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The Emerging Model of Economic Policy Making Under Xi Jinping China's Political Structure and Decision-Making Process

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The Emerging Model of Economic Policy Making Under Xi Jinping China's Political Structure and Decision-Making Process CIGI Papers No. 208 — December 2018 The Emerging Model of Economic Policy Making under Xi Jinping China’s Political Structure and Decision-making Process Alex He CIGI Papers No. 208 — December 2018 The Emerging Model of Economic Policy Making under Xi Jinping China’s Political Structure and Decision-making Process Alex He CIGI Masthead Executive President Rohinton P. Medhora Deputy Director, International Intellectual Property Law and Innovation Bassem Awad Chief Financial Officer and Director of Operations Shelley Boettger Director of the Global Economy Program Robert Fay Director of the International Law Research Program Oonagh Fitzgerald Director of the Global Security & Politics Program Fen Osler Hampson Director of Human Resources Laura Kacur Deputy Director, International Environmental Law Silvia Maciunas Deputy Director, International Economic Law Hugo Perezcano Díaz Director, Evaluation and Partnerships Erica Shaw Managing Director and General Counsel Aaron Shull Director of Communications and Digital Media Spencer Tripp Publications Publisher Carol Bonnett Senior Publications Editor Jennifer Goyder Senior Publications Editor Nicole Langlois Publications Editor Susan Bubak Publications Editor Patricia Holmes Publications Editor Lynn Schellenberg Graphic Designer Melodie Wakefield For publications enquiries, please contact [email protected]. Communications For media enquiries, please contact [email protected]. @cigionline Copyright © 2018 by the Centre for International Governance Innovation The opinions expressed in this publication are those of the author and do not necessarily reflect the views of the Centre for International Governance Innovation or its Board of Directors. This work is licensed under a Creative Commons Attribution — Non-commercial — No Derivatives License. To view this license, visit (www.creativecommons.org/licenses/by-nc-nd/3.0/). For re-use or distribution, please include this copyright notice. Printed in Canada on paper containing 100% post-consumer fibre and certified by the Forest Stewardship Council® and the Sustainable Forestry Initiative. Centre for International Governance Innovation and CIGI are registered trademarks. 67 Erb Street West Waterloo, ON, Canada N2L 6C2 www.cigionline.org Table of Contents vi About the Author vi About the Global Economy Program vii Acronyms and Abbreviations 1 Executive Summary 2 Introduction 3 The Party-dominated Political Structure in China 11 The Decision-making Process in China 22 Main Features of Economic Decision-making Process in China 29 Conclusion 30 Works Cited 34 About CIGI 34 À propos du CIGI About the Author About the Global Xingqiang (Alex) He is a CIGI research Economy Program fellow. His work focuses on China and global economic governance, the Group of Twenty, Addressing limitations in the ways nations domestic politics in China and their role tackle shared economic challenges, the Global in China's foreign economic policy making Economy Program at CIGI strives to inform and and Canada-China economic relations. guide policy debates through world-leading research and sustained stakeholder engagement. Prior to joining CIGI in 2014, Alex was a senior fellow and associate professor at the Institute With experts from academia, national agencies, of American Studies at the Chinese Academy of international institutions and the private sector, Social Sciences (CASS) and a visiting scholar at the the Global Economy Program supports research Paul. H. Nitze School of Advanced International in the following areas: management of severe Studies, Johns Hopkins University in Washington sovereign debt crises; central banking and DC (2009-2010). Alex was also a guest research international financial regulation; China’s role fellow at the Research Center for Development in the global economy; governance and policies Strategies of Macau (2008-2009) and a visiting of the Bretton Woods institutions; the Group Ph.D. student at the Centre of American Studies of Twenty; global, plurilateral and regional at the University of Hong Kong (2004). trade agreements; and financing sustainable development. Each year, the Global Economy Alex is the author of The Dragon’s Footprints: Program hosts, co-hosts and participates in China in the Global Economic Governance System many events worldwide, working with trusted under the G20 Framework (2016) (in both English international partners, which allows the program and Chinese) and co-author of A History of to disseminate policy recommendations to an China-U.S. Relations (2009). He has published international audience of policy makers. dozens of academic papers, book chapters and newspaper and magazine articles. Alex’s upcoming Through its research, collaboration and book will examine China’s monetary policy- publications, the Global Economy Program making process under President Xi Jinping. informs decision makers, fosters dialogue and debate on policy-relevant ideas and He has a Ph.D. in international politics from the strengthens multilateral responses to the most Graduate School of CASS and previously taught pressing international governance issues. at Yuxi Normal University in Yunnan Province, China. Alex is fluent in Chinese and English. vi CIGI Papers No. 208 — December 2018 • Alex He PBoC People’s Bank of China Acronyms and PRC People’s Republic of China Abbreviations PBSC Politburo Standing Committee CCDI Central Commission for SEZ special economic zone Discipline Inspection SASAC State-owned Assets Supervision CEWC Central Economic Work Conference and Administration Commission CLGCDR Central Leading Group for SOEs state-owned enterprises Comprehensively Deepening Reform SPC Supreme People’s Court CLGFEA Central Leading Group for Financial and Economic Affairs CLGFA Central Leading Group for Foreign Affairs CLGTA Central Leading Group for Taiwan Affairs CSRC China Securities Regulatory Commission CCPCC Chinese Communist Party Central Committee CPC Communist Party of China CPLAC Central Political and Legal Affairs Commission CPPCC Chinese People’s Political Consultative Conference CRES Commission for Restructuring the Economic System ESOP Employee stock ownership MBO management buyout MCA Ministry of Civil Affairs MoF Ministry of Finance NSC National Supervisory Commission NDRC National Development and Reform Commission NGOs non-governmental organizations NPC National People’s Congress The Emerging Model of Economic Policy Making under Xi Jinping vii With regard to economic policy making in China, the most significant economic policy initiatives, Executive Summary such as underlying principles, guidelines and strategic design, are made in a top-down way by The party-state dual model of governance is the the country’s leaders. Other significant but specific basic institutional framework to understand economic decisions are created by technocrats the decision-making process in China. With from lower-level government ministries, but its huge, highly institutionalized nationwide the final decision needs to be made by the State network that infiltrates into all institutions and Council or the party central. This constitutes organizations, the Communist Party of China (CPC) the method of bottom-up policy making. A case tightly controls the administration, congress, study of the state-owned enterprises (SOEs) judiciary, military, media, social organizations reform illustrates the two main approaches in and all other entities in Chinese society. China’s economic policy-making process. Over Based on its nearly 90 million members in more the past decades, the decision-making process than three million party committees across of the SOE reform has demonstrated mainly China, the party hierarchy is the institutional the top-down approach, but has also shown basis upon which the CPC can play the leading some elements of the bottom-up approach. role in the decision-making in China’s political The basic party-state dual model of governance process. The Politburo and the Politburo and the primary principle that the party is the Standing Committee (PBSC) are the highest most important policy maker moulded the main decision-making bodies, while the central characteristics of China’s decision-making process. leading groups perform the important role of This type of decision-making process can be coordinating the decision making. The party groups referred to as the Chinese-style elite decision- play an important role for the party to control making model, with collective leadership and government agencies and non-governmental consensus decision making in the party committee organizations (NGOs) in which the party at each level. This decision-making model has committees are in no position to fulfill its control. its virtues: extensive field investigations are Superficially, the Chinese government consists routinely conducted at the grassroots level, of three separate systems including the people’s as well as consultations with experts, lower- congress (the legislature), the State Council level officials and the public figures are held and local governments (the administration) outside the party system before and during the and the judiciary branch. In practice, all the decision-making process. Incrementalism and agencies and institutions in each branch trial-and-error approaches in decision making can must follow the leadership of the CPC and help prevent a blunder from happening before it unconditionally implement the guidelines, is too late. Collective leadership and consensus proposals and policies made by the CPC.
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