Reforms a 'continuation of Deng's policies'

China's supply-side reforms can be compared with those of Margaret Thatcher in Britain in the 1980s, according to one of the former prime minister's economic advisers.

Patrick Minford, now professor of applied economics at Cardiff Business School, says they both have similar aims of extending the role of market forces in their respective economies.

"They are both aimed at dealing with inefficiencies and a lack of enterprise in particular sectors and in generating growth," he says.

The supply-side elements of Thatcherism were largely curbing trade union power and therefore allowing the labor market to operate more freely and privatizing inefficient state-owned enterprises, beginning with British Telecom in 1984.

"There is an element of paradox in China with, on the one hand, the state controlling the economy while trying to liberalize various elements of it. I see it more as a continuation of Deng Xiaoping's reforms that began in the late 1970s," he says.

Tim Congdon, another economic adviser to Thatcher, particularly in her later years, says China may have something to learn from Thatcherism in relation to state-owned enterprises.

"What people don't realize is that privatization in Britain was an accident. It wasn't something that Mrs Thatcher was going to do when she was first elected in 1979," he says.

"When they did their first big privatization in 1984, the state actually retained quite a big shareholding, and in the end it worked out fine. So whatever way China reforms its state-owned enterprises, this gradual approach would be better than that of the eastern European one of just selling off everything, where you got all this avarice and crookery."

Charles Goodhart, who was an adviser to the Bank of England during the Thatcher years, believes China should look to France when it comes to reforming state-owned enterprises rather than the UK or the US.

"The French are very centralized and the debates there have been concerned with how much central control there should be and how much private sector influence. I think this is quite close to what is happening in China," he says.

Congdon points out that the Chinese in trying to reform the hukou system - making it easier for people to move rural areas - are not the first to contend with this issue.

"This is what many European countries have had to deal with in the past. In Britain they had to end settlement laws in the 19th century to enable the Industrial Revolution to happen," he says.

andrewmoody@chinadaily.com.cn

(China Daily European Weekly 03/25/2016 page7)