The Beijing shuffle

Why the government reorganisation package is a disappointment

Written by Minxin Pei | Published:March 15, 2013 3:02 am

Expectations of China’s new leadership have been relatively subdued since its formal installation in November last year. It would be hard to blame the marketing campaign launched by the new mandarins in Beijing. In fact,they have been working very hard to project a fresh image,vowing to restart China’s economic reforms. Apparently,the Chinese public prefers action to rhetoric.

Based on the news coming out of the annual session of China’s National People’s Congress (the country’s rubber-stamp parliament),it seems that popular cynicism is fully justified. This event provided the first opportunity for the new leadership to demonstrate its commitment to reform. Unfortunately,the measures announced during the proceedings of the congress fell short even of the lowered expectations of the new leadership’s ability to galvanise China’s stalled march towards a market economy.

Before we discuss the bad news,let us report some promising developments first. The most important and heartening step Beijing is about to take is merging the national family-planning commission and the ministry of health. The family-planning commission has been responsible for the enforcement of China’s disastrous one-child policy for the past three decades,and is viewed as the last staunch defender of this draconian and inhumane policy. Its disappearance signals the end of the one-child policy (although no officials in Beijing are ready to acknowledge this inevitability). Another possible encouraging change is the elevation of the bureaucratic status of China’s food and drug administration,apparently to show the government’s resolve to improve food safety,which has become,along with environmental degradation,a source of public discontent.

The abolition of the railway ministry,a government agency that builds,owns and operates China’s vast rail system,may qualify as another piece of good news. The ministry is the last bastion of the country’s planned economy. It is known chiefly for corruption,inefficiency and financial indebtedness. Beijing’s plan is to spin off the debt-laden assets of the ministry into a standalone corporation,which will operate the railway system. The regulatory functions of the ministry will be assumed by the ministry of transportation. It is hard to determine the long-term effects of this measure at the moment. On the surface,it might appear to be a positive step. However,past experience of replacing a government ministry with a national monopoly has not been very good. In the 1990s,China abolished its ministry of petroleum and split its assets among three giant national oil companies (China National Petroleum Corporation,Sinopec,and China National Offshore Oil Corporation),each protected by regional or sectoral monopoly. The result was not progress in economic reform,but its hidden subversion.

Besides these three notable bureaucratic reorganisations,of course,Beijing has announced other changes,but they are relatively insignificant in terms of their economic and social impact. So in judging the new leadership’s performance in reform,we may have to examine what did not happen at the National People’s Congress and speculate on the meaning of this political inaction.

Those familiar with China’s reform and development priorities have long argued that the country needs to re-establish a commission for economic reform (there was one such commission in the 1980s,but it was merged with the national planning commission after Tiananmen). Today,there is no government institution that is solely devoted to the formulation and implementation of key economic reforms. Nominally,the National Development and Reform Commission (NDRC) performs such a function. But everyone knows that the NDRC,China’s super-regulator,is the most conservative economic bureaucracy and patron of the state-owned enterprises. Tasking the NDRC with formulating reform initiatives is like asking the Vatican to think about abandoning Catholicism.

Regrettably,Beijing’s government reorganisation has left the NDRC intact. It has lost none of its power. The proposal to set up an independent reform commission,advanced by reformist economists before the congress,was ignored.

If China’s new leadership expects the Chinese public and the international business community to greet enthusiastically its first attempt to unveil a reform programme for the coming years,it is clearly mistaken. The government reorganisation package,which the incoming premier Li Keqiang and his deputy have worked on since mid-November,is a disappointment.

It is a disappointment not simply because it has done too little. To revive China’s economic reform,the most urgent task is not to reshuffle the chairs inside the bureaucracy. The problem China faces today is not that certain bureaucracies are doing a poor job (although that is true),but that the state as a whole is too big and powerful. It meddles too much in the economy. The right approach is to reduce the power of these bureaucracies and change their functions.

Given the fact that China’s leaders are smart people,it is reasonable to assume that they fully understand this problem and how to fix it. But when smart people who “get it” fail to do the right thing,it only proves that the cynics are right again.

The writer is a professor of government and non-resident senior fellow at the German Marshall Fund of the US

express@expressindia.com

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