Globalization and Public Sector Reform in China

Kjeld Erik Brødsgaard

• Publisher: Taylor & Francis
• Year: 2014
• Print ISBN: 9780415788069
• eBook ISBN: 9781317934271
• Edition: 1
• Topic: Social Sciences
• Subtopic: Ethnic Studies
• Index: Social Sciences

This book analyses public sector reform comprehensively in all parts of China's public sector – government bureaucracy, public service units and state-owned enterprises. It argues that reform of the public sector has become an issue of great concern to the Chinese leaders, who realize that efficient public administration is key to securing the regime's governing capacity and its future survival. The book shows how thinking about public sector reform has shifted in recent decades from a quantitative emphasis on 'small government', which involved the reduction in size of what was perceived as a bloated bureaucracy, to an emphasis on the quality of governance, which may result in an increase in public sector personnel. The book shows how, although Western ideas about public sector reform have had an impact, Chinese government continues to be best characterized as 'state capitalism', with the large state-owned enterprises continuing to play an important – and increasing – role in the economy and in business. However, state-owned enterprises no longer provide care for large numbers of people from the cradle to the grave – finding an alternative, efficient way of delivering basic welfare and health care is the big challenge facing China's public sector.

1 Globalization and public sector reform in China

Kjeld Erik Brødsgaard

Introduction

Reform of the public sector has become an issue of great concern to the Chinese leaders as they realize that efficient public administration is a key to securing the regime’s governing capacity and ultimately long-term survival in a globalized world. The public sector in China is large, comprising 65.5 million people and efforts to reform the system as well as to change the work habits and routines of the personnel staffing of the administrative organs are of an enormous nature. Reform in this area is also constrained by the complexity of the Chinese public sector. At one level the public sector in China is not a unitary system. It can in fact be divided into three institutions: Party and state organizations (dangzheng jiguan) comprising twelve million people; public service units (PSUs or shiye danwei) with 27 million employees; and state-owned enterprises (SOEs or qiye danwei) employing 26 million staff and workers. Each component has its own personnel management system and personnel and budget allocations. But behind this division and fragmentation, the Chinese Communist Party remains in ultimate control. Some studies have been done on reform of Party and state organizations and public service units, but very little is available on reform of state-owned enterprises in the overarching context of public sector reform. There are also no scholarly attempts to discuss the linkages between the various components of the public sector in China. Our book aims to remedy this lacuna in extant research.

Clearly, how China conducts this reform will have an important bearing on the political and social development and stability of the country. It will also provide interesting comparative perspectives for public sector reform in other major emerging economies, including India. The following chapters are based on papers presented at a conference on “Globalization and Public Sector Reform in China and India,” held at the Copenhagen Business School, September 23–24, 2011. The papers pertaining to China have subsequently been revised and updated in the fall of 2012. They provide an overview analysis of the character of the Chinese public sector as well as a number of case studies of the issues at stake in reforming the three main components of the public sector. They show that the Party-state has different and at times conflicting reform goals. There is no doubt that the civil service system will continue to form the core of the bureaucracy. Reform in this area aims to strengthen the professional capacity of civil servants while maintaining their political loyalty. Civil servants will be subjected to streamlining and institutional merger, but there is no intention of reducing their status and their key role in government at central and local levels. Public sector units, on the other hand, will be subject to a reform which will transfer a large number of them to enterprise status leaving their employees without their former tenured job security and associated pension and social security benefits. Finally, the state-owned economy has been subject to an ambitious corporatization process. However, the result of this has not been comprehensive privatization. In fact the strategic sectors of the economy, such as steel, telecom, aerospace, power generation, oil and gas, are still dominated by a group of huge state-owned enterprises. Thus the reform process seems to have resulted in consolidation of state dominance in certain sectors, whereas other sectors have been exposed to market forces, and less favorable supply of state benefits. This disparity has not made it easier to implement reform.

In most of the world the public sector expanded after World War Two until the early 1980s. As economies grew and societies became more differentiated and complex, the state’s functions of regulation, allocation, and redistribution grew correspondingly (Bertucci and Jemiai 2013). This was clearly the case in the US and in Western Europe and in particular in the Scandinavian countries. In East Asian countries such as South Korea, Japan and Singapore economic development was stimulated by an interventionist developmental state (Brødsgaard and Young 2000). In communist countries central planning necessitated the existence of a strong state that could take care of resource mobilization and allocation. In China the state also grew in terms of scope and task. This was especially the case after the Cultural Revolution during Hua Guofeng’s interregnum and the first few years of the reform period, when large numbers of cadres were rehabilitated.

During the 1980s and 1990s the critique of big government and big spending was the dominant theme of public policy and debate throughout most of the developed world, providing the intellectual framework for the emergence of the New Public Management Agenda of reducing direct state intervention. The Thatcher and Reagan regimes and the ascendancy of neo-liberalism further strengthened the idea of downsizing government personnel and functions in order to reduce fiscal deficits and create more efficient public management.¹ In addition, many European countries tried to fulfill the criteria for membership in the European Monetary Union in the 1990s. An important criterion was the ratio of total government debt to GDP and government borrowing to GDP. Therefore these governments were pressed to initiate various public cost containment programs (Bender and Elliott 2003). Moreover, international financial institutions such as the International Monetary Fund (IMF) and the World Bank advocated measures to reduce state intervention in economic affairs in the developing world (Fukuyama 2004). In essence this was the prescription the IMF suggested to solve the Asian Financial Crisis in 1997–98.

During the 1980s and 1990s, Chinese leaders also perceived reform of the public sector in quantitative terms. It was thought that the main problem was big government and that streamlining and reducing the bureaucracy in terms of personnel and agencies would create favorable conditions for a more efficient public sector.

In 1981 the first of a series of post-cultural revolutionary administrative reforms was launched in an attempt to downsize the state bureaucracy. Government ministries and agencies had multiplied so that there were 100 ministerial-level working departments, of which no fewer than 65 were responsible for economic management (Brødsgaard 2002). There were for example no less than eight machine-building industries as well as a number of ministries within the power and energy sector, such as the Ministry of Coal-mining, the Ministry of Petroleum, the Ministry of Electricity and the Ministry of Metallurgy. In addition there were a number of commissions dealing with overall as well as sectoral planning such as the State Economic Commission, the State Commission of Science and Technology, the State Planning Commission and the State Capital Construction Commission. The proliferation of ministries and commissions were symptomatic of a centralized planning system that had grown out of proportion and did not harmonize with the reformers’ goal of creating a more market-friendly economic environment. In order to address the problems of overbureaucratization, the reformers took two initiatives. The first initiative was to introduce an ambitious administrative streamlining program which reduced the number of central-level ministerial organs by more than one-third to 61. The second initiative was to shift functions that previously had been handled by central ministries to newly created enterprises. Thus abolishing the Ministry of Petroleum resulted in the creation of three new companies: China National Offshore Oil Corporation (established 1982), China Petrochemical Corporation (established 1983) and China National Petroleum Corporation (established 1988). These were all carved out of the assets and functions of the former Ministry of Petroleum. In other sectors of the economy similar restructurings took place. These developments became the start of the corporatization process that created a number of huge business groups and transformed the state’s control and management of an important part of the public sector in China (Brødsgaard 2012b).

The 1981 reform was only the beginning of a series of administrative reforms during the 1980s and 1990s, i.e., in 1988, 1993 and 1998. The reform launched by Premier Zhu Rongji in 1998 deserves special mentioning. It involved reducing 41 ministerial-level working departments to 29 and downsizing central-level administrative staff by 50 percent. Zhu Rongji also initiated an economic restructuring that left two or three dominant business groups in each sector. The role of the large business groups was further strengthened by reorganizing a number of ministries such as the Ministry of Coal Industry, Ministry of Metallurgic Industry, Ministry of Power, Ministry of Chemical Industry and the remaining Ministry of Machine-Building Industry into bureaus and placing them under the management of the State Economic and Trade Commission. By dismantling these old branch ministries associated with the Soviet administrative model and heavy-industrial development strategy, the autonomy of the business groups was considerably strengthened (Brødsgaard 2012b: 629).

In the 2000s there have been three major administrative reform attempts—in 2003, 2008 and 2013. The 2008 plan was particularly ambitious and was launched under the rubric of “super ministry reform” (dabuzhi gaige) (“Guowuyuan jigou gaige fang’an (caoan)” 2008). The plan involved the establishment of five new super ministries: the Ministry of Industry and Information; the Ministry of Human Resources and Social Security; the Ministry of Transportation; the Ministry of Housing and Urban-Rural Construction; and the Ministry of Environmental Protection. They were formed by reorganizing, merging and expanding existing ministries. However, some of the original reform ideas had to be given up because of vested interests and political opposition within affected ministries. For example, it had not been possible to merge the Ministry of Railways with the new Ministry of Transportation. Powerful interests were against the merger since it would appear to downgrade the importance of the railways in China’s transportation system. Moreover, the idea of creating a super ministry within the area of energy also had to be abandoned due to heavy resistance from powerful entrenched interests in the big business sector. The big SOEs within the energy sector were against the establishment of a ministry that might interfere with their activities. In 2013, it finally became possible to close down the Ministry of Railways by moving the administrative functions to the Ministry of Transportation and by turning the commercial operations of the railways into a large state-owned company. The ministry had been severely weakened by a serious high speed train accident in July 2011, near Wenzhou, Zhejiang province. The move against the ministry was further facilitated by a huge corruption case involving the powerful railway minister Liu Zhijun. However, it was still not possible to establish a Ministry of Energy (Brødsgaard and Grünberg 2013; Gore 2013). In Chapter 4 of this volume Jesper Schlæger shows that at the local level there can also be heavy resistance to consolidation and mergers of institutions. He mentions how an attempt at consolidation at the local level in Chengdu through service centers set off “fierce bureaucratic turf-wars.”

In general, although downsizing and streamlining still are important objectives of administrative reform, in recent years the discussion in China has shifted towards a more qualitative-based discourse. The question is no longer whether to downsize the bureaucracy, but how to define which essential functions the state must take care of and to identify how this should be done in the most efficient way. On this basis a determination would be made as to the number of personnel and administrative organs to take care of key functions. The process is called the three fixes (san ding) in Chinese administrative terminology. There is also a renewed focus on the abilities and competences of civil servants in government agencies as well as officials and personnel in public service units (shiye danwei). There is a growing realization that public sector reform cannot be reduced to administrative reform and downsizing alone. Moreover, the corporatization process has resulted in the formation of huge state-owned enterprises, which do not signify a retrenchment of the state, but in fact only has resulted in transferring resources and power from one part of the state (the central planning apparatus) to another (the SOE sector).

Civil servants

The civil service system was conceived in the mid-1980s as a way of professionalizing the administrative work in state agencies and reducing the role of the Party in public sector management.² Due to the political fallout from the Tiananmen debacle, plans were put on hold until 1993, when regulations for a new civil service system were decided on and published. During the 1990s and early 2000s a number of additional regulations detailing issues such as appointment and removal, employment appraisals, training, rotation, resignations and dismissals, retirement, management and supervision as well as remuneration were published, and in January 2006 a set of revised regulations were adopted in the form of a Civil Service Law.

The various regulations all aimed at creating a civil service system characterized by ability and professionalism. They also aimed to create a younger and better-educated state bureaucracy. A look at available statistics seems to show that formal qualifications did improve. We do not have detailed information on the composition of the civil service corps. However, available information on the composition of the cadre corps can be used as a yardstick. Although the main part of the 41 million strong cadre corps are not civil servants, all of the ten million civil servants manning the state and Party bureaucracy are considered cadres. Moreover almost all leading cadres are civil servants. Therefore changes in the composition and qualifications of the cadre corps is indicative of similar changes among civil servants.

In 1979 only 29 percent of Chinese cadres were below 35 years of age. This percentage has now risen to more than 50 percent. The share of cadres between 36 and 54 years of age has fallen from 65 percent in 1979 to 45 percent today. Thus the Chinese cadre corps is now considerably younger than at the end of the Mao era (Brødsgaard 2011).

The educational level of cadres has improved dramatically since the beginning of the reform period in 1979. The share of cadres with junior middle school education or less was almost 50 percent in 1979, now this share of less educated cadres is below 8 percent. Among leading cadres, the share of people with a university degree has increased from 16 percent in 1979 to more than 80 percent. Now more than 95 percent of the Central Committee have a college degree and an increasing number of top leaders even hold a PhD.

The change to a younger and better-educated cadre corps is associated with rigorous training courses for Chinese officials. The rule now is that Chinese officials must have at least three months of training within a five-year period. For many officials training and educational courses at Party schools or training centers in China and abroad is a precondition for advancing in the system.

New guidelines and regulations have been adopted with stipulations concerning open appointment and selection of cadres and filling of official positions and examination. These include a public notification system for positions below ting-level and experiments with multi-candidate elections for leading government and party posts; regular job rotation from section level and above; and strengthening the supervision of cadres by introducing clear measures for performance evaluations combined with public feedback on the quality of work done. There are also flexible remuneration and pecuniary rewards to high performers.

As shown by Zhengxu Wang and Dragan Pavlićević in Chapter 3, civil servants form the backbone of the Chinese bureaucracy. They are the primary instruments through which the Chinese Communist Party controls the country (Brødsgaard 2012a). It is not an easy task to determine the numerical strength of the civil servants. Estimates vary between six million and ten million. In this volume Kjeld Erik Brødsgaard and Chen Gang in Chapter 5 choose the higher estimate. This figure of ten million is based on the category of “employees in organs of the Communist Party of China, government agencies, People’s Political Consultative Conference, democratic parties, and various organizations such as the trade unions” minus the number of logistical personnel.³ It is noteworthy that the concept of civil servants is markedly different than in European countries. In Europe civil servants are bureaucrats staffing agencies, bureaus and offices at local and central levels, including positions of permanent secretary. However ministers, including the prime minister, are selected according to...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• List of contributors
• Acknowledgements
• List of abbreviations
• 1. Globalization and public sector reform in China
• 2. Looking West: the impact of Western ideas on public sector reform policies in China
• 3. Transitional meritocracy? Institutions and practices of personnel management in state-building in contemporary China
• 4. Digital monitoring and public administrative reform in China
• 5. Public sector reform in China: who is losing out?
• 6. Health sector reforms in contemporary China: a political perspective
• 7. China’s centrally managed state-owned enterprises: dilemma and reform
• 8. Creating corporate groups to strengthen China’s state- owned enterprises
• 9. China’s bureaucratic capitalism: creating the corporate steel sector
• 10. Public sector units in India and China: inefficient producers or creators of crucial knowledge assets?
• 11. Public sector reforms and political discourse in India and China
• Index