Pacific Century Plaza, Beijing
Sucking Coffee Grounds
For a long time I have been trying to find a good way to frame the evolving relationship between China’s central government and the provinces in a way non-Chinese could start to understand. China is not a confederation like a “unified” Europe, nor a nation with a clear and constitutional division of powers between state and national governments like that of the U.S. Nor is it, fortunately, a coalition of regional warlords with a single leader as ostensible primus inter pares like the Republic under the Kuomintang.
But a passage from Chapter of Richard McGregor’s book The Party helped the penny fall into place.
“Every jurisdiction is a company, and every company a jurisdiction – all of them with powerful incentives to compete against each other.”
China functions, essentially, in a manner I would call “corporate federalism.” Each province and locality operates as an economic entity, and the political relationships among them and between the localities and the center are driven by the economic (i.e. commercial) interests.
As McGregor points out, the central government’s challenge is that the more it asserts its power over provincial affairs (including its tax collections), the more it serves to slow the economic engines in the provinces. The looser it holds the reins, though, the greater the opportunity for the negative effects of rapid development to run rampant, and the less responsive the provinces are to centrally-driven policy and regulation.
The ongoing process of maintaining a dynamic balance between the center and the regions in China is different than the classic issue of centralization vs. decentralization. While China’s local party organs and governments are structured to look like the central party and government in miniature, appearances do not reflect reality.
In truth, the system more closely parallels the way industry regulators in the west manage their corporate charges, with the focus being allowing the commercial entities the widest possible range of freedom as long as the economic benefits of their activity do not over-exceed the social and political costs thus incurred.
As such, the central government does not concern itself with a sharing of powers. Instead, it retains full power but informally grants the localities considerable license in return for playing their role in ensuring growth, and thus supporting the legitimacy of the party and the system. Only when local leaders publicly fail in this effort do central authorities step in.
Whether his is a “good” thing or a “bad” thing is subject to debate. What is laudable about framing centers of power in an economic context is that a) it keeps those centers focused on commerce, not on playing power politics (a fatal malady in a naturally centrifugal country like China), and b) it provides a framework for incorporating non-governmental economic actors, like major SOEs, in national decision making.
Traditional political power-sharing systems, like confederations or federal states, ignore non-governmental actors or pointedly exclude them from the process as non-relevant, forcing them to play sub-rosa roles in a polity or form alternative power basis. A corporate federalism, on the other hand, is in a position to integrate non-governmental actors into the system, something that, while inappropriate for parliamentary or republican democracies, may actually be a wise approach for developing states.
What I expect is that corporate federalism will be a transitory arrangement for China as it evolves. In the meantime, this gives us a framework to begin to understand the varying roles local, provincial, and national governments play in our businesses.
- Chinese premier urges officials to obey laws (seattletimes.nwsource.com)
- Talk of Reform to Enliven Leaders’ Meeting in China (nytimes.com)
- China cracks down on corrupt golfing cadres (independent.co.uk)
- Why ‘GQ’ Was Yanked Off Newsstands in China (newsweek.com)