Tweet
Originally posted by DOR
View Post
China has provinces much as America has states. And, like in the US, these sub-national bodies carry out much of the work of governing. But, unlike the US, provincial officials are appointed by the central government and – if they perform well – may be promoted to higher office. The prospect of promotion serves as an inducement to follow central guidelines. But, sometimes the leash has to be pulled a bit tighter, and this is one of those times.
Periodically, the top leadership will allow provincial elites to experiment with new policy initiatives. Deng Xiaoping’s famous cat was allowed to catch mice regardless of color, so long as it accomplished that goal. Failing to take initiative can be seen as either resistance to the central leadership, or incompetence.
The most notorious examples of radical decentralization were the Great Leap Forward of the late 1950s and Mao Zedong’s Great Proletarian Cultural Revolution a decade later. Both led to extreme excesses that had to be reined in from the top. This was only possible when those who initially supported the movements – including Mao himself – were weakened by failure.
In the early reform era, provincial leaders such as Wan Li (Anhui) and Xi Zhongxun (Guangdong; the father of Xi Jinping) experimented with radical ideas such as family farms and businesses. Because they were protected by powerful allies at the highest levels, they were safe from attack on charges of reversing socialism and abandoning previous practices. Success provided the proof that the approach favored by Deng and his allies was the better choice.
At some point, power shifts and someone on top decides it’s time to rein in the provinces and recentralize power. This most often happens when there is a change in power relationships at the top. The mechanics of recentralization are well known, and generally involve bureaucratic restructuring and personnel adjustments. Work teams may be sent down from on high to examine local conditions and directly interfere with provincial and even municipal operations.
Reining in the lower levels is an opportunity to remove officials and replace them with people more in tune with the new thinking. This is an excellent time to purge one’s opponents’ loyal underlings and promote friends and close allies. Deng and Hu Yaobang used this technique to great effect in the late 1970s. At the time, provincial revolutionary committees had a dozen or more vice chairman, mainly incompetent radicals. By reorganizing the revolutionary committees into provincial People’s Governments, Deng and Hu were able to dismiss scores of radicals by reducing the number of Vice Governors, and filling those slots with their allies.
The 21st Century version
Under Xi Jinping, much of the work of reining in the provinces has been finished, and it is now time to turn to the central government and major economic sectors. The first major reshuffle was in the armed forces, where powerful regional commands were transformed into theatre commands. Other silos, such as the Second Artillery Force (rockets and nuclear weapons) were split in two. Purging top generals such as Xu Caihou and Guo Boxiong opened the path for promoting his own men. Zhang Youxia, a new Military Affairs Committee vice chair, was the big winner among the men in uniform.
Next on the list is finance, and Xi is now completing his consolidation of the financial regulatory and anti-corruption regime. In the past, these functions have been managed by the Premier or Executive Vice Premier, but Premier Li Keqiang, the 7th man to hold the post, is the weakest since the founding of the People’s Republic of China nearly 70 years ago. The major reform program announced in late 2013 was, for example, designed by Central Party School President Liu Yunshan and [then] Executive Vice Premier Zhang Gaoli, without significant input from Premier Li.
Xi’s point man on the economy is Liu He, and he is likely to be the most powerful economic czar since Zhu Rongji. Or, rather he will be that candidate until he surpasses Zhu’s power. With President Xi no longer bound by tenure traditions, it is likely that Liu will be free to remain on top of the economy for as long as he can do the job effectively.
Liu He comes from a National Development and Reform Commission (NDRC) background, and prior to that, State Planning. He has a Masters of Public Administration from Harvard, an undergraduate degree in industrial economics, and has proven that he knows what he’s doing. First on the list of chores is gutting his old bureaucracy and redistributing parts of it to other organs. The NDRC will shed influence over healthcare, antitrust, agriculture, ‘key national projects’ and environmental matters. Portions of the Commerce Ministry will similarly be relocated to other bureaucracies. In particular, a national market supervision management bureau will be oversee price controls and anti-monopoly law enforcement.
He Lifeng will take over the emasculated NDRC, and offer no challenge to Liu He’s authority. Similarly, Liu Kun, the new Finance Minister, is also a weak policy implementer. Liu Kun's background in Guangdong at a time when Xi Zhongxun (Jinping’s father) ran the province echoes He Lifeng’s experience in Fujian.
The highly respected People’s Bank of China (PBoC) Governor, Zhou Xiaochuan, has been able to put his protégé, Yi Gang, into the top central bank position. This may be partly due to Zhou’s great competence running a part of the economy that is not well understood by generalists. Yi’s background as head of the State Administration of Foreign Exchange (SAFE) and the PBoC Monetary Policy Department shouldn’t cause too much investor concern. Another central banker to watch is Pan Gongsheng, the current SAFE chief. He spent time at Cambridge and Harvard, and is the closest thing China has to a crypto-currency specialist.
Financial sector oversight will be consolidated under China Banking Regulatory Commission Chair Guo Shuqing. Guo is expected to pick up new responsibilities with the merger of other regulators into his balliwick, including insurance. He has a team of anti-corruption experts keeping an eye on things that includes Zhou Liang, Du Jinfu and Xu Jia’ai.
Finally, there’s the new National Supervisory Commission which will be run by politburo member and former Discipline Inspection Commission Deputy Secretary, Yang Xiaodu. Yang is clearly Vice President Wang Qishan’s man, and as such will enjoy very strong political support for his work. His new body extends the party’s anti-corruption work into the non-party sector. Under China’s curious legal structure, party members cannot be tried in court until they have been stripped of party membership. Yang will be in charge of making that call.
(Wang is the second consecutive Vice President to not be a member of the Politburo Standing Committee.)
Periodically, the top leadership will allow provincial elites to experiment with new policy initiatives. Deng Xiaoping’s famous cat was allowed to catch mice regardless of color, so long as it accomplished that goal. Failing to take initiative can be seen as either resistance to the central leadership, or incompetence.
The most notorious examples of radical decentralization were the Great Leap Forward of the late 1950s and Mao Zedong’s Great Proletarian Cultural Revolution a decade later. Both led to extreme excesses that had to be reined in from the top. This was only possible when those who initially supported the movements – including Mao himself – were weakened by failure.
In the early reform era, provincial leaders such as Wan Li (Anhui) and Xi Zhongxun (Guangdong; the father of Xi Jinping) experimented with radical ideas such as family farms and businesses. Because they were protected by powerful allies at the highest levels, they were safe from attack on charges of reversing socialism and abandoning previous practices. Success provided the proof that the approach favored by Deng and his allies was the better choice.
At some point, power shifts and someone on top decides it’s time to rein in the provinces and recentralize power. This most often happens when there is a change in power relationships at the top. The mechanics of recentralization are well known, and generally involve bureaucratic restructuring and personnel adjustments. Work teams may be sent down from on high to examine local conditions and directly interfere with provincial and even municipal operations.
Reining in the lower levels is an opportunity to remove officials and replace them with people more in tune with the new thinking. This is an excellent time to purge one’s opponents’ loyal underlings and promote friends and close allies. Deng and Hu Yaobang used this technique to great effect in the late 1970s. At the time, provincial revolutionary committees had a dozen or more vice chairman, mainly incompetent radicals. By reorganizing the revolutionary committees into provincial People’s Governments, Deng and Hu were able to dismiss scores of radicals by reducing the number of Vice Governors, and filling those slots with their allies.
The 21st Century version
Under Xi Jinping, much of the work of reining in the provinces has been finished, and it is now time to turn to the central government and major economic sectors. The first major reshuffle was in the armed forces, where powerful regional commands were transformed into theatre commands. Other silos, such as the Second Artillery Force (rockets and nuclear weapons) were split in two. Purging top generals such as Xu Caihou and Guo Boxiong opened the path for promoting his own men. Zhang Youxia, a new Military Affairs Committee vice chair, was the big winner among the men in uniform.
Next on the list is finance, and Xi is now completing his consolidation of the financial regulatory and anti-corruption regime. In the past, these functions have been managed by the Premier or Executive Vice Premier, but Premier Li Keqiang, the 7th man to hold the post, is the weakest since the founding of the People’s Republic of China nearly 70 years ago. The major reform program announced in late 2013 was, for example, designed by Central Party School President Liu Yunshan and [then] Executive Vice Premier Zhang Gaoli, without significant input from Premier Li.
Xi’s point man on the economy is Liu He, and he is likely to be the most powerful economic czar since Zhu Rongji. Or, rather he will be that candidate until he surpasses Zhu’s power. With President Xi no longer bound by tenure traditions, it is likely that Liu will be free to remain on top of the economy for as long as he can do the job effectively.
Liu He comes from a National Development and Reform Commission (NDRC) background, and prior to that, State Planning. He has a Masters of Public Administration from Harvard, an undergraduate degree in industrial economics, and has proven that he knows what he’s doing. First on the list of chores is gutting his old bureaucracy and redistributing parts of it to other organs. The NDRC will shed influence over healthcare, antitrust, agriculture, ‘key national projects’ and environmental matters. Portions of the Commerce Ministry will similarly be relocated to other bureaucracies. In particular, a national market supervision management bureau will be oversee price controls and anti-monopoly law enforcement.
He Lifeng will take over the emasculated NDRC, and offer no challenge to Liu He’s authority. Similarly, Liu Kun, the new Finance Minister, is also a weak policy implementer. Liu Kun's background in Guangdong at a time when Xi Zhongxun (Jinping’s father) ran the province echoes He Lifeng’s experience in Fujian.
The highly respected People’s Bank of China (PBoC) Governor, Zhou Xiaochuan, has been able to put his protégé, Yi Gang, into the top central bank position. This may be partly due to Zhou’s great competence running a part of the economy that is not well understood by generalists. Yi’s background as head of the State Administration of Foreign Exchange (SAFE) and the PBoC Monetary Policy Department shouldn’t cause too much investor concern. Another central banker to watch is Pan Gongsheng, the current SAFE chief. He spent time at Cambridge and Harvard, and is the closest thing China has to a crypto-currency specialist.
Financial sector oversight will be consolidated under China Banking Regulatory Commission Chair Guo Shuqing. Guo is expected to pick up new responsibilities with the merger of other regulators into his balliwick, including insurance. He has a team of anti-corruption experts keeping an eye on things that includes Zhou Liang, Du Jinfu and Xu Jia’ai.
Finally, there’s the new National Supervisory Commission which will be run by politburo member and former Discipline Inspection Commission Deputy Secretary, Yang Xiaodu. Yang is clearly Vice President Wang Qishan’s man, and as such will enjoy very strong political support for his work. His new body extends the party’s anti-corruption work into the non-party sector. Under China’s curious legal structure, party members cannot be tried in court until they have been stripped of party membership. Yang will be in charge of making that call.
(Wang is the second consecutive Vice President to not be a member of the Politburo Standing Committee.)
Comment