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Dear friends and colleagues,
I’m still on the road, so another short newsletter this week. I will be in Paris from Tuesday for a week. If there are any readers in Paris who would be interested in meeting, please get in touch.
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Rules of the game
The Fourth Plenum, which concluded Thursday, is an important step in moving forward the Party’s ambitious reform agenda laid out at the Third Plenum last November. This leadership shows a sense of purpose and determination that is impressive. As per usual, the full text of the Decisions reached at the meeting have not been released; they should come out in the next week. Nevertheless, the communiqué itself is clear and relatively detailed as to the path of reform.
The proposed reforms do not seek to alter the current Party-led political system; instead they aim to optimize it. A complex set of interlocking measures seek to better regulate Party and state institutions, further circumscribe the power of officials, improve the legislative process and create a more professional, independent judiciary. These reforms essentially boil down to:
- Make better rules.
- Make sure people follow the rules.
- Make accountable those who do not follow the rules.
While simple in principle, it represents a Herculean task in a bureaucracy as large and fragmented as that of China. Progress is likely to be slow, but the direction of change is clear.
For business, this is a welcome development. One of the key aims of the reforms is to enhance productivity and economic efficiency. A more transparent, rules-based system that limits the ability of officials to interfere in the economy should help to create a more friendly business environment and spur competition.
However, there is a downside for business as well. As the government shifts from market manager to regulator, companies will face an increasingly challenging regulatory environment. Recent aggressive actions on the parts of regulators (typified by the NDRC’s anti-monopoly investigations) are likely to become more common as officials become more incentivized to enforce the law.
Are you a believer?
The Central Discipline and Inspection Commission (CDIC) held its fourth plenary session on Saturday October 25. The meeting focused on implementing the decisions of the Central Committee’s Fourth Plenum.
In his speech at the meeting, Wang said, “the CPC is a political organization with a sacred mission.” Most foreign analysts (an a fair number of Chinese as well) dismiss such lofty rhetoric as “empty speech”. Instead they believe that the Party’s sole motivation is to maintain power.
The Party does want to maintain power, but many of its members are also motivated by a sincere desire to create a strong and prosperous country. Economists on both sides of the debate tend to agree about structural issues in the economy, as well as what should be done to solve them. The debate is not about what is happening, but rather whether or not the Party has the will and ability to push through reforms. Pessimism in the bear camp springs from a view that sees all Party officials as self-interested rent seekers. Bulls tend to have more faith in the Party’s technocrats.
I think Wang’s statement is a sincere one. He and many other top leaders- in particular Xi Jinping- seem to be motivated by much more than just power (though I suspect they like that too). The important question is what grassroots and mid-level officials thinks. If they buy into the Party’s mission, the prospects for stable, sustainable growth are good. If not, no amount of anti-corruption campaigns will solve the country’s problems.
| About CPW
China Politics Weekly aims to keep business leaders, investors, diplomats, scholars and other China hands up to date on important trends in China. It is produced by Trey McArver, a London-based consultant providing advice and intelligence to firms and investors engaged in China and the region.
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