3. Governance in China
3.3. Issues relating to China‟s governance performance
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3.3. Issues relating to China‟s governance performance
This chapter continues to evaluate China‟s governance performance from different angles. My aim is not to cover every aspect, but rather to focus on some „hotspots‟ in China‟s recent reforms which affect the state‟s governance capacity.
The chapter follows the definition developed earlier in 0.
Governance is the (1) process of policy development and implementation, as well as (2) the manner in which economic, social and environmental resources are allocated and used. The (3) outcome of this process can be measured in three dimensions of
„Selection and Monitoring‟, „Efficiency‟ and „Respect‟.
The government (process of policy development and implementation)
Although the concept of governance encompasses much more than the government‟s governing of the state, the government has still a predominant position. There are several aspects to how the organization of the government influences a country‟s governance capacity. The five territorial divisions: province level, prefecture level, county level, township level, grassroots level,192 all have extended power structures and appropriate rules, a situation which has led to the highly fragmented authority of the Chinese state, which has long encouraged a politics of bargaining both between and within institutions at all levels.193
The OECD sees no less than a redefinition of the role of the state as the most salient challenge in China194 and suggests that government activities should concentrate on issues where the market can not accomplish „national objectives‟195 such as:
(1) Increasing public expenditure in education, health and science and technology, (2) consolidating the institutional framework of the newly created SASAC and of other regulatory bodies, (3) redefining the role of the state and (4) rationalizing the administrative organizational structure and improving co-ordination.
Policy making (policy development and implementation)
192 OECD, "China in the Global Economy: Governance in China", 16.
193 Howell, "Getting to the Roots: Governance Pathologies and Future Prospects", 230.
194 OECD, "China in the Global Economy: Governance in China", 39.
195 Ibid., 40.
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On the one hand, the fragmented structure of China‟s political system has led to fragmented and contradictory governance processes with regard to policy making.
The “central government struggles to enforce national and uniform policies and laws,”196 yet Saich197 argued that it is China‟s size and diversity which make it necessary that China‟s policies remain flexible.198 This fragmentation, according to the viewpoint of „flexibility‟, causes a localized nature of governance in regard to outcomes and processes.199 From a governance perspective, policy making in China leads to the conclusion that the process does not embody the primacy of rationality.
Furthermore, the lack of “a direct relationship between the problem and the solution, and the policy outcome may not be an actual response to the problem that triggered the decision process.”200 Cheung and Schott (2003) have suggested that one solution is to produce better results in the sense of more coherent policies. To guarantee a more rational policy, which is independent of special interests, the states‟ capacity has to be raised. This “capacity-building is linked to governance in that one of the conditions for strengthening state institutions, according to most international and regional agencies concerned with public sector reform, is that they should be transparent, accountable, predictable, participatory, efficient and corruption-free.”201 In other words, the authors suggest strengthening China‟s „good governance‟ capacity.
External effects (process of policy development and implementation)
The important issues of external effects are evident in China‟s opening up of its economic policies; it automatically became increasingly subject to economic and social forces from the outside,202 from private enterprises to NGOs, along with new pressure to take responsibility on global issues like global warming and the post-Kyoto process.
196 Howell, "Governance Matters: Key Challenges and Emerging Tendencies", 16.
197 Saich, "Governance and Politics of China".
198 Ibid., 214.
199 Howell, "Governance Matters: Key Challenges and Emerging Tendencies", 16.
200 Saich, "Governance and Politics of China", 212.
201 Cheung and Schott, "Governance and public sector reforms in Asia: paradigms, paradoxes and dilemmas", 4.
202 Howell, "Governance Matters: Key Challenges and Emerging Tendencies", 16.
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State-Owned Enterprises (SOEs) (the manner how economic resources are allocated)
State-owned-enterprises play an important role when it comes to governance in China.
Before the reforms, SOEs functioned as an extended arm of the Chinese state. The reform processes separated the state-owned-enterprises from the administration. Since then, the responsibility for a wide range of policies, for example for welfare service policies, has shifted from the state-owned enterprises to local governments.203 The loss of this power, along with a diversification of ownership systems, has weakened the influence of the Communist Party, and as a consequence, the influence of the state itself. As a follow-up to corporate governance reforms, the separation of management and organization rights became the basis for large SOEs to gain autonomous management.204 “The main damage inflicted here has been on the capacity of the Party/state to mobilize support, to persuade, and to maintain authority at the microlevel,”205 which in other words is a loosening of governance capacity in China.
The importance of corporate governance reform is related to tackling corruption.
According to Wu,206 corporate reforms in the sense of strengthening the stakeholders‟
rights may be one of the most important contributions to curb corruption. Shifting power to local governments is a major reallocation of the governance framework, the outcome of which has to be determined with concrete cases. A general conclusion seems to be inappropriate.
Participation (allocation of social resources and the outcome of the process in regard the dimension of „selection and monitoring‟)
Participation is not necessarily related to democracy. The main idea is that the field of actors in the process of policy development and implementation is based on a broad basis. The idea of governance, as the definitions show, is that the political arena is not centered on the state. It includes variety actors at different levels, with the state, parties, enterprises and civil society „participating‟ in the process of governing the state, and formulating and implementing policies. This may be one of the weakest points when it comes to governance in China, as effective “participation also implies
203 OECD, "China in the Global Economy: Governance in China", 14.
204 Seung-Wook Baek, "Does China follow "the East Asian development model"?," Journal of Contemporary Asia, Vol. 35, No. 4 (2005), 489.
205 Howell, "Getting to the Roots: Governance Pathologies and Future Prospects", 230.
206 Wu, "Corporate Governance and Corruption: A Cross-Country Analysis."
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the existence of a „robust civil society‟ that includes more or less autonomous groups, including NGOs that can „help to identify people‟s interests, mobilize public opinion in support of these interests, and organize action accordingly‟.”207 China‟s current political leaders are reluctant to extend political choice, because they fear that an opening in participation would be likely to alter the influence of the central government on local governance. There is a strong preference on the part of the leadership to maintaining the status quo but that “might well pose a more pessimistic scenario of rapidly declining legitimacy and spiraling social unrest.”208
Corruption (outcome, dimension of „respect‟) plays an essential role, as corruption undermines the legitimacy of the party and could affect “the party‟s ability to survive.”210 Corruption in China may have several causes.
For Pei211 the roots can be found in the economic conditions and also in China‟s institutions, with their massive incentive system for corruption opportunities. Less radical explanations argue, for instance, that due to the low salary base of civil servants, the high rate of corruption serves as financial compensation212 for civil servants or is even an incentive to join the civil service in the first place. Corruption is so widespread that a large number of official positions are filled through corruption213; people have to pay a superior to be employed. Another factor is that as the economy becomes stronger, more money is involved. Larger financial transactions “undertaken during the course of the restructuring process may lead, in the absence of functioning control mechanism, to the siphoning off of assets; the shift from traditional control to systems of accountability does not pass without frictions; and the utility of material wealth has increased, given the availability of consumer goods and the perception of
207 Burns, "Governance and public sector reform in the People's Republic of China", 70.
208 Howell, "Governance Matters: Key Challenges and Emerging Tendencies", 9.
209 OECD, "China in the Global Economy: Governance in China", 30.
210 Saich, "Governance and Politics of China", 299.
211 Pei, "China's trapped transition the limits of developmental autocracy", 212.
212 OECD, "China in the Global Economy: Governance in China", 68.
213 ibid., 64, Saich, "Governance and Politics of China", 303.
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wealth as a symbol of success.”214 Solutions to curb corruption are mostly related to the concepts of „good governance, particularly concerning improvements in transparency and accountability. The latter implies that efforts for governance reforms include establishing criteria to measure the performance of civil servants,215 compare them and introduce incentives so that the performance may be enhanced. Other propositions, like government officials authorities being required to regularly rotate their positions, are highly controversial. As previous mentioned, Yang 216 considerers job-rotations as a instrument to curb corruption while Pei217 argues strongly that such systems are a cause of corruption. Such reforms may be a part of a broader solution which requires far-reaching reforms and more „checks and balances,‟ such as the implementation of audits for leading officials, their offices, and their families which are in programs of job-rotations.218 Corruption is clearly generally seen as very negative outcome of a governance system and as a strong indicator of an unhealthy governance system. But we should not overestimate corruption in China as one of its main problems. Compared with other countries, China‟s record of curbing corruption might not be as bad as the WGI suggests. Moreover, the topic is under scrutiny by the government and the CCP.
214 OECD, "China in the Global Economy: Governance in China", 105.
215 Burns, "Governance and public sector reform in the People's Republic of China", 69.
216 Yang, "Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China", 181.
217 Pei, "China's trapped transition the limits of developmental autocracy", 153.
218 OECD, "China in the Global Economy: Governance in China", 70.
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