Economic pitfalls such as these are what the National People’s Congress’ new economic reforms are intended to address.  In the realm of real estate, the Chinese government revealed plans to introduce a nationwide real estate registration system and levy a property tax to curb real estate speculation.  Farmers may receive greater rights to their land, perhaps even the ability to mortgage it.  Local governments will be allowed to issue bonds and hybrid securities so that they are not overly reliant on the shadow banking system.  Moreover, they have been encouraged to set up local “bad banks” and debt exchanges so that they can offload their bad debt and sell it to private investors willing to accept the risk of default.  And, finally, Beijing will attempt to ease the traditional hukou system, a household registration method that ties an individual’s social benefits to where he or she is from, in order to ease the barriers to further urban migration.[3]

However, these reform measures have run up against the “new left” within the Communist Party.  Those new leftists have been troubled by China’s three-decade long shift toward a market economy and want a stronger hand for the state in economic planning.  They harken back to the communist ideology of Mao Zedong, which advocated income equality and liberation from material desires (clearly not present-day China).  That has clashed with those who are more reform-minded.  Indeed, the 2012 downfall of former Communist Party highflier Bo Xilai, who the “new left” revered for his spending on public welfare and affection for state-owned enterprises, was seen as a sign of an internal party struggle.  But perhaps to allay the fears of that wing of the party (or in recognition of its strength), China’s leaders have allowed Maoist sentiments to be heard.  Their recent speeches have even referred to Mao.  Certainly, China has in the past downplayed Mao’s collectivist failings, like those documented in Yang Jisheng’s book Tombstone: The Great Chinese Famine, 1958-1962.  But rarely has Mao been cited by China’s reformist leaders until recently, demonstrating the influence that the “new left” may have on contemporary policy discussions.[4]

The influence of the “new left” may make mending China’s economic problems all the more difficult.  Many of the policy communiqués that emanated from the Third Plenum seemed to temper the tenor of reform.  Even as the government would seek to encourage private banks through the establishment of a deposit insurance scheme, it recognized the need for the state to guide their interest rates.  And though a market-based economy would continue to be its goal, Beijing proclaimed “the dominance of the public sector” in that economy.  “New left” priorities were also apparent in Third Plenum initiatives that focused on income inequality and kept state-owned enterprises firmly in the hands of the state.[5]

There is also the fact that the Communist Party is simply accustomed to being in control.  Despite its interest in market reforms, the party still believes it knows what is best.  At the moment, it thinks that urbanization is the best way for the country to create a consumer-led economy.  But going a step further, the government wants to steer its rural population into smaller “second-tier” cities, rather than bigger “first-tier” ones (i.e., Tianjin, rather than Beijing), in order to avoid the over-development and crash that hit Japan in the 1980s.  While that sort of policy fine-tuning may be judicious, a government used to such a high degree of control often finds it hard to step aside to allow markets to function.[6]

So even though the Communist Party openly endorsed the “decisive” role of the market in China’s economy, it clearly still wants a big say in how that economy is run.[7] That was again evident in February 2014, when China’s central bank began to push reforms to make the yuan more responsive to market forces.  Ironically, it did so by directly intervening in the market—directing China’s state-run banks to buy U.S. dollars in order to devalue the yuan and flush out those that the government considers to be market speculators.[8]

Such episodes leave some to wonder how effective China’s new reform measures will be.  No doubt the National People’s Congress will approve the measures.  But the influence of the “new left” within the Communist Party may not make implementing them any easier.  Over the next year, that may not be much of a concern.  China’s central bank has sufficient reserves to backstop the debt that the country currently has on its books (now that it made the effort to account for all the debt).  But if the growth of new bad loans goes unchecked, that may not always be the case.  Chinese banks will need roughly $320 billion in capital over the next five years to stay afloat.[9]  Plus recently, China experienced three brief, but sharp credit crises, one in June 2013, another in December 2013, and a third in January 2014—each time interbank interest rates suddenly spiked higher.  Clearly, economic waters can quickly turn choppy.  Letting go of old ways of doing things was always going to be hard, but if the economic waters get choppier, the Communist Party might find holding on to be even harder.