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. Last Updated: 07/27/2016

Keeping China's Reform Away From the Politics

While China's economy and financial markets are in the throes of a sometimes chaotic modernization -- demonstrated by last week's equity market turmoil in Shanghai and around the world -- the country's political system steadfastly resists reform.

Starting Monday, nearly 3,000 delegates to the National People's Congress, or NPC, the Chinese parliament, are attending their annual 2-week meeting in Beijing. They will debate some big issues -- the budget, the gap between rich and poor, energy security, pollution and what to do with foreign exchange reserves in excess of $1 trillion -- but in the end they will do the bidding of the ruling Communist Party.

They are also expected to pass important laws. One, on corporate tax, will end discrimination against domestic companies. At present, Chinese companies pay 33 percent tax, while foreign investors pay as little as 15 percent; after a transition period, all companies will probably be taxed at about 25 percent.

This makes sense because China no longer needs much foreign capital, the existing system discourages local private enterprise, and many of the supposedly foreign investors profiting from tax concessions are Chinese investors "round-tripping" their money via tax havens.

Another law will protect private property rights for the first time since the communists took power in 1949. Delayed by opposition from the old guard, the law is of practical as well as symbolic significance in China's increasingly capitalist economy. Gongchandang, the Chinese translation of "Communist Party," suggests -- even more than the English words -- that public ownership of property is an ideological necessity.

The Communist Party, however, is not going soft. Where it cannot be sure of NPC compliance, it has simply put legislation on ice. That is the case with draft laws on competition policy, patents and labor contracts.

In some ways, the NPC is less lively than it was in the 1980s. When Premier Wen Jiabao gives a closing news conference on March 16, the questions from the media will have been carefully vetted. Wen – like Hu Jintao, the Chinese president, and Wu Bangguo, the NPC chairman, who are his two superiors in the hierarchy -- has yet to grasp that China's economic modernization and the resulting liberalization of society will inevitably lead to political reform.

Only last week, Wen tried to dampen any hopes of such reform by declaring that China was still in the early stages of socialism and would stay there for 100 years. Translation: We may have a parliament called the NPC, but if the party has anything to do with it, you can forget about real democracy in China any time soon.

This comment appeared as an editorial in the Financial Times.