Even as President Xi Jinping strengthens the Party’s rule, local officials are thwarting central government policies.
The central government has identified a sensible set of reforms to address China’s structural economic and social problems, but it faces a challenge ensuring compliance at the local level.
Even if the Xi administration manages to silence political opponents in the top echelons, a greater challenge may lie at the county and township levels, where silent non-implementation and policy distortion threaten the outcome of the reforms.
What next
Beijing will respond to local officials’ foot-dragging by tightening political discipline and strengthening the Party’s monitoring power. This will see some success in the short-term, but in the longer term it could undermine local officials’ cooperation and the system’s capacity for innovation and flexibility, eventually holding back China’s development.
Impacts
- Beijing has limited capacity to monitor local cadres; major progress is likely only on reforms singled out as national priorities.
- Political and administrative reforms and environmental policies have the brightest prospects for local implementation. Financial reform, wealth redistribution and marketisation of local-level state-owned enterprises will be more challenging.
Analysis
For much of the post-Mao period, the interests of local political elites have largely aligned with national economic interests.
Since economic decentralisation in the 1980s, counties and townships, which carry out most of the functions of local government, have been assigned extensive discretionary powers. They enjoy high budgetary leeway, being the primary provider of funds for an overwhelming majority of local investment projects and social welfare.
Local cadres have therefore been able to reap most of the benefits of economic growth, either by rewarding themselves for governing collective enterprises or by exploiting state policies to their advantage.
Changing priorities
Recent changes in central government priorities, however, conflict directly with their interests. The central government’s intent to shift from an investment-led growth model towards a more market-oriented, consumption-driven growth model, will deprive local officials of rent-seeking opportunities.
Reining in the cheap credit available to local governments and diminishing their engagement in state-owned companies will likewise reduce local government’s revenues and budgetary power.
Responsibility contracts
Reforms are further threatened by the structural weaknesses of the system ensuring local government’s compliance.
Policy implementation in counties and townships is supervised through the Cadre Evaluation System, which links village, township and county officials to the next higher administrative level through ‘responsibility contracts’, setting specific performance goals in exchange for bonuses and promotions.
The supervision system suffers from structural weaknesses
Evaluations are conducted on an annual basis, and combine self-evaluation, collegial evaluation (including reports by subordinates) and inspection by higher authorities.
This system prevents open defiance from local governments but also leads to under-implementation and policy distortions. Local officials can easily manipulate the on-site evaluation process by concealing problems and bribing superiors during inspections. A tradition of reciprocity and fear of reprisals also undermine collegial evaluations, resulting in a widespread phenomenon of fabricating performance statistics and under-reporting bad performances.
As evaluations are mainly based on hard quantitative targets, local cadres also tend to value short-term policy output rather than long-term impact, and prioritise growth above sustainability. They tend to prefer ‘political achievement projects’ that will bring positive evaluations from their superiors, rather than less visible but more relevant long-term projects.
Selective implementation
The evaluation system also leads to selective implementation, favouring policies that are specifically categorised as national priorities. Economic performance, social stability and population control, in particular, have been long seen as crucial issues with potentially career-ending consequences and have therefore been implemented carefully, if grudgingly.
However, general guidelines without specific details or numerical targets give local governments leeway to apply them according to local circumstances and conditions, and are often distorted or neglected. Laws and regulations passed by national and provincial People’s Congresses are violated by local authorities even more often, due to a lack of appropriate monitoring systems.
Implications for reform
Given the limited monitoring capacity of the central government and local officials’ reluctance, the Xi administration will not be able to fully implement all the reforms they have pledged to carry out.
So far, environmental reforms and administrative reforms aiming to streamline and modernise local government have been implemented relatively well, whereas reform of the financial system, wealth redistribution and efforts to reduce local government involvement in state-owned enterprises still lack clear political will and precise targets.
Monitoring powers
In response to the expected local opposition, Xi’s administration is mobilising the Communist Party’s internal institutions to rein in recalcitrant authorities. In October 2015, the Politburo approved a new edition of the Party disciplinary guidelines. In June 2016, it announced that the 6th Plenum of the 18th Central Committee (probably in October or November this year) will focus on party discipline.
By reinforcing the Party’s Leninist organisation, launching top-down anticorruption campaigns and reinvigorating sanctioning mechanisms for local cadres, Xi intends to increase the monitoring power of the Central Discipline Inspection Commission, the Party’s powerful watchdog institution that monitors implementation of party procedures and rules, and cadres’ loyalty and behaviour.
This recent evolution has renewed the long-running dominant role of the Party over state institutions: the two other monitoring institutions, the Ministry of Supervision and the People’s Congresses at each level, have not been given more supervisory power and still lack authority and autonomy.
Mitigated consequences
This reconfiguration of central-local relations has proven efficient in the short term, reducing corruption and silencing dissenting voices within the Party. The carrot-and-stick system linking financial bonuses and career promotions to political loyalty and policy implementation still allows the central leadership to ensure compliance at the local level.
However, the current repressive turn could encourage local officials to block upward flows of information and circumvent supervision. As discipline supervision is often distorted to serve political struggles between rival factions, the Party’s cohesion could also be threatened in the long term.
Tightening party discipline, moreover, is likely to have unintended consequences, decreasing local officials’ enthusiasm and creativity. Coercing local cadres into compliance could undermine innovation and flexibility, thus reducing what has been one of the strongest catalysts of economic growth for the last three decades.
This article was first written for the Oxford Analytica Daily Brief, which is the copyright holder.