Commentary: What path will economy take (3)

So far, progress on the reform agenda has been mixed. While there has been progress in financial reform and raising the government's role in healthcare, education and social security, there has been little progress in key areas such as leveling the playing field for SOEs and other companies, and reforming the intergovernmental system - areas where political economy issues hold the key.

The impact of the new leaders on the reform process should not be overestimated. China has moved to collective leadership and policymaking has become increasingly institutionalized and consensus-based. Also, traditions call for continuity and stability in policy orientation during and after a transition while the 12th Five Year Plan (2011-15) provides further continuity.

Nonetheless, the leadership transition may have some impact on the orientation and emphasis of reforms. The introduction of the objective of building a xiaokang (moderately well-off) society and greater emphasis on improving the quality of life and making public services accessible to all under the leadership of President Hu Jintao and Premier Wen Jiabao fitted well with what seem to be their views.

Turning to the current challenges, while economic restructuring and rebalancing has been on the agenda for about eight years, it has taken time to form a comprehensive understanding and approach on how the different challenges and reforms are linked together. There has been some progress in this regard, as indicated for instance by writings and speeches on economic reform by Vice-Premier Li Keqiang.

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