China pledges free-market blitz but necessary freedom lags Wang Tao from UBS said the document amounts to a "sweeping reform plan" but the real test is whether the Communist machinery delivers on the pledges. The party will have to navigate treacherous waters, coping with the fall-out from a credit bubble that has pushed loans to more than 200pc of GDP and led to massive overcapacity. Promises made 10 years ago came to little, leading to a so-called "lost decade" for reform. The aim is to break reliance on state-driven investment in heavy industry and shift towards a modern consumer society, with a bigger role for private companies that are much more agile and creative. President Xi vowed that China would make the leap to a new model in time to avert the sort of "middle income trap" that has ensnared countless states over the past half century that clung too long to an exhausted structure. China's Development Research Centre warned last year that the low-hanging fruit of catch-up growth has already been picked. The country risks stalling unless it moves beyond Deng Xiaoping's 30-year-old system, which relies on cheap wages, imported technology and exports of low-margin goods. Crucially, it said the next phase of hi-tech growth requires an open, free-thinking society, and an end to top-down rule. It remains far from clear whether Xi Jinping will take that risk. The clampdown on the internet has become more intense since he took charge. Xu Yaotong, from Beijing's academy of political science, said President Xi's crackdown has been a tactical move to ensure stability and secure the support of Politburo hard-liners for his free-market drive. Deng Xiaoping used the same ploy before launching China's first market revolution in 1978. Without political stability, nothing is going to work. Xi Jinping can't rush society into democracy," said Mr Xu. Yet expert opinion is deeply divided. Critics say the contradiction between Xi Jinping's free-market push and his reliance on Leninist party control is untenable, certain to be tested as the middle class grows in confidence. The new leadership may have to choose between the two. The reforms may meet stiff resistance from vested interests, especially from state behemoths that serve as patronage machines for party bosses. The text said they would have "less role in allocating resources" and would have to transfer 30pc of their profits to the general budget. Even the one-child policy has its vested interests. Richer Chinese who flout the controls have to pay a fine of £900 for each extra child. This generated £1.8bn of revenue for local authorities last year. Officials have come to rely on the income just as British local councils rely on parking fees. Yet the broad thrust of the plans seems likely to transform Chinese life over time. Land reform will allow farmers to sell, rent and inherit land that is not earmarked for agrarian use, creating a property-owning "yeoman" society in the countryside, with political views to match. Price controls on water, oil, gas and electricity will be lifted gradually, ending a subsidy system that is bleeding the budget and leading to a wasteful abuse of the country's scarce resources. "We will provide a pricing mechanism that will be decided by the market," it said. The new hukuo rules will abolish curbs on rural migration to smaller towns, phase out controls gradually for medium-sized cities, but maintain a tight grip for the bigger cities. The "fine-tuning" of the one-child policy has sparked the most interest in the West, but is unlikely to have much economic impact. Fertility rates have collapsed to near 1.2 in Japan, South Korea and Taiwan - far below the replacement level of 2.0 - and much the same is happening in China's eastern cities for complex reasons. The rate in Shanghai has dropped to 1.08, the word's lowest. Families can already have a second child if both parents are single children. The reform merely extends this to marriages where just one parent is a single child. This covers only 16m couples. The changes will have no impact on labour supply for 20 years. Yet China's demographic crisis is already in full swing. The workforce declined by 3m last year, an inflexion point that has hit sooner than expected. The International Monetary Fund says the numbers in work will now go into "precipitous decline," leading to a labour shortage of 140m shortly after 2030. What is remarkable is that the Communist Party has kept such stringent curbs in place until now. The one-child reform comes 20 years too late.