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China Securities Journal: Three Major Challenges for China’s Economic Reform

A China Securities Journal article listed three major challenges that severely hinder China’s economic reform:

1. The lack of protection for legitimate property rights. Local governments expropriate farmer’s land, even when the farmers have the proper contracts for using the land. When there is a need to boost the economy, local governments invite companies to invest. Later, when they try to cool down some overheated sectors, the local governments force them to exit the market.

2. The lack of a formal government budget spending process. The top official can, individually, make a decision on spending. At end of the budget year, government agencies rush to spend funds.

3. The lack of measurements for correct performance and of a reward system for government officials and the heads of state-owned enterprises. Their evaluation is linked to short-term economic achievements instead of long-term performance. This induces officials to pursue temporary results while leaving the major burdens for the public to handle in the long run.

Source: China Securities Journal Online, May 13, 2014