Where will China go? It has become a bewildering question. Authoritative media is constantly releasing mixed signals, with business and academic elites discussing it wildly. A few days ago, I attended a conference. During the event, a business analyst from an investment bank pointed out that the entrepreneurs had suffered psychological impact to a certain extent. People doubt that reform of marketization, legalization and democratization will go on.

For more than thirty years, China has been changing. The economy is growing rapidly, the government and the public wealth are increasing drastically and social autonomy is developing. Moreover, government behavior tends to be more rational, and most importantly, freedom of the common citizens is expanding, especially through the development of Internet which provides an open platform for discussing public affairs. The nature of reform is obvious, which is marketization, legalization and democratization.

Of course, during the last thirty years, reforms of all fields have shown reversal. This happened, due to ever-present political and social forces against reforms. For instance, in the past several decades, the government took advantage of land management monopoly and intervened in economic activity. And in part of economic structure, phenomena of “guo jin min tui” came about constantly, which means that “the state advances while the private sector retreats”. State-owned enterprises’ privileges escalated, and private enterprises’ living environment was deteriorated. To some extent, marketization is not advancing but retreating, which also appeared in the judicial area.

However, it is normal for the reform to show signs of reverse. Different from revolution, reform is much less violent and explosive. The nature of reform is complicated. Not only the victim but the vested interests can speak for themselves. These forces are likely to reverse the system in certain areas during the course of time.

Nevertheless, once good reform begins, it will continue to generate new powers for itself. Looking back at the thirty years of Chinese economic reform, it can be said that the reform produced that kind of effect. The past thirty years of marketization brought China the greatest change, which is the change of social structure. Specifically speaking, industrialization and urbanization generated an increasingly large scale of middle class, including entrepreneurs, white collars and professionals. They are the main resource owners besides the government. For instance, entrepreneurs own lots of social wealth.

These social changes are particularly evident concerning the creation of knowledge and formation of ideas. The middle class generally received good education, and was employed in professional industries. During the process of receiving education and running careers, these people learned and followed values and systems of dignity, liberty, market, democracy, rule of law, etc. Therefore, during the thirty past years, the change of social structure brought about the change of social value. The value of today’s middle class is dramatically different from their parents. Lots of emerging mainstream media aimed at them and spread these values into the public. The middle class formed a set of discourse system and a set of order system.[Page]

The most important is that the middle class formed a common expectation, which is a clear political expectation. Their success derives from market system brought by the reform, and they rely on the system to accumulate wealth and power. Naturally, they thought China should continue to reform, following the direction of marketization, legalization and democratization. They believe that this kind of reform enables them to improve their lives.

Nothing else than this expectation inspired the middle class to struggle and accept their own position. The legal, political and social living environment of the middle class is very poor, and their life and work pressure is quite large. However, the middle class can tolerate it. This is because the Chinese people have the traditional virtue of strong will and self-improvement. Furthermore, the Chinese people have hope, and they believe with deepening and expanding reform, their property rights can be protected by law, their children can receive better education, and the enterprises can have a better living environment. The common and strong expectation of the middle class made the Chinese society maintain order and stability for decades.

In other words, the stability in present China is fragile. The expectation of people to some extent offset the anxiety and controlled the potential social conflict. Valuing and stabilizing the reform expectation of the middle class is the most crucial thing in politics. Reform is sophisticated, especially touching some core redistribution problems of power, rights and interests. So, reform should be slowly promoted. Anyway, people having right to speak in their own fields should be highly cautious and concern people’s heart in the mainstream society. They should let the mainstream society believe that reform will continue to the direction of marketization, legalization and democratization, and that an increasing influent China will have a reasonable legal and political system. The middle class’s stabilizing reform expectation is the basic guarantee of the stability of China society and prosperity.
 (The Economic OBserver)

Yao Zhongqiu
President, Unirule Institute of Economics