It is on this dynamic that our observation put in its proper context was focused. I reckon it’s changed significantly since I did an extensive survey of state-owned enterprises under the profit-retention system in the mid 1980s, for example. And it is still changing. These changes are also in our political and economic strategic interest.

A core issue here is the relationship between economic and political reform (including legal and institutional reform). If there is a central idea in Callick’s piece it is that ‘progress in almost any new area (of economic and social reform) will only succeed if it is linked with the Party accepting limits to its power’. In one sense at least this is clearly wrong. Established political power rarely knowingly cedes it except under duress. The inference has to be that there has been, and can be, no strengthening of market systems without reform where the one-party system gives way. And that’s clearly incorrect. The Party remains but the system has undeniably changed.

Reform has changed the limits of the power of the state and the Party. But what doesn’t stack up is the idea that reforms as fundamental as introduction of the household responsibility system and state-owned enterprise haven’t involved fundamental political reforms as the complement of economic reform , even although the one-party state persists. The Party may in many respects remain the same but it cannot and does not behave as it once did. At the heart of that change has been the very kai fang reforms which Callick himself praises in his piece.

Indeed, Callick might be surprised to learn that many theoreticians of political transition in the CCP argue that every significant economic reform in China has involved, and must involve, political reform. They’ve got a point. And this does not mean that there will not come a point at which the concession of the one-party system is essential to continuing economic success,  but at what point this occurs is not only or mainly a matter of ideological insistence (a la Callick). Rather, based on experience, history and logic, it is likely to be determined by forces and pressures from the market at home or abroad.

Let me be clear. My view is that the imperative of political reform will come sooner rather than later, and that it is indeed critical to the sustainability of Chinese economic performance in the medium term. It is not a question of ‘if’ but ‘how and when’. But that is another and much larger story and the idea that nothing changes until that story is complete is a faulty one on which to base a whole raft of important policy judgments (link).

Certainly the idea that large scale political reform is our prior default position on economic reform is neither a sensible nor a sustainable strategy. These issues deserve study not only by researchers, but as a matter of urgency in policy agencies. The answers need to be based on evidence and careful logic. They are critical to a host of frontline policy interests and decisions for Australia and China’s other partners and to getting strategies towards China within cooee of being right.