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Society & Culture

The Right Way to Judge Chinese Governance

Mar 27, 2018
  • Andrew Sheng

    Distinguished Fellow at the Asia Global Institute at the University of Hong Kong
  • Xiao Geng

    President of the Hong Kong Institution for International Finance

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HONG KONG – Following China’s “two sessions” – the annual meetings of the national legislature and the top political advisory body – all Western observers, it seems, are discussing the removal of the two-term limit for the president. Xi Jinping, the international media insists, is consolidating power, and may even be laying the groundwork for a Mao Zedong-style personality cult. But this reading is fundamentally flawed.

The predominant Western view that Xi’s growing authority represents a dangerous trend partly reflects anxiety over growing challenges to democracy in the United States and across Europe. But it makes little sense to view Chinese political developments through a Western lens, especially at a time when the world is shifting from a unipolar to a multipolar system.

Recent changes in China should instead be regarded as part of a broader process, in which competing systems of governance are emerging to cope with complex, globally connected challenges, such as disruptive technologies, geopolitical rivalries, climate change, and demographic shifts. In short, countries are trying to find their governance footing.

In a fast-changing world, governance systems must support rapid decision-making under conditions of radical uncertainty, while maintaining accountability. That – not the Western expectation of what a governance system should look like – is the standard by which we should be assessing political developments in China.

In fact, Western-style governance no longer looks like the gold standard its advocates long proclaimed it to be. Western democracies are facing serious internal threats – most notably, populist forces espousing dangerous policies like trade protectionism – that have risen largely in response to these systems’ failure to manage problems such as income inequality, political polarization, rising debt, and failing infrastructure.

That failure partly reflects the short-termism that tends to dominate in Western democracies, where short electoral cycles (from about six months to four years) often compel politicians to focus on cyclical issues, rather than on structural impediments to long-term productivity gains and income growth. (Similarly, Western companies tend to base their operations on quarterly results, and thus may neglect long-term risks and opportunities.)

By contrast, when China’s leaders formulate and execute policies, they tend to think in terms of decades. This is vital to enable an effective response to the structural problems – such as corruption, environmental pollution, and inequality – that more than two generations of rapid growth and development have brought.

The current bureaucracy, working within its silos, is already addressing these problems, in order to create a more equitable society that is also innovative and adaptable. Only then can China escape the infamous “middle-income trap” before population aging begins to take a higher toll on economic growth.

More broadly, China’s leaders have set a 30-year target for modernizing the country’s economy and governance – a long-term goal that reflects the kind of vision that few countries have managed to articulate, let alone implement. By removing the presidential term limit, China’s leadership is improving its chances of success, by opening the way for Xi and his vice president, Wang Qishan, to go further in realizing this vision.

Xi and Wang are seasoned politicians with extensive experience dealing with crises and managing complex institutional and social challenges, from the local to the global level. Both have a strong grasp of history, as well as the charisma and will needed to confront recalcitrant vested interests. Their continued leadership is thus invaluable.

But this does not mean that accountability will be lost. On the contrary, the National People’s Congress has approved a major overhaul of China’s governance structure, creating a new National Supervision Commission to check corruption by all Chinese officials, regardless of their affiliations or status in the Communist Party of China.

The State Council has also been restructured, with ministries, commissions, and agencies consolidated and streamlined to manage reforms in a more coordinated and efficient way. For example, agriculture and rural affairs have been combined under one ministry, as have all environmental issues.

Likewise, in order to reduce financial-sector risks (including excessive leverage and shadow banking), regulation of banking and insurance have been consolidated under the new China Banking and Insurance Regulatory Commission. These sweeping institutional reforms would make China’s governance structure look functionally similar to American and European counterparts.

Like Xi and Wang, officials at these institutions are dedicated, competent, and experienced reformers. Assisting Premier Li Keqiang will be the Harvard-educated vice premier Liu He, who has spent more than 30 years in long-term development planning, and has a deep understanding of how market forces can support efficient resource allocation. Financial reforms are in the hands of People’s Bank of China Governor Yi Gang, a US-educated economist, and the chairman of the China Banking and Insurance Regulatory Commission, Guo Shuqing, an Oxford-trained economist with experience in provincial leadership, central banking, and securities regulation.

Two thousand years ago, the Chinese philosopher Han Fei argued that effective governance required three things: the rule of law, bureaucratic tools, and political will. Changing laws or honing the tools of governance is important, but they mean little without sustained and determined efforts by political leaders. China’s system has survived because its leaders have been willing to confront market failures and administrative deficiencies in a direct and consistent manner. New efforts to boost accountability – vital to reinforce legitimacy – will strengthen the system further.

China, like the US and Europe, is too big to fail. It thus has a responsibility to develop a system of governance that can deliver structural changes to its economy and society, while ensuring effective accountability. The test is whether that system adapts to long-term challenges and contributes to national and global wellbeing, not whether it adheres to Western standards.

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