If Beijing wants an innovative economy, it must free Chinese minds

"Emancipate the mind, seek truth from facts and unite as one in looking to the future." In December 1978, Deng Xiaoping delivered a historic speech with this inspiring title, which set the tone for China's reforms and opening up.

Less than two years later, on August 26, 1980, China approved the formation of its first special economic zone in Shenzhen, then a sleepy fishing village across the border from Hong Kong.

Having marked its 40th anniversary on Wednesday, Shenzhen certainly has a lot to celebrate. In 40 years, it has become China's most successful example of reforms and opening up. Its economy overtook that of Hong Kong in 2018, among many other accomplishments.

As Shenzhen, and China as a whole, contemplate and plot the path forward for the next five years or even longer, Deng's exhortations on "emancipating the mind" and "seeking truth from facts" still resonate today.

Again China is at a critical juncture. As Chinese President Xi Jinping has put it, the world is undergoing profound changes not seen in a century, which are being accelerated by the spread of the coronavirus pandemic.

China may become the first major economic power to emerge from the pandemic and return to normal but it faces an increasingly hostile international environment characterised by an all-round confrontation between Washington and Beijing.

At home, concerns are rising that the leadership's decision to pivot to the domestic market and consumption will come at the expense of opening up.

The fact that Chinese leaders, including Xi, and the state media have repeatedly stated in recent weeks that China will not turn its back on reforms and opening up reflects the scale and multitude of those concerns.

The reality is that the Chinese government has promised a lot but failed to deliver, particularly in the private sector and foreign investment. This is especially true since the Chinese Communist Party has strengthened controls at all levels of society and placed a greater emphasis on the role of the state sector over the past few years.

For years, the Chinese government has made solemn promises of levelling the playing field for the private sector and foreign investors but they are still treated as second-class players next to the state sector.

Chinese President Xi Jinping. Photo: Xinhua alt=Chinese President Xi Jinping. Photo: Xinhua

This is despite their rising economic influence. Take the private sector, for example. The scale and influence of China's private economy can be summarised by the figure 56789 - the private sector contributes 50 per cent of tax revenue, 60 per cent of gross domestic product, 70 per cent of industrial upgrades and innovation, 80 per cent of total employment, and 90 per cent of the total number of enterprises.

But private entrepreneurs are often at the mercy of the government's arbitrary powers.

The latest example is that of a private businessman, involved in property development and hotel management in the northwestern province of Shaanxi, who was detained in July by the local police for an old case involving online betting during the 2018 Football World Cup. In August he was taken to hospital with serious head injuries - self-inflicted, according to the police, who refused to allow relatives to visit him, according to an online report by the business journal Caixin.

The report was later removed. His relatives suspected that he was arrested because of his public campaign to expose loan-shark operations in the city of Yanan where he is based. The loan-shark outfits are often backed by the local police or officials.

Likewise, foreign investors in China have also long cried out for an even playing field. The new foreign investment law, passed in March last year, has promised to offer foreign investors equal treatment, greater market access and better legal protection.

Workers at a start-up company in the Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone. Photo: Xinhua alt=Workers at a start-up company in the Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone. Photo: Xinhua

But, in reality, foreign businesses are still concerned about the industry-specific laws and local administrative approvals which could impede their market access.

With the Chinese economy now facing unprecedented headwinds, it is high time that the Chinese government took resolute and concrete measures to ensure a level playing field for all firms in the country, foreign or domestic, private or state-owned.

The problem is not that the Chinese leadership lacks a detailed road map, but determination and will.

Back in November 2013, the third plenum of the Communist Party's 18th Central Committee released a detailed reform blueprint which vowed to allow the market to have "a decisive role" in the economy and strengthen judicial independence. That was one year after Xi came to power.

At the time, the reform road map was hailed as a landmark document which was aimed at achieving "decisive results" by the end of this year.

Now with just four months to the deadline, several key economic measures remain unfulfilled, including rural land-usage rights reforms and introduction of property tax.

Moreover, as the Chinese leaders are stepping up efforts to draw up the 14th five-year plan, which runs from 2021 to 2025, and set long-term development targets for 2035, they have repeatedly vowed that China would create new growth drivers through scientific and technological innovation.

At a meeting with a group of economists on the five-year plan on Monday, Xi said the government would vigorously enhance the capability to innovate independently and achieve breakthroughs in key and core technologies as soon as possible.

He urged giving full scope to enterprises as the main players in technological innovation, and cultivating and recruiting world-class talent and research teams.

But for innovation to flourish, it needs much more than government support and funding.

A free flow of ideas and opinions is vital to drive innovation in an environment where people are encouraged to nurture independent thought and critical thinking.

Unfortunately, the opposite is happening in China: the government is cracking down hard on dissent and tightening the muzzle on the media. Academic freedom is also suffering as researchers and professors have to strictly toe the party line or face stern punishments, including dismissals or, even worse, jail time.

Without freeing the mind first, innovation is hard to achieve.

This article originally appeared on the South China Morning Post (SCMP).

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