The results have been clear: breakneck growth, huge infrastructure and manufacturing development, enormous corruption, massive environmental devastation, growing inequality of wealth, and rising social tensions. If they wish to change the behavior of these local leaders, Xi and his colleagues must expend enormous political capital to do so.
And local officials are hardly the only impediments to reform. Beijing has fostered "national champions" -- state-owned corporate behemoths, many of which are seen as key to the party’s grip on power and are closely tied to elite political families. This marriage of wealth and political power presents major obstacles to effective changes in economic strategy.
Corruption at all levels, moreover, makes reforms even more difficult to implement through China's massive bureaucracy. And the fear that reform itself can generate expectations that may get out of hand adds to the hurdles to making necessary changes.
Thus, there are no simple solutions to China's challenges, almost all of which are more difficult than those confronting the United States. In the United States, the core issue is one of gaining a political consensus on federal revenues and expenditures. For China, the challenges require major structural overhaul of the economy and wide-ranging changes in the political system. The complexity of both the problem and the necessary corrective measures are massively more daunting in Beijing than in Washington.
The reforms China knows it should undertake are very much in America's interests -- reducing Beijing's need to resort to unfair trade practices, while at the same time further opening its economy, increasing the role of the market, and allowing greater opportunities for U.S. investments in sectors (such as financial services) in which the United States is highly competitive. In addition, putting China on a path of more sustainable, less environmentally damaging growth increases the chances that its government will be more confident, outward-looking, and constructive internationally. China, in turn, has a major interest in U.S. success in getting its deficit under control, given how heavily Beijing has invested in the health of the U.S. dollar and the American economy.
U.S.-China relations, in short, will almost certainly experience less strain if both Beijing and Washington deal more effectively with their need to undertake significant reforms. If each falls short, the opposite is true. Leaders on both sides should keep this fundamental reality in mind over the coming years.