum’s “Summer Davos” meeting in China have sparked significant interest and debate as they were notably absent from Chinese state media coverage.
Li emphasized caution in addressing China’s economic challenges, likening the recovery process to reinforcing foundations rather than administering “strong medicine.” His acknowledgment of the economy’s vulnerabilities contrasts sharply with the official narrative portraying China as a beacon of stability amid global economic uncertainties.
Li’s veiled reference to “strong medicine” has left many questioning its nature and implications, particularly with the economic strategies endorsed by the Chinese Communist Party (CCP) at the Third Plenary Session.
Wang Juntao, chairman of the China Democracy Party, said that within the current CCP framework, “strong medicine” could be interpreted in two distinct ways. One perspective aligns with Deng Xiaoping’s economic reforms, advocating for liberalization that fosters private enterprise and entrepreneurial initiatives while maintaining government oversight of macroeconomic policies.
“This approach incentivizes the private sector through deregulation, financial support, and substantial monetary injections,” Mr. Wang said.
“In contrast, Xi Jinping favors a more centralized economic model reminiscent of the Soviet and Maoist eras, emphasizing state control over resources and the economy. In this case, ’strong medicine' may entail ambitious development plans like issuing fifty-year bonds or conducting extensive tax audits spanning three decades.”
He believes that Li’s cautious stance, seemingly reluctant to endorse the latter approach aligned with Xi’s vision, reflects his hesitation in adopting policies akin to Deng’s reforms, which many believe could potentially reinvigorate China’s economy under the CCP’s governance.
Advocating Government Withdrawal From the Economy
Guo Jun, editor-in-chief of The Epoch Times in Hong Kong, said that the meaning behind Li’s reference to “strong medicine” likely entails monetary expansion and tax reduction. Over the past three years, China has surpassed the United States, Japan, and Europe combined in money printing, resulting in an M2 money supply of 300 trillion yuan (about $41 trillion), equivalent to 250 percent of China’s GDP. Such sustained monetary expansion raises concerns about potential hyperinflation.She says that tax reduction is another proposed remedy. While globally recognized for stimulating economic growth, reducing government spending and taxes is challenging in China, where state control permeates all aspects of society.
“The resultant reduction in government revenue has already impacted social operations, rendering tax cuts impractical. Alternatively, there exists the possibility of tax increases, suggesting that neither of these aggressive measures is likely to be implemented,” she said.
Implications of New Rural Law
Ms. Guo said that the revised Rural Collective Economy Organization Law resembles past policies such as the People’s Commune.“While Chinese reforms initially dismantled the People’s Commune and introduced land contracting, current challenges in rural agriculture, such as limited mechanization and inefficiencies due to small-scale farming, gave the CCP two main options: privatizing land to facilitate farm consolidation naturally or reintroduce government control and collectivization, which aligns more favorably with the CCP’s objectives,” she said.
Ms. Guo said the revised law emphasizes collective land ownership and socialist public ownership to promote shared prosperity and strengthen control over agricultural resources, effectively managing farmers under stringent regulations. Privatizing farmland, she says, would undermine the CCP’s authority, making collectivization an inevitable recourse.
“While the law allows rural collective property to be leveraged for investment, ultimate decision-making power rests with village committees, essentially extensions of local party branches. This centralized governance structure consolidates control in line with the Communist Party’s strategic objectives, ensuring grassroots dominance,” she said.
Mr. Wang believes that despite the new rural law’s implications, Xi’s leadership and broader ambitions are unlikely to revert to the extreme measures of the People’s Communes era. Instead, the law establishes dual systems—political and economic—to regulate farmers and agricultural resources.
“This regulatory framework serves Xi Jinping’s vision of new national governance by mobilizing resources towards high-tech advancements, reminiscent of strategies seen during the Great Leap Forward,” Mr. Wang said.
Wartime Mentality
Mr. Wang said that Xi’s adoption of a wartime mentality, prioritizing security over developmental pursuits, is reminiscent of Mao Zedong’s era when war was seen as inevitable.“Xi’s policies reflect this strategic shift, prioritizing security and preparing for potential internal rebel and external challenges. This includes consolidating resources and tightening control over the population, potentially transitioning towards a wartime footing if necessary,” he said.
