How authoritarian or fragmented is China’s economic policymaking?

China has traditionally prioritised control and stability over flexibility in its financial policy, evidenced by its managed exchange rate, closed capital account and fixed interest rates. In recent years, however, there have been signs that control is being relaxed to allow more flexibility and openness in the financial system. China has officially ended RMB’s peg to the US dollar, taken initial steps of internationalising the currency, launched local experiments of financial liberalisation, and carried out initial steps of interest rate liberalisation.

Were the recent financial reforms in China the result of a national strategy based on consensus among policymakers, or imposed by an authoritarian leadership on fragmented interests, or the result of battles and compromises between different camps in a fragmented authoritarian regime? To what extent is China’s current financial policymaking fragmented or authoritarian? Which factors determine the future progress of China’s financial reform?

Yang Jiang’s chapter ‘The Domestic Politics of China’s Financial Reform’ in a new book Chinese Politics as Fragmented Authoritarianism (Routledge 2016) maintains that the recent steps of financial reform are the partial success of reformists, supported by domestic and international pressures or crises, China’s changing economic needs, and intervention by the leadership. The consensus on the necessity of financial reform has been reached on the surface, but differences remain regarding the specific steps and pace of reform. The extent to which financial reform remains a rhetorical commitment or can be steadily carried out depends on how strong and reformist the leadership is. Without institutional guarantees, the progress of reform will still be entangled in political battles between reformists and conservatives in a fragmented policymaking and implementation structure.