A new round of institutional reform has begun. The politburo of the Communist Party of China’s (CPC) Central Committee recently discussed a draft plan on the reform of party and state institutions. The meeting decided that the draft plan will be submitted to the second plenary session of the 20th CPC Central Committee for review. This is another major move five years after the last round of institutional reforms. It will also be the ninth round since China’s reform and opening-up in 1978. The politburo stressed that this reform should be “problem-oriented.” This gets to the heart of the matter. Although the plan has not yet been announced, we look to this new round of reforms to modernize the national governance system and to respond effectively to the challenges China currently faces. In particular, we must give high priority to the lessons we have learned from the three-year fight against the Covid-19 pandemic.
State institutions, the superstructure of society, must adapt to the changing economic base. Sometimes, they should even become forerunners of the change. China has undergone several rounds of institutional reforms over the past 45 years, which reveal the hardships and achievements that China has experienced and gained since reform and opening-up began. Although the pace and the intensity of reform have varied at times, the core idea has always been clear and consistent: to continuously modernize the national governance system. State institutions were overstaffed and inefficient before the reform and opening-up era. Take the industrial machinery manufacturing industry as an example. At the time, there were eight government ministries that oversaw the industry. This, though, was highly compatible with the planned economy. Thus, at the beginning of the institutional reform process, the main mission was to cut back on overstaffing and make the transition to a market economy. It is very impressive that the central government launched a round of drastic institutional reforms at the turn of the century, right after the goal of establishing a socialist market economy had been determined by the 14th CPC National Congress, which ran from 1992 to 1997. This round of reforms created the basic framework of the government.
Reform should never end. The latest round of institutional reform was launched in 2018, which put more emphasis on “enabling the market to play a decisive role in allocating resources and the government to guide and oversee it instead of controlling it.” Consequently, the State Council cut the number of ministerial-level entities by eight and vice-ministerial-level entities by seven. And the most important outcome of this round of reforms was that it “optimized such institutions’ functions in important fields and key areas.” Of these, the reforms in financial supervision, market supervision, anti-monopoly and emergency management are quite remarkable. In addition, the once powerful government body that had broad administrative and planning control over China’s economy — the National Development and Reform Commission — was finally “slimmed down.” Its functions in micro-managing affairs and government approvals were reduced.
While the outcome of the last reform deserves recognition, many issues remain unresolved. These include, for example, the unscientific separation of authority between certain government entities, the inadequate supervision mechanism for enforcement power and the co-existence of power struggling and responsibility shirking. In the past three years, the fight against the virus has achieved remarkable results. However, problems such as disconnection between the bottom and the top of government, government departments acting discordantly, and violations of civil rights, have occasionally emerged. Solving these problems should be a leverage point for the new round of institutional reform. The politburo stressed that China must adopt a problem-oriented approach. The government needs to be more scientific about institutional setup and keep optimizing function allocation, refining institutional mechanisms and increasing operational efficiency. Thus, it can be expected that the next round of reforms will continue to enhance the existing benefits while mitigating the negative effects. It will also address the role of government in the market economy in a more rational way and help arouse enthusiasm among governmental departments, regions and all sectors of society. Ultimately, the goal is to modernize the national system and capacity for governance.
For that to happen, the upcoming round of institutional reforms has to confront head-on a number of severe challenges that China faces. Here are two examples. The first is the lack of innovation in science and technology. As a result, there is just not enough groundwork to underpin China’s high-quality development. It also puts China in a predicament: the country will encounter technological bottlenecks in several core technologies. China urgently needs to improve its scientific and technological innovation capabilities — particularly in basic research and primary innovation. This requires profound changes in the education sector and the science and technology systems. Recently, the fact that the politburo held the third group study on strengthening basic research has demonstrated the urgency of the matter. Administering social security is another challenge. As China enters a period of “negative population growth,” the 65-and-older population is growing even more rapidly. With the country getting old before getting rich, China’s social security remains under enormous pressure. Coupled with the severe employment situation of recent years, the social security system in China is in need of a major revamp. Only by doing so can it become a safety net for people and function as the stabilizer in social development. The list of current challenges facing the government could go on and on, demonstrating the difficulty of reform. And a simple test of whether a reform is successful is to see whether these challenges have been overcome.
It’s worth noting that transforming the functions of state institutions is just as important as streamlining institutions. Departments that have not been touched in this round should not rest but continue to devote effort to streamlining government administration, delegating more powers and improving services. After achieving “a major, decisive victory in Covid-19 prevention and control,” China urgently needs to bring its economy back on a normal track. Currently, it faces “triple pressure” from shrinking demand, supply shocks and weakening expectations. How to stabilize investment, boost consumption and restore confidence is not only a short-term problem but also a longer-term challenge. Reforms of governmental institutions should therefore take into account these real-world factors. In particular, there should be institutional mechanisms preventing government departments from arbitrarily introducing contractionary policies.
To fulfill the goal of modernizing national governance, institutional reforms should be driven by efficiency concerns and, more importantly, common values. The common values of humanity China advocates — peace, development, equity, justice, democracy and freedom — should become the soul of the national governance modernization. And of course, these values should also be reflected in the general structure and detailed design of the reforms. They are crucial for determining in what direction and on what items governments at all levels must uphold for its “optimized, coordinated and efficient principle.”
The 20th CPC National Congress has made important arrangements for deepening reforms of state institutions. It proposed that China will basically realize the modernization of the national governance system and governance capabilities by 2035. Time is tight, and the task is great. Institutional reform could, and should be, a critical starting point for this great course. It will also become a window to showcase “Chinese-style modernization.”
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