Originally published in the Financial Times, January 27, 2003.

Recent reports about plans for bold administrative reforms in Shenzhen, China's first special economic zone, have fuelled speculation that the country's new leaders may start opening up the political system.

Shenzhen is the latest of several signs of tentative change. In the past few months, competitive elections for neighbourhood committees - civic groups responsible for minor local administrative matters - have been held in several urban districts, apparently as an experiment in extending village elections to the cities. A newly implemented regulation issued by the Communist party has forced village party secretaries to compete for the elected post of the village committee chairmanship as a condition of retaining their party positions. Hu Jintao, the new general secretary of the Communist party, recently gave a speech on the supremacy of the Chinese constitution. He also invited China's leading constitutional scholars to give a seminar at a special politburo meeting.

Three powerful forces are placing pressure on China's rulers to restructure the country's political system. The biggest of these is the economy, which has become more market-oriented and more closely linked to the world. In spite of adopting policy changes that have propelled market reforms, Chinese leaders have not made state institutions market-friendly. As a result, the state has maintained its command-and-control orientation and interferes excessively in the marketplace.

That is evident in the size of the Chinese bureaucracy. Even though the share of state-owned enterprises in the economy has fallen 60 per cent since 1979, the number of officials has tripled. A bloated bureaucracy and unchecked power breed corruption. At the very least, political reform would require a painful downsizing of the bureaucracy. The proposed measures in Shenzhen suggest that administrative streamlining is likely to be the dominant theme of reforms.

The second force comes from China's changing society. Increasing affluence, economic independence, access to information and physical mobility have rendered the government's traditional means of social control obsolete. Luckily for the Communist party, the emerging middle class has not displayed much zeal for democracy. But it would be foolhardy to take its political apathy for granted. The party needs to court these elites and to incorporate them in the political process.

More important, continued political disenfranchisement is radicalising China's two biggest social groups: peasants and workers in moribund state-owned enterprises, who are relative losers in economic reform. Unable to protect their interests, these groups are increasingly turning to riots and street demonstrations to press their demands. Opening up the political process could help to defuse rising social tensions.

The third force comes from the party itself and many officials have begun to call for change. The results of a recent poll of mid-level officials at the Central Communist Party School in Beijing show that, since 2000, political reform has become the most important issue for them. Li Rui, a former personal secretary of Mao Zedong and deputy chief of the party's organisation department, published an essay recently that openly called on the party to institute democratic reforms.

But the need for such reforms does not necessarily mean that the regime will undertake them. Experience of democratic transition elsewhere suggests that few authoritarian regimes initiate, of their own accord, reforms that could threaten their hold on power. In most cases, political and economic crises have forced them to accept the inevitable.

However, it is likely that Chinese leaders will undertake some limited reforms out of enlightened self-interest. In all probability, they may sanction administrative reforms to cut bureaucracy and combat corruption. But the real test of Chinese leaders' seriousness about democratic reforms is their willingness to limit the power of the Communist party. This would include giving the national and local legislatures more autonomy in supervising the government's budgets and confirming important executive appointments; making the judiciary more independent; and subjecting the party to the rule of law.

Unfortunately, despite a few, faint signs of new thinking in Beijing, there is no indication that Chinese leaders are ready to take the plunge.

The writer is co-director of the China Programme at the Carnegie Endowment for International Peace