As the Chinese Communist Party’s 19th National Congress has unfolded,
much of the focus has been on who will occupy the key positions in
President Xi Jinping’s administration for the next five years. But
China’s future trajectory depends crucially on another group of leaders,
who have received far less attention: the technocrats who will carry
out the specific tasks associated with China’s economic reform and
transformation.
Over the last four decades, China’s technocrats have collectively
engineered a miraculous transformation. The current generation, a gifted
group of policymakers, will step down in or around March 2018, passing
the baton to a new generation. That generation – highly educated,
experienced, and, for the most part, successful on their own merits – is
prepared to carry China’s economic and social progress forward with
great skill and dedication. The question is whether they will have an
open field on which to run.
One thing is certain: the next generation of technocrats will face very
different conditions from those confronted by their predecessors. China
has reached a moment of significant uncertainty. Beyond the questions
inherent in the process of generational turnover, there has been a
dramatic shift in China’s dominant policy framework under Xi.
Under Deng Xiaoping – the leader who initiated China’s radical “reform
and opening up” in 1978 – the singular policy goal was domestic economic
transformation and growth, to be achieved with a collaborative
decision-making model that included vigorous internal debate. Deng
explicitly ruled out a broader international agenda for China – a
dictate that China’s policymakers followed for more than three decades.
Since taking power in 2012, Xi has changed this policy framework in
several key ways. For starters, he tackled the endemic corruption that
had been undermining the credibility of the CCP (and, by extension,
China’s governance model), by launching an unprecedented anti-graft
campaign that reached the highest levels of the Party’s leadership.
Many expected Xi’s anti-corruption campaign to be a temporary
initiative, intended to pave the way for implementation of the
aggressive economic reforms announced at the Third Plenary Session of
the 18th Central Committee in 2013. Instead, the campaign has become
essentially a permanent feature of Xi’s administration.
Xi believes that a government’s legitimacy is mainly a function of
consistently delivered values, together with economic and social
progress, with strict commitment to the public interest taking
precedence over the form of governance. While few Western observers have
fully recognised this perspective, developments in the West over the
last ten years – the 2008 financial crisis, widening income and wealth
inequality, and intensifying political polarisation – have reinforced
this mindset.
As a result, Chinese leaders and citizens are more convinced than ever
that government by a strong single party is an essential pillar of
stability and growth. The focus in the West on the form of governance,
as opposed to inclusive economic and social outcomes, is misguided, they
believe, because both democratic and autocratic systems can be
corrupted.
Moreover, China’s economic agenda under Xi has expanded beyond its
narrow focus on domestic growth and development to include a concerted
effort to expand Chinese influence in the global economy, especially in
the developing world. This broad and expanding external agenda generates
claims on resources – you can’t be the dominant external investor in
Africa and Central Asia without spending a lot of money – while
influencing policy choices. For example, state-owned enterprises,
including banks, may respond more flexibly than purely private
enterprises to a variable mix of public and private incentives and
investment returns.
Finally, in recent years, China’s policy frameworks have increasingly
reflected the inherent tension between the long-standing imperative of
ensuring social and political stability and the more modern objective of
market liberalisation. China’s leadership remains steadfastly committed
to protecting the Party’s interests, which it views as coterminous with
those of society. For that reason, the CCP continues to focus on
upholding order and instilling values in all aspects of Chinese life,
maintaining an active presence not only in policy debates, but also in
private-sector activities and social affairs.
At the same time, the government is seeking to give markets a more
decisive role in the economy, unleash the power of entrepreneurship and
innovation, and respond more effectively to the needs and desires of a
young, educated, and fast-growing middle class. And for good reason:
these are the internal engines that have enabled China to achieve 6-7%
annual GDP growth amid a difficult structural shift and middle-income
transition, carried out in a relatively weak global economy.
It is hard to say for sure whether these two objectives are in direct
conflict with each other. But there is reason for concern. The kind of
dynamic competition that leads to innovation is, after all, far from a
centrally guided process, though public-sector choices in areas like
basic research do have a substantial impact.
Moreover, in both policymaking and academia, active debate is
indispensable to sorting good ideas from bad ones. Yet while the Chinese
system has proved its capacity for high-level internal policy debate
among highly trained and experienced participants whose loyalty is not
in question, and then act quickly and decisively, China’s leaders remain
suspicious of unfettered public debate and commentary. But many complex
policy choices – for example, about financial-sector reform and opening
up – would benefit from the winnowing process that greater openness
affords.
Over the next five years, China’s success will depend largely on how
well the government’s complex agenda, and the tensions it entails, are
managed. To achieve their objectives, China’s leaders will need to
strike a delicate balance between a muscular, disciplined, and
ubiquitous Party, setting standards and protecting the public interest,
and innovative, empowered, and potent markets, driving the economy into
the future. – Project Syndicate
* Michael Spence, a Nobel laureate in economics, is Professor of
Economics at New York University’s Stern School of Business and Senior
Fellow at the Hoover Institution.
Chinese President Xi Jinping raises his hand to vote for the reports with other China’s leaders at the closing of the 19th Communist Party Congress at the Great Hall of the People in Beijing yesterday. Chinese President Xi Jinping’s name was added to the Communist Party’s constitution at a defining congress, elevating him alongside Chairman Mao to the pantheon of the country’s founding giants.