Impatient with Beijing,Shanghai sets the pace for reform. It has lessons for India
In India,it is called policy paralysis. In Washington DC,they crib about a political gridlock. In Europe,they lament a lack of political will. In China,the concern now is with growing political risk-aversion.
Last week,a young official in Shanghai told me that Beijing had become too cautious on the economic policy front,so provinces seeking speedier economic growth must take their own initiative. We will not have much reform from above, he said to me,but we can have reform from below.
By way of example,he cited how the Shanghai financial services authority had liberalised the regime for private equity investors without reference to Beijing,while the latter looked the other way. If the Shanghai authorities had sought Beijings permission they would not have got it,because the bureaucracy in Beijing has become very cautious and that has made our political leadership also cautious. So we just went ahead and changed policy. Soon other provinces started doing this and finally the central government issued an order approving what the provinces had already done!
Earlier in the day,a senior official of the central government in Beijing,who spoke with the authority of a ruling Communist Party of China (CPC) member,put it differently: China had half a century of top-down leadership. Thirty years under the leadership of Mao Zedong and 20 years under the leadership of Deng Xiaoping. We now have bottom-up leadership. I said to him that in India we call it coalition politics.
The new era of bottom-up politics has had politically paradoxical consequences in China. While it has made the system of governance more participatory,it has made the central government less authoritarian and,therefore,more bureaucratic and cautious. In the Mao and Deng era,a powerful national leadership could initiate bold reforms. To a large extent,Dengs successors operated in the shadow of this dying era. Today,especially when China is in the process of a political transition and there are no powerful over-arching national leaders,the party and government bureaucracy have taken charge and seem to have slowed things down to avert mishaps.
That this has had some impact on Chinas economic performance is now evident from the latest economic data coming out of China. The official view,of course,is that China cannot sustain double-digit growth for ever,that after two decades of 10 per cent growth a slowing down is quite natural. Reporting a deceleration of growth to around 7 per cent,Sheng Lalyun of Chinas National Bureau of Statistics told reporters last week: After 30 years of vigorous growth,Chinas economy has entered a period of transition. The potential growth will slump,but this is a universal rule.
Quite so. And one must never underestimate Chinas capacity to bounce back or find new routes to sustain high growth. Indeed,a period of slower growth may be good for China as it tries to re-balance its economy and promote domestic consumption. But there is a new generation that is impatient and wants to push for higher growth. Higher growth will not come without reform. Reforms will not come from Beijing. So the time has come for Shanghai to set the pace, a young think-tanker in Shanghai told me.
There is nothing new about this phenomenon in Chinese policy-making. Whenever Beijing sought to put the break on reform,Shanghai would press the accelerator. In his dying days,and while in retirement,Deng Xiaoping reached out to Shanghai and to its leaders,like Zhu Rongji,to force his more conservative successors in Beijing to move forward on economic reforms and liberalisation. My young interlocutors in Shanghai now talk of the need for a new Zhu Rongji.
In his exhaustive and authoritative biography of Deng,Deng Xiaoping and the Transformation of China,Harvard scholar Ezra Vogel recounts how,at the age of 87 and three years into retirement,Deng took a train journey from Beijing to Shanghai and Shenzhen,lighting little fires of protest against the return to power of anti-reform conservatives and Maoists in Beijing. He would tell party functionaries from small towns and villages,who came to greet him as his train journeyed south,that they should strengthen the hands of the reformists in Beijing.
It was not as massive an initiative as Maos own bombard the headquarters,but it had the impact that Deng sought. Jiang Zemin,Dengs chosen successor who was guilty of trying to roll back Dengs policies under pressure from the CPCs more conservative Maoists,flew down to reassure him that he would continue to walk the path set by Deng.
In response to criticism that economic liberalisation had led to greater corruption,Deng told his comrades,You have to use a two-fisted approach. With one hand,grab reform and opening. With the other,you grab every kind of criminal behaviour. You have to have a firm grip with both hands.
All this finds an echo in todays India. If New Delhi cannot move fast enough on the economic policy front because of coalition compulsions,nothing stops pro-reform and pro-liberalisation chief ministers from moving faster in their own states. Second,taking measures that would unleash the animal spirits of private enterprise need not mean that the law would not take its own course,to use an Indian euphemism,in dealing with corruption and cronyism.
Today,in no major country in the world is there the kind of strong and powerful political leadership that many idle critics of Prime Minister Manmohan Singh seek in India. Barack Obama is no Ronald Reagan or even Bill Clinton. Angela Merkel is no Konrad Adenauer or Helmut Schmidt. David Cameron is no Margaret Thatcher. Wen Jiabao and Hu Jintao put together are no Deng Xiaoping. Only a Vladimir Putin fancies himself to be a latter-day tsar,and can do so as long as oil prices remain high.
The world as a whole is gripped by political risk aversion on the economic front. Even so,the space to act can always be found,as we now find Dr Singh attempting to,and those who begin walking make their own path,to quote an old Chinese saying.
The writer is director for geo-economics and strategy,International Institute for Strategic Studies,and honorary senior fellow,Centre for Policy Research,Delhi