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China economy
OpinionComment
Winston Mok
Winston Mok

The View | The rule of law will lead China out of its economic morass

  • A full transition to a rules-based society will help Beijing restore the confidence of businesses and citizens in its ability to weather the economic storm
  • To root out corruption, China must put its faith in institutions with accountability, not endless anti-corruption campaigns

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People cheer after a national-flag-raising ceremony at Tiananmen Square in Beijing on January 1. To realise its dream of national rejuvenation, China must do more to protect property rights and honour social contracts. Photo: Xinhua
Winston Mok
Forty-five years after China launched its economic reform, its once unstoppable momentum of growth has stalled. This year’s growth is projected by some to be 4.6 per cent. The much-anticipated milestone of China’s GDP surpassing the US’, seen only a few years ago as within imminent grasp, has now been postponed indefinitely. What happened? How can the economy regain its vitality?
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What propelled China’s economic dynamism was an increasing recognition of private property rights amid reforms initiated by Deng Xiaoping. The inefficient state sector was gradually replaced by private businesses, which drove economic growth.

But unless China can make a full transition to a rules-based economy, it may be stuck in a middle-income trap that stops it realising its full potential. Today, not only young people, but many business owners are lying flat – acting cautiously to preserve wealth.

For one, property rights are still not completely secure in China. It’s no wonder some of China’s wealthy have set up family offices in Singapore, which is ranked second globally on property rights protection by the Property Rights Alliance’s International Property Rights Index.

While China has gradually boosted its IP protection, the safeguarding of property rights has not improved in the past decade, according to the index. Similar trends were reported by the World Economic Forum, where a glaring gap in investor protection was seen.
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Some even perceive property rights as marching backwards in China. And here we should look to the draconian clampdown on the tutoring sector. With the stroke of a pen, billions of dollars in market value was wiped out and tens of thousands of well-paid jobs vanished.
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