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Xi Tianyang: Different approach to development


For decades, scholars and policy observers have debated over whether a China model exists or not. According to one view, the causes of China's rapid development do not go beyond the conventional wisdom of Western economics and social science: better assured property rights, growing human capital and the participation into global markets following the accession to World Trade Organization are among the most commonly observed factors behind China's strong economic performance.

But an alternative interpretation maintains that China follows a different model. A strong State sector, State-led investments and widely adopted industrial policies are deemed to be the key to the economic rise of China.

The divergence in these opinions stems not merely from the question of whether China is different from the West, but whether the difference contributed to the country's catch-up with the global economic frontier during the past decades. These debates warrant fundamental research to develop theoretical frameworks on how China's governing system works, and importantly, how the Chinese governing system functions differently and similarly compared with the West.

In a recent book, China: A New Narrative, several scholars of economics and political science put together a theoretical framework for understanding the Chinese institutions. According to them, China's path toward modernization shares many common features with state formation and economic development in the advanced economies of the world, and thus, the governing model of China speaks concordantly to the Western experience.

Meanwhile, China is unique in its history, culture, economic size and social structures. The fundamental constraints on socioeconomic conditions faced by the Chinese led the country to pursue its own governing model of socialism with Chinese characteristics. As the book illustrates, four institutional features are noteworthy for understanding the China model.

First, the leadership of the Communist Party of China is the political foundation of the country. The CPC plays a decisive role in policymaking, political selection and the consensus building on the direction of economic and social development. As of today, nearly 90 million Chinese citizens, including the majority of government officials, are members of the CPC. In terms of political representation, the CPC does not represent a particular political force or interest group, but the overlapping consensus on interests of Chinese people across all regions, industries, ethnicities, and social and economic strata.

In terms of accountability, policy responsiveness and the efforts to meet the fundamental demands of the public stems not from electoral pressure, as the case in Western democracies, but the guidance and discipline of the CPC over cadres.

As such, the political constitution of China under the leadership of the CPC enhances representation and accountability by containing the parochial politics and opportunism that are often salient problems with contested elections in the West. Moreover, the CPC is the constitutional maker of the state, and the political governance under the Party's leadership is implemented through institutions, including the Party Constitution, rather than personal discretions. The CPC assures a strong leadership with firm long-term commitments to the state's development goals and the rule of law.

Second, the Chinese government plays an active role in facilitating the socialist market economy. Economic development remains the key to overcome domestic imbalances and relax constraints on State capability. In contrast to the model propagated by the Washington consensus, which maintains that the state should refrain from any intervention in the economy except for enforcing the law, in China, the government is an important player, shaping investment projects, facilitating market transactions and supporting R&D activities.

The Party plays two important roles in managing the economy. The first role is to coordinate complementary investments in different sectors and create a "big-push "for underdeveloped regions. The fast development of high-speed rail and its economic spillovers in the western provinces present evidence in line with this role.

The second role is to calibrate development goals and switch the attention of government officials from GDP growth to sustainable and inclusive development. The regulatory overhauls on workplace safety, public health, and environmental protection are arguably such examples.

Third, incentive and selection matter. The personnel management system of the State is a key mechanism for providing proper incentives and selecting the most capable and loyal cadres to become government officials.

The performance and political integrity of officials are subject to routine performance evaluation by their superiors and the Party's organization departments at upper levels. The system is meritocratic to the extent that the career development of officials depends on their performance and merits of their personal characteristics.

There is no single formula, however, for determining the probability of promotion. The Party committees have the final say over political selection. In some scenarios, good performers are laterally transferred, rather than promoted, to help underdeveloped regions grow faster. The rotation system is instrumental for identifying capable officials and better matching them to different regions and functional departments. Rotation also serves as a sponsoring mechanism to invest further political human capital in officials by exposing them to different local conditions.

Fourth, the central government encourages policy innovations from local governments. To some extent, the economic reform and opening up in contemporary China started from a bold policy experimentation in agriculture on a small scale in a village in Anhui province some 40 years ago.

Today, local experimentation remains a widely adopted public policy approach in many policy domains, from land rights transfers to e-commerce, before implementing reforms on a nationwide. Allowing for bottom-up initiates helps policymakers improve policy efficiency through better utilizing "local knowledge", a concept pioneered by economist and Nobel Prize winner Friedrich Hayek. In addition, it is a necessary mechanism to screen out premature initiatives and reduce the risk of mistaken policies.

By Xi Tianyang, National School of Development, Peking University

(From: China Daily Global 06/27/2019 page13)