Headlines in the Chinese official media over the last couple of days have been dominated by Xi Jinping’s tour of Yinchuan, in the western province of Ningxia. The visit was the occasion for some stirring rhetoric about helping poorer regions like Ningxia; on his first day, Xi declared that
No region or ethnic group can be left behind in the drive to build a moderately prosperous society by 2020 (到2020年全面建成小康社会，任何一个地区、任何一个民族都不能落下)
He also made a speech at a conference on poverty alleviation that emphasized the duty of the prosperous eastern provinces to aid the inland. In a no-doubt-deliberate echo of Deng Xiaoping’s famous formulation that “we permit some people and some regions to become prosperous first,” Xi said that
The first to prosper should help the latecomers, to achieve the final goal of common prosperity (实现先富帮后富、最终实现共同富裕目标)
The conference was about a system where wealthier cities and counties in the east are “paired” with poorer counterparts in the west, which Xi praised because
a gradual reversal of the trend of widening regional gaps in development has been achieved, and poverty alleviation in impoverished western regions and old revolutionary areas has made great progress (区域发展差距扩大的趋势得到逐步扭转，西部贫困地区、革命老区扶贫开发取得重大进展)
Of course, it’s stretching the truth a bit to say that China’s regional gaps have been narrowing; the widening regional gaps in the current slowdown have been a huge subject of huge public debate. But I’m more interested in what Xi’s comments show what he thinks should be done: of course, regional gaps should narrow; of course, funds must flow from wealthier provinces to poorer ones. So this latest propaganda push seems like a very clear example of the egalitarian-Maoist strain of thought that is still very powerful in Chinese economic thinking.
Which is interesting, because some people who are close to Xi seem to have have been pushing back quite strongly against this line of thought. In early May, the People’s Daily carried a now-famous interview with an unnamed “authoritative personage,” who is widely assumed to represent the views of Xi’s top economic advisors (Barry Naughton’s recent piece in the China Leadership Monitor is the best overview of the debate). The piece got headlines for the way that it directly attacked stimulus policies and openly expressed worries about debt and slowing growth, all in a rather harsh tone unprecedented in recent official discourse. But the “authoritative personage” also attacked the notion that widening regional gaps are inherently bad, and must be aggressively tackled by the government. Here is the passage, in my translation:
Question: At the same time that the economy is slowing, we have also noticed that the trend of divergence has become more pronounced: the stabilizing and improving trend in the economy of the eastern coastal region has strengthened, but some resource-dependent provinces in the northeast and the west are still experiencing economic difficulties. Some foreign media call this “two worlds.” What signal does this trend of divergence send?
Authoritative Personage: Divergence is a necessity of economic development. …
In the “new normal,” we need to optimize the allocation of resources, develop new growth drivers, and form a new industrial structure. Therefore the faster divergence happens, the better. Whether we are talking about regions, sectors or companies, one part of them will, following the “80-20 rule,” obtain 80% of the benefits, and stand out from the rest as having a bright future. And there is another part that will experience hardship, but will also learn a lesson and will know what to do next. To me this is not a bad thing.
Since China began reform and opening up, the divergence in the economy has accelerated, and in this process there has emerged a group of vibrant regions and competitive sectors and companies with famous brands. After the global financial crisis, divergence in the world economy accelerated, our country entered the new normal, and domestic economic divergence further intensified. Last year, in analyzing the first quarter’s economic trends the Party Central pointed out that as long we actively adapt to the new normal, and focus on innovation and qualitative efficiency, then the trend of development will be relatively good; if not, the pressure will be very great. This year this trend has continued and even intensified, so while some are happy others are worried.
In the foreseeable future, amid economic divergence, vibrant regions and internationally competitive sectors and companies will continue to arise, but some regions, sectors and companies will encounter more and more difficulties. … The people in these regions, sectors and companies have now shed their illusions, are relying on themselves, are taking the initiative to promote reform and innovation, and are striving to catch up.
The “authoritative personage” is presenting a more classically laissez-faire view, where regional gaps reflect the workings of market forces, and the failures in the backward regions are in fact necessary for them to develop further. Xi himself on the other hand seems to be more comfortable in a more paternalistic and interventionist mode. This of course is not the first time that different parts of the leadership have sent conflicting messages about the economy, and is another indication that the economic strategy at the moment is rather confused.