How Do Elite CCP Decisions Really Get Made?

A Former Deputy Secretary-General of the State Council reflects on how top-level leadership, pilot program, academic support, and market forces are key to getting anything done in modern China.

It’s not often that former Deputy Secretary-Generals of the State Council open up on how decisions really get made in Chinese politics.

Jiang Xiaojuan, currently is a standing committee member of the NPC and dean of Tsinghua’s School of Public Management, recently wrote a piece reflecting on how CCP politics works post-Reform and Opening. She focuses on

  • The top-down nature of decision-making, mostly driven by high-level officials

  • The importance of pilot programs to start anything novel

  • How academics can still have an impact

  • How hard it is to justify government intervention

Paying scant attention to Marxist theory, her essay emphasizes the successes of market-oriented reforms and serves as a practical review of the inner workings of China’s often opaque bureaucracy. Full translation of her essay below…but first!

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Academic Reflections on Government Work

By Jiang Xiaojuan, Director of the School of Public Management at Tsinghua University. Thanks to Antony Louthan for the following translation.

In 2004, I was transferred to the Research Office of the State Council as deputy director. When I left the Chinese Academy of Social Sciences (CASS) to take up my new post, I went to ask an old leader of CASS for advice on how to do my new job well. He saw my smug appearance which bothered him. He admonished me, saying "you cannot view your new position as a stage to demonstrate your familiarity with political theory. You are going to serve the State Council of the Party Central Committee. Therefore, put aside your ideas, and seriously and humbly look, listen, learn and understand."  

This warning helped correct my basic attitude towards my new position and was my first lesson on the new job. In 2011, I was transferred again to the post of Deputy Secretary General of the State Council. I am not entirely sure what I can and cannot talk about openly. Therefore, I would rather talk about some experiences and feelings related to academic research.

The aspirations and determination of high-level officials is extremely important

Few important decisions are made in which all parties fully agree and many problems cannot be solved by debating theories and ideas. Therefore, all decisions should be made by high-level officials after fully listening to the views of all parties involved. I know little about the decision-making process in the earlier period of reform and opening. However, it would have been impossible to make certain important decisions if it were not for the final say of the top leader. It is both difficult to overcome the varied interests of multiple parties and challenging to take on the costs of reform.

Take, for example, the environmental protection measures which have been very strict in recent years. Although bad environmental accidents continue to occur, all parties agree that there must be improvements in the government’s ability and speed in managing these crises. But when it comes time for the government to act, all of a sudden there are many concerns and questions, such as those related to a plan’s impact on economic growth, the effects of increasing government spending and taking on too much global responsibility. Each of these arguments has its own reasoning and viewpoint.

The reasoning of an argument can still be debated, but the perspective of an argument is difficult to change, and logical reasoning will not solve the differences in perspective.

Even scholars rarely agree on any given issue, their premises and conclusions are often different.

Returning to arguments about environmental regulations, one side argues that strict environmental protection measures are neither economically beneficial nor socially equitable. The economic logic behind arguments in favor of lax environmental regulation is well understood. In terms of why strict environmental regulations would have a negative impact on social equity, this argument goes: the rich fuss over and complain about the quality of life, while the poor are in urgent need of jobs and income. Therefore environmental protection favors the desires and demands of the rich. However, the other side argues that environmental protection measures have both social and economic benefits. They would argue that the rich have ways to protect themselves from the effects of environmental degradation, such as drinking only bottled water, eating imported food, or even moving to other countries, while the poor have no choice but to suffer the consequences of pollution.

In the end, it is not the unified understanding of the parties involved, but rather the determination of leaders at the highest level that solves serious environmental pollution problems. It was only after Xi put forward his theory that "green water and green mountains are mountains of silver and gold” (绿水青山就是金山银水) that strict environmental measures could be introduced and effectively implemented. In recent years the government has tried to improve administrative reform by adopting the “Streamline Administration, Delegate Power, Strengthen Regulation and Improve Service” (“简政放权、放管结合、优化服务”(简称放管服)) plan to simplify government functions by promoting more effective government regulation and cutting red tape.

However, many officials who currently have authority to oversee and regulate projects believe that there are reasonable grounds for their power and believe that streamlining regulations will just bring new problems. On the other hand, senior leaders believe that the government manages too much and manages things inappropriately which has reduced the developmental ability and incentives of market forces. These are the current problems and main contradictions of the present. Based on this assessment, only when the government resolutely implemented its plan could it improve the situation.

Cartoon demonstrating how the “Streamline Administration, Delegate Power, Strengthen Regulation and Improve Service” plan cuts red tape for entrepreneurs. In his hand the man holds a sign saying “work” while he notes of how “simply and quickly” he can execute his plan with the help of the new government reforms to “streamline administration.”

Trial schemes and pilot programs are an important way to promote reform in China and a unique feature of China’s public management model

In China’s 40 years of reform and opening, pilot programs and trial schemes played important roles. In addition to pilot programs generally promoting the basic concept of "respect for the grassroots experience, wisdom, and the spirit of innovation" (paraphrasing Xi Jinping), there are several reasons why they have received so much focus.

Since we don’t know what the effects of implementing an entirely new system or set of policies are, it is necessary to conduct small-scale experiments to observe their effectiveness and their potential to promote reforms.

Most pilot programs fall in this category. Second, since a pilot program will be implemented on a small scale, there is more room for experimentation, and it is easier to compromise on the implementation of the program with those who hold different views. Third, it allows localities to promote reform based on local conditions. With wide disparities in local conditions, some policies may not be suitable for all places, so the pilot programs are promoted in batches and phases. For example, the college entrance examination reform in recent years requires an effective local government and good educational resources, so the provinces and cities that first voluntarily implemented reforms were allowed to start the pilot programs. Fourth, in a very small number of cases, pilot programs can be a strategy to relieve pressure from senior officials. When the call for reform is high, the top-down intergovernmental pressure is also high, therefore the first to implement a pilot program can relieve some of the pressure. Fifth, in a small number of cases at the department level, pilot programs are a way for a government department to  “set rent.” Since a department has the power to shape the implementation of the pilot program by  either including built-in preferential policies, or setting standards, a pilot program can thus be a form of local “rent seeking.”

Pilot programs can accrue experience, test the effects [of potential policies], break through barriers, and are an effective way to advance reform.

There are certainly some problems with the pilots, but they are not very common so far. In recent years, the government has made great efforts to promote intergovernmental decentralization and the power of various government departments has been significantly reduced. A very few departments seem to have demonstrated rent-seeking behavior through implementing pilot programs, and I hope that no new incentive to do so will arise.

Perhaps China’s most classic example of pilot programs comes from decollectivization of rural agriculture during the Reform and Opening period under Deng. This cartoon shows how implementing pilot programs in China’s countryside leads to land reforms.

Although pilot programs are so important for China's reform process, scholarship on them has been limited. From the perspective of theoretical analysis, the fact that pilots work well does not mean that they work equally well when implemented on a large scale. For example, moving from a local pilot to a country-wide rollout presents a classic market equilibrium problem. A small-scale pilot program changes only the local equilibrium and does not change the nature of the market as a whole, and in this scenario market prices can be considered fixed. But the full-scale implementation of a pilot program will certainly lead to changes in the overall equilibrium, which will affect the market prices or factors of production and can produce different results from small-scale pilot programs. For example, when a small-scale public-private partnership (PPP) project is piloted, the project is more manageable due to attentive and high-quality management. But when the pilot is rolled out on a large scale, there is a high risk of conflicts of interest or corruption. I originally assumed that there would be a significant amount of scholarship on evaluating the effects of scaling-up pilot programs but in fact I can rarely find studies on this topic.

The views and opinions of the academic community can influence policy-making

When most scholars have shared and firm opinions, the policy makers tend to listen and treat their views seriously. I recall that in 1999, when a document on reforming state-owned enterprises was being drafted for the Fourth Plenary Session of the 15th Central Committee, hundreds of research reports, opinions and suggestions were written to the drafting team by research institutions and individual scholars. The vast majority of scholars agreed that substantial progress must be made in reforming the state-owned economy and that state-owned enterprises should not compete with other types of enterprises in other industries. These opinions had an important impact on reform decisions. In addition, there are rare and highly specialized situations in which the relevant authorities feel less certain about the state of affairs and the consequences of particular decisions, and for which the well-researched professional advice of scholars can play an important role. For example, there was a time when problems related to academic dishonesty became a major issue in the domestic academic community and caused bad publicity internationally. However, the nature and extent of the problem were not easy to judge, and since the relevant government departments did not come to a final conclusion on the problem, they gave off an impression of not caring. Professor Xue Lan of Tsinghua University made an in-depth analysis of the problem, and considered that it needed to be dealt with seriously, and made suggestions for work, which effectively helped address the problem. Another situation is that when there is a high demand from various parties to formulate some kind of unrealistic and unsustainable welfare policy. When economists raise doubts, their opinions will be taken seriously and accepted by policymakers.

In recent years, with improvements in transparency and increased channels for the public to express their opinions, the views and opinions of scholars have often been criticized and questioned. For example, during the healthcare reform process, many economists and sociologists were criticized for lacking compassion for patients when they disagreed that the basic level of coverage and reimbursement rates were set too high. Now there seems to be a tendency for experts to be more cautious and vague in expressing their views. I remember an important issue where several experts had clear opinions, but when they spoke publicly, they all would hesitate and avoid directly expressing their opinions.

Less research seems to have been done by our scholars which cogently demonstrate the effects of reform programs or policies. Yet such research is much needed. Having identified policy goals, one needs to test whether the multiple goals are compatible with each other, or whether the means to achieve them are appropriate and adequate, etc. I remember around 2004, Zunyi Liu published a paper about the financing and sustainability of different programs of social security reform, with more detailed data measurements. I happened to be drafting a document at the time that had a social security component, and I showed the paper to a leader, who lamented that “it would be nice if there were more studies of this kind. We all knew that we should build a social security system, but it would not be responsible to start pushing such reforms without clear accounting.” During my tenure as Deputy Secretary-General of the State Council, I have been inspired by the results of many academic studies related to education, science and technology, and health care reform. However, on the whole, there is still too much discussion of principles and reasoning and too little attention to detailed measurements and statistics. This state of affairs has largely affected the acceptance and usefulness of ideas coming from academics.

It is also common for scholars to make major recommendations that are both thorough and fundamental which demonstrate their sound thinking and reasoning. However, policymakers prefer to see an analysis of the problems that may be encountered during the implementation of reforms and an assessment of the costs of implementation of those reforms, so that they can prioritize policies.

For example, some scholars now criticize the government's efforts to bail out enterprises during the 2008 financial crisis for preventing the market from playing its role in eliminating excess capacity and backward enterprises. Huge amounts of money were invested by countries to prevent their industries from being affected by the crisis which led to global monetary easing. Everyone knows that this was problematic, but all countries wanted to keep their own companies afloat and hope for other countries' companies to fail first. When there are massive quantities of debt linking enterprises and banks, governments are inevitably concerned about domino-like reactions for failing companies, and it is difficult to coordinate the "invisible hand" of markets with the "visible hand" of interventionist economic policies. Although scholars put forward many plans addressing the problems, there were in fact very few complete, calculated, and effective proposals aimed at tackling those challenges. 

It is difficult to determine whether government intervention is justified.

A market economy and openness to the outside world are the sources of our 40 years of prosperity. Our economy and society continue to grow at a high rate, and though it is fast, it is easier for society to become unstable. Therefore, the need for regulation in China is higher than in countries with stable development. Local governments, especially under the pressure to reach GDP growth targets, have both the incentive and ability to intervene inappropriately in businesses to empower them to enter the market and enhance the local government’s competitiveness. Even Alibaba, Tencent, and Baidu, the giant companies of today, received much support from local governments in the early stages of their growth. The position and views of foreign-invested companies are interesting, as they have long received more attention from local governments, which they never accused of being inconsistent with market rules at the time. In recent years, when we emphasized equal treatment for domestic and foreign investors, some foreign investors complained about the deterioration of China's investment environment. I personally think foreign investors have to follow the procedures today, even though they used to be able to get things done by complaining directly to the mayor. Although the investment environment needs to be further improved, there is nothing wrong with this principle of equal treatment for domestic and foreign investors. Over the past few decades, the situation has changed rapidly, and the "bad" policies that people later criticize are often the "good" policies that have been implemented for too long. So in principle, it is right to say that government intervention should be reasonable. But in the handling of each specific issue, sometimes the boundary is not clear.

political cartoon contrasting the importance of the market economy with the local government’s tendency to protect local firms. The tree on the right represents an ideal market economy in which local firms and those from other provinces compete equally. The stamp on the left shows a government’s conflict of interests in both promoting equal competition and the desire to intervene on behalf of local firms.

Another thing that struck me was in 2009. I was the leader of a leadership training group organized by the Central Organization Department for two months at Tsinghua University School of Public Administration and two months at Harvard University's Kennedy School. During my time at Harvard, crisis management and emergency management was a major course, with case studies as the main focus. After the teacher explained several cases in the first class and started discussing them, a city secretary stood up and said, "There are so many types of crises, your set of crises is too complicated and excludes other important cases. In China, it is very simple. As long as the secretary is there, he/she can do what needs to be done. Having a contingency plan is just the bottom line, in reality, there are too many problems which must be dealt with quickly on the spot."

He then spoke of an example from his own city. Once he said this, the secretaries and mayors in the class discussed their own experiences, and then the class became very lively. The teacher also found it very interesting and even brought in the teaching assistants to listen together and thought that China has another set of institutions and mechanisms to manage crises, some of which are very useful.

Later, one of the secretaries told me proudly that the class was very useful, and he went back to China and gave a very theoretical talk on emergency management at a meeting. Everyone at the meeting praised him for his "Harvard" level of eloquence. I was reminded of British economist Ronald Coase's comment. Coase had been a civil servant for a while, and his boss never accepted his advice, but he still persevered, and because he believed that when people asked his boss for advice, his boss could not simply repeat the same thing and would have to say something different. He would thereby remember what Coase had said. And that’s how Coase was able to influence government decision-making.

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Twitter avatar for @jordanschnycJordan Schneider 司马乔丹 @jordanschnyc
The House is excited that putting money into the NSF will allow them to create jobs by hiring more cleaning staff. Reminds me of this article where @JeffreyGoldberg interviewed King Abdullah talking to tribal leaders abt a stick-based jobs plan… Image

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Johnson also stresses how pumping more money into NSF and DOE will lead to "good, high-paying jobs ... and I'm not just talking about scientists and computer programmers." Says electricians, pipe fitters, technicians, custodial staff, factory workers will all benefit.