Decoding Policy Innovation in Xi's Era
A Deep Dive into China's Governance Under Pressure
This week, we will focus on examining policy experimentation in China during the Xi Jinping era. We will be analyzing the article 'Policy Experimentation under Pressure in Contemporary China' by Abbey S. Heffer and Gunter Schubert, which provides a detailed and sophisticated analysis of the changing dynamics of China's policy process.
The article explores the profound influence of Xi Jinping's perceived authority on the operations of the Chinese government, from the central administration to the grassroots level. This shift in power dynamics has created an environment of uncertainty among local officials, causing once-confident cadres to become noticeably apprehensive.
A critical question that emerges from this situation is the impact of (re)centralization on China's characteristically decentralized local policy-making process, especially in the area of policy experimentation. Observers are divided on this issue. Some suggest that (re)centralization diminishes local decision-making autonomy and hinders experimental policymaking, while intensified anti-corruption campaigns increase political risk.
The primary research question of the article is: In what ways has local policy experimentation transformed under Xi Jinping's leadership? Before delving into this, it's essential to determine whether there have been any significant shifts at all. Academic literature presents two conflicting perspectives. The first suggests that Xi's (re)centralization initiative has resulted in a considerable decline in local experimentation. However, quantifying this is challenging, as experiments often start without formal approval and aren't necessarily labeled as "experimentation." To tackle this, the authors scrutinized the introductory sections of all official regulatory documents published between 2010 and 2019 by the municipal governments of 10 diverse cities. Their analysis reveals an increase in the proportion of regulations that authorized, advocated or built upon local policy experiments. This trend was even noticeable in regions typically considered "less innovative."
The authors propose that the traditional notion of "experimentation under the shadow of hierarchy" may no longer be relevant in the current context. They argue that experimentation is not primarily reliant on the "political personalities" of individual policymakers or the "policy innovation imperative" driving them. Instead, they introduce the concept of "experimentation under pressure," which aims to refine the existing understanding to explain the phenomenon of compelled policy experimentation under Xi Jinping's administration. This concept emphasizes the transformation of policy experimentation from an optional practice to an immediate requirement under systemic pressure.
Policy Experimentation Revisited
The next section delves into the intricate relationship between policy innovation and experimentation. It underscores that innovation is an integral part of the policy experimentation process, initiated by local governments. This process is multidirectional, with some aspects being decentralized and others centralized, thereby integrating bottom-up policy innovations into top-down policymaking.
The mainstream academic discourse suggests that the increased risk under Xi's leadership has led to a decline in local policy experimentation. This decline is often attributed to a causal centralization-decentralization dichotomy, arguing that the dismantling of provincial and local governments' discretionary power diminishes any willingness to experiment and immobilizes the local policy process.
Scholars often describe the central government's influence as "suffocating" local initiatives and leading to a "broken policy process." They also refer to a rule-based "iron cage" for local officials. However, the concept of "Experimentation under hierarchy," as conceptualized by Sebastian Heilmann and others, is seen as a "correcting mechanism" that balances state planning with local innovation, complementing rather than contradicting hierarchical control.
Policy experimentation has always been susceptible to central intervention at any stage, which can distort organic local outcomes. Similarly, the historical pressure for central recognition has encouraged local governments to be pioneers rather than followers. Despite having similar policy goals, the methods employed by different localities vary significantly.
The experimental policy process, controlled by the center, effectively gathers information on popular local demands to incorporate into real policies. This process serves as a crucial feedback mechanism for the regime, appeasing public demand and aligning the interests of diverse social actors with regime survival.
Relationships with higher-level patrons can enhance the chances of a local policy experiment being recognized as successful and mitigate risk. Conversely, a lack of patronage can deter local officials from experimenting at all.
The literature indicates that policy experimentation is not merely a means of central control over local officials or a feedback mechanism. It also provides bargaining opportunities for policymakers lacking the resources needed for effective governance. Consequently, discouraging experimentation seems to neither benefit the Chinese regime nor local governments, raising the question of why the Xi administration would consider discouraging it.
Theorizing Experimentation Under Pressure
The literature review underlines the significant role of local policy experimentation in China. It serves as a mechanism for managing the extensive local government structure through central acknowledgment of local policy innovation. This process facilitates communication among various stakeholders, including local government, the private sector, the public, and the central government.
The central state's increased intervention in local experimentation under Xi Jinping's leadership is a key focus. This intervention is reflected in local government behavior. The "political steering theory" provides a useful framework for understanding this shift. This theory, proposed by Gunter Schubert and Bjørn Alpermann, emphasizes the central state's steering capacity, which is its ability to regulate lower-level behavior using a mix of steering instruments.
The central state's steering capacity has been amplified since the mid-1990s, but under Xi, multiple systemic pressures have made it almost impossible to defy direct administrative orders. This concept of steering capacity has become a common theme in Chinese policy-making literature, often discussed in terms of (re)centralization or top-level design.
Local officials often refer to "pressure" when justifying the initiation of a policy experiment. This trend continues in Chinese academia, with the "pressurized system" concept explaining how the center applies pressure on local officials using various steering instruments. Despite the intensification of pressure under Xi, many of these instruments were developed before his tenure and have since been radicalized.
Increased pressure is seen as the intended outcome of targeted central steering, but increased political risk is a subtler form of central control. The Xi era has introduced unique forms of political risk, including the risk of punishment under Xi's anti-corruption campaign, the risk of punishment if an experiment fails to meet targets, and the risk of punishment if an experiment inadvertently crosses a central red line.
The current period is characterized by steering instruments that centralize control at the top, using increased political risk and clear, comprehensive, and formalized punishment to ensure high levels of local compliance with central commands. The anti-corruption campaign serves as both a hard-steering mode ensuring central control and a method of soft-steering, creating an environment of uncertainty, especially among local officials.
The direct administrative command to experiment began with Xi's clean governance campaign right after he took office. This command was formalized in the Chinese Communist Party’s (CCP) Central Committee's 2019 Notice on cadre evaluation, which stated that officials who do not display enough entrepreneurial spirit or are unwilling to face contradictions will not receive a positive evaluation or promotion. Inaction is now considered corruption, and a precedent for punishment was set in mid-2015.
The performance evaluation system has long included both material rewards and punishments like the "one-vote veto," where failure to complete certain tasks resulted in a performance score of zero and no chance of promotion. However, the one-vote veto was not previously applied to experimentation. This latest addition to the incentive structure actively punishes those who do not experiment.
The selected policy domain exposes officials to a high risk of corruption, serving as an effective measure to determine if the uncertainties and risks surpass the explicit administrative directive to innovate and the threat of a one-vote veto. This article’s in-depth investigations reveal that local officials from a variety of backgrounds continue to innovate, indicating that the equilibrium between the potential for advancement and the danger of penalty does not explain the variability in the incidence of innovation. Despite the inherent corruption risks associated with foreign direct investment (FDI) policies and the lack of experimentation experience in certain regions, particularly with FDI policies, innovation continues to occur.
Two Case Studies: Foshan and Ganzhou
The study encompassed an examination of over 3,000 official documents from a variety of locations spanning from 2010 to 2019, which indicated a general trend towards increased experimentation, with a single case showing a minor decline. These documents were categorized as "experimental" if they endorsed, requested, or expanded upon "trials," "demonstrations," new models," or "pilots." This facilitated the identification of periods of fluctuating experimental activity. All cases witnessed a decline in experimentation between 2012 and 2014, but rebounded by 2016, following a series of speeches by Xi that identified "innovation, coordination, greenness, openness, and sharing" as the pillars of the "four comprehensives" development concept.
The Party theory department interpreted the "four comprehensives" as a call for comprehensive innovation in governance, which was previously associated with investigation, research, and reform in policymaking, or in other words, experimentation. The correlation between Xi’s "four comprehensives" and experimentation was tested by examining the frequency of "innovation" citations within local regulations, which revealed an upward trend. Documents related to experimentation constituted 67 percent of the mentions of the "four comprehensives." Despite some cities having an inconsistent relationship with experimentation, all appeared to be responding to Xi’s various directives to experiment.
To delve deeper into the concept of comprehensive innovation in governance, two contrasting case studies were selected, one from a region known for its innovation (Foshan) and the other from a region considered the least innovative in China (Ganzhou). Despite the variance in local conditions, which can influence the occurrence of experimentation in a specific policy area within a given province, the distribution of experiments categorized as political, social, or economic was similar in both cases. Central policy priorities, such as industrial upgrading and environmental protection, were given equal emphasis.
Local conditions play a significant role. In economically advanced Foshan, local officials have a long track record of successful policy experimentation, initiating more ambitious political experiments. In Ganzhou, issues related to development in "lagging" regions were addressed, such as public health issues and social policy transfers. Both Foshan and Ganzhou prioritized local development, which necessitated substantial local expenditure.
Foreign investment provides the financial resources required to implement centrally mandated policies, such as social policies that prioritize the people and respond to their needs, as well as to ensure local development. However, inbound FDI has seen a significant decline in recent years. In both experiments discussed below, FDI is viewed as a means to achieving local development objectives. However, while Foshan has a history of successful experiments in this policy area, Ganzhou does not, making an experiment there with FDI considerably riskier.
Local conditions can mitigate the risk of experimenting under pressure in specific policy fields, thereby promoting experimentation. However, another potential variable is that some officials may be more risk-averse than others. Despite these differences, both experimented.
Fieldwork for both case studies was conducted during visits to China in September 2018 and June 2019 and in follow-up discussions with 39 subnational governments involved in attracting FDI. The Foshan Bureau of Commerce (BofCom) provided policy documents and arranged interviews with those officials directly involved in initiating the Foshan experiment. Jiangxi province’s BofCom provided information on Ganzhou’s experimental taxation policy and put the authors in contact with Ganzhou BofCom for clarification. These discussions were then supplemented with news reports, media interviews, and secondary commentary on the policies in question.
Foshan: Hiring Foreigners to attract FDI (Foreign Direct Investment)
In Foshan, experimentation was a common practice even before the explicit directive from Xi, hence a significant rise in experimental regulations was not anticipated. The city's experimentation followed the pre-Xi model, but by 2015, Foshan's direct competitors visited the city to learn from its experiments, challenging the pre-Xi concept of local experimentation.
Foshan has a rich history of initiating policy experiments without clear central approval, many of which have involved Foreign Direct Investment (FDI). Zhou Zhitong, the director of Foshan's Bureau of Commerce (BofCom), followed the pre-Xi tradition of experimenting first and seeking permission later when he published a job advertisement to hire foreign nationals for local government posts before obtaining approval. The project was already in progress when it received central approval in 2014, with the Ministry of Commerce declaring Foshan as a model for others to emulate.
Zhou's innovative approach of hiring foreign employees in a domestic government agency was recognized and affirmed by the National Administration of Foreign Experts Affairs. Zhou cited his experiences with civil servants in Italy and South Korea as the motivation for initiating this experiment. However, since 2013, the central government has curtailed local governments' interactions with foreign actors through stringent measures such as targeted budget cuts.
Despite the anti-corruption campaign making public-private collaboration politically risky, Zhou actively sought engagement with the private sector. The Foshan case supports the argument that officials with an "entrepreneurial" personality type are less affected by changes in hierarchical pressure and are therefore more likely to continue experimenting under Xi.
Towards the end of the pilot phase of the Foshan project, there was evidence of horizontal promotion and career stagnation. Initially, officials involved in Zhou's experiment were promoted, but a lack of observable results, new experiments, or nationwide expansion has since stalled their careers.
The Foshan case suggests that experimentation under pressure mandates continuous innovation and an "entrepreneurial spirit" rather than encouraging one-off, high-impact policy experiments. However, even in regions with a long history of successful experimentation, the increased risk of experimenting under Xi's "top-level design" has led to horizontal promotion and career stagnation, thereby influencing the policy decisions of local officials. This is evidenced by the emergence of immediate local policy learning.
Ganzhou: Offering tax incentives to attract FDI
In the case of Ganzhou, the city's experimental policymaking trajectory differs significantly from that of Foshan. Ganzhou's history of experimental initiatives is relatively recent, with a 30-year gap separating it from Foshan's pioneering efforts. The early experiments in Ganzhou were heavily influenced by the patriotic rhetoric of central policymakers. The city's experimental policymaking has been inconsistent, with a noticeable decline following the departure of Party Secretary Shi Wenqing in 2015.
Ganzhou, situated in Jiangxi, is a region that lags behind the rest of the country in terms of development. Despite this, it is one of several influential subregions that challenge provincial authority over policymaking. In 2012, Communist Party Secretary of Ganzhou Shi Wenqing made an unprecedented move in Jiangxi by bypassing provincial authorities and petitioning central leaders to allow the region to initiate a new policy. His proposal involved the use of tax incentives to attract foreign direct investment (FDI).
Shi's experiment was not a novel national first but a learned innovation, making it less risky. Despite Ganzhou being a city in the central region, Shi's experiment repurposed a national policy intended for the development of the western region to gain support for his flagship experiment. This approach, coupled with Shi's direct petition for central approval, was more cautious than Foshan's nationally unprecedented experiment, which was initiated with only tacit approval.
Shi's experiment aimed to use FDI to stimulate Ganzhou's development, a city where economic development was lagging, especially in southern Jiangxi. This policy was not only an economic task but also a political one, aiming to improve the level of opening up to the outside world, transform, and upgrade foreign trade and export.
As a leading official in the Ganzhou investment promotion agencies (IPA) noted, since the 13th Five-Year Plan, Ganzhou has maintained rapid growth and momentum in attracting foreign investment, growing at an annual rate of 10.08 percent, reaching US$2.012 billion in 2019, and ranking first in the province.
Shi is a quintessential "strategic autocrat," motivated more by reward and promotion than by a genuine desire for change, and is highly sensitive to personal risk. As the Xi administration seeks to curb rather than encourage local autonomy, strategic autocrats like Shi only experiment in compliance with central directives. However, Shi not only experimented but also tailored his presentation of this experiment to align with Xi's "good cadre" rhetoric, which demands clean, innovative cadres willing to face risk, take responsibility, and constantly innovate.
Despite central patronage, his cautious but materially successful policy experimentation, and his subsequent promotion in 2015, Shi Wenqing was placed under investigation for corruption in September 2020 and eventually sentenced to death with a two-year reprieve in 2022. The Ganzhou case demonstrates that experimentation has continued under Xi but also that it continues despite dramatically increased risks for officials seeking to distinguish themselves as innovators.
In the face of disparate local conditions and varying propensities for experimentation, both case studies under review initiated and developed policy experiments during Xi Jinping's tenure. The study reveals that both "strategic autocrats" and "entrepreneurial" personalities were instrumental in initiating these policy experiments. Strategic autocrats, as exemplified by Shi Wenqing's speeches, only venture into experimentation if it aligns with central directives, explicitly echoing Xi's persistent call for ceaseless innovation.
A noteworthy commonality between these two contrasting cases is the emergence of new risk mitigation strategies during experimentation. Ganzhou's prudent approach hints at a potential shift towards a more prevalent method of experimentation, which involves learning from other regions. This is in stark contrast to previous observations that Chinese policy experiments typically do not mimic innovations adopted by neighboring locations. It also implies that local officials might be shifting their focus from being recognized as pioneers to initiating learned experiments from nearby regions, thereby minimizing failure risks while still showcasing their readiness to experiment.
A fascinating divergence is that Ganzhou's mode of experimentation did not adhere to the traditional pre-Xi model, which Foshan seems to largely follow. Instead, a new risk mitigation strategy was developed. By seeking authorization prior to initiating his experiment, Shi was able to reduce risk and secure central recognition should the experiment prove successful.
The most significant transformation, as discussed in both the existing literature and demonstrated in our two cases, is that experimentation has transitioned from being optional to mandatory. This has been facilitated by the center's enhanced steering capacity, compelling regions that would typically be unlikely to experiment to comply with Xi's administrative command to do so.
The political risks associated with experimentation have escalated. In both cases, despite the differences in local conditions, officials experienced career stagnation. In Foshan, those tasked with implementing the experiment failed to meet targets or generate new innovations, while in Ganzhou, the case involved corruption. However, experimentation continues to occur, suggesting that the political risk of refraining from experimentation outweighs the increased risk involved in experimenting, a claim further supported by explicit references to the direct administrative command to experiment in Shi Wenqing’s speeches.
Based on the comprehensive analysis of the seven sections, it is evident that policy experimentation under Xi Jinping's administration has undergone a significant transformation. The study of Foshan and Ganzhou, despite their contrasting local conditions, reveals that both cities have initiated and developed policy experiments in response to Xi's directives.
The personality types of local officials, specifically the "strategic autocrat" and the "entrepreneurial" types, have been instrumental in shaping the nature of these experiments. It's clear that strategic autocrats, like Shi Wenqing, will only experiment if it aligns with central directives, while entrepreneurial types are more likely to experiment regardless of the increased risk.
Considered noteworthy is the emergence of new coping mechanisms to mitigate the inherent risk of experimentation. Ganzhou's cautious approach, which involved learning from other regions and seeking central authorization before initiating an experiment, is indicative of this trend. This approach not only minimizes the risk of failure but also ensures central recognition upon the experiment's success.
Contrarily, Foshan's approach adheres more closely to the traditional, pre-Xi model of experimentation. However, both cases demonstrate a shift towards a local learning mode of experimentation, where competing governments emulate successful experiments of their neighbors. This contradicts previous observations and suggests a change in the dynamics of policy experimentation in China.
The most significant change observed is the obligatory nature of experimentation under Xi's administration. The combination of directives demanding clean governance and constant innovation has created a unique situation where local governments are compelled to experiment. This has been facilitated by the increased steering capacity of the central government, which includes both new and pre-existing instruments.
However, this shift has not come without its challenges. The political risks associated with experimentation have escalated, leading to career freezing in both Foshan and Ganzhou. Despite these risks, experimentation continues, suggesting that the political risk of not experimenting outweighs the increased risk involved in experimentation.
In conclusion, the evolution of policy experimentation under Xi Jinping's administration is characterized by increased central oversight, the emergence of new coping mechanisms, and a shift towards obligatory experimentation. While this has led to innovative approaches in policy development, it has also introduced new challenges and risks for local officials. Further research is needed to substantiate these findings and explore their implications for future policy-making in China.
Thank you for reading this week’s Eastern Empirics. We encourage you to read the original article as this is only an attempt in summarization. The article provides a comprehensive exploration of policy experimentation under Xi Jinping's administration, offering a detailed understanding of the shifts in China's political landscape. It is highly recommended for anyone interested in Chinese politics, policy-making, and the dynamics of innovation in an authoritarian context. The original article's depth and breadth of information, backed by robust research and compelling case studies, make it a must-read for scholars, policy analysts, and anyone with a keen interest in contemporary China.