I characterize China's reform as "legislation-dependent reform". For example, before the promulgation of Corporate Law of the PRC, our industries had fundamentally no concept of things like corporate governance, and held a traditional outlook on SOEs, the market economy, and other basic elements. But as soon as Corporate Law was released, all of the enterprises became corporations overnight, and subsequently created corporate charters, boards of directors, oversight committees, and shareholders' groups. I've always felt that a well-designed system will quickly change the status quo. In fact, our society already has a strong foundation for resolving the issues with public institutions – a very good foundation – we just need to carry out reform based on the needs of a market economy.

Observer: The problem is, as you've said, some associations are actually government departments' "Mistress Agencies", and also their "checkbooks" – how will they determine to act against these interests and sever the connection?

Li: This question is connected to another issue, that the government's public accounting system has yet to be developed. In 1994, we issued Budget Law of the PRC and Rules for the Implementation of the Budget Law of the PRC, which proposed the establishment of three systems for public finance accounting, state-owned capital accounting and social security accounting. But after 13 years, these systems have not been established even today. Public finance and public accounting systems have not been created, and government departments continue to hold a lot of power and maintain many administrative application processes, this is a major problem. The issue is related to internal government reform: the government should first be transformed into a public service-oriented government, and public service is directly linked to the operation of public finance. Really, the drive for reform comes primarily from the market and society.  I believe China's reform also requires patience. The market economy itself will gradually set a direction. Inherent in the market is the ability to make natural adjustments, including political mobilization, impetus for reform, changing behavior of interest groups, stakeholders, and social classes. This is a relatively slow process.

Observer: The worrisome thing is that the power for interventions will also cause the market mechanism to be distorted.

Li: Where there is freedom there are the seeds of justice. The degree of freedom determines the path of societal development. We can divide countries into three categories: those with high, moderate, and low levels of state control. In countries with perfect market economies, it is not that there is no government management, but government control is quite low, because the market acts as a powerful monitoring force. Of course our government's power to control the economy is still very strong, but I don't believe the government can fundamentally influence the market. In the short term the government is sensitive and can have great influence over concepts of market prices, regulation of the flow of goods, and market confidence levels-- but this influence is only short term.