Perhaps we are seeing a new version of Socialism with Chinese Characteristics. My idea is that both the US and China will need to spend the next couple of decades on social capital - health care, pensions, education. Zhejiang is an excellent province in which to run some tests. This has to mean money for primary schools, health care an…
Perhaps we are seeing a new version of Socialism with Chinese Characteristics. My idea is that both the US and China will need to spend the next couple of decades on social capital - health care, pensions, education. Zhejiang is an excellent province in which to run some tests. This has to mean money for primary schools, health care and insurance, and a trustworthy pension system. I believe Shaoxing enacted a pension system for farmers about six or eight years ago. It was pretty small, though - a thousand or couple of thousand yuan a month. Zhejiang has completed (I think) reconciling the university pension system so that it is part of the provincial system. Before, each school had its own pension system. There was insurance for farm crop
losses, but a lot of farmers didn't buy it. And typhoons are pretty common.
Dunno if it would make sense to make it mandatory somehow - although that
would probably have to cross provinces to make it stronger. The list of illnesses
covered by rural health insurance is pretty short - could greatly expand that
with heavy subsidies. As it is, urban areas generally provide social services for their residents, and rural areas do the same. Perhaps greater services in rural areas fit with Xi's overall centralization ideas, and the central government will help Zhejiang with new social service costs.
Super interesting questions—putting aside the soe share of the economy which to me is the most pressing issue, to focus on other (still very crucial) issues, to what extent is there room for “better governance” somewhere like Zhejiang? In terms of healthcare, social security, hukou, rural land rights, etc.
In other words, creating benefits through efficient administration and incentives and policy and anti corruption versus resource reallocation from the soe sector.
There are - or at least, were, up to about 2014 - plenty of local government experiments in better governance and service provision. These had to do with citizen comment and complaint procedures and greater efficiencies in service provision. One experiment, the Yantai experiment in Shandong, has been copied in Zhejiang and elsewhere. In 2014 I wrote a paper on changes to government land use policies that was published in the Zhejiang Province School of Administration Journal (CCP Party School Journal). Couple of paragraphs from that august work -
The Chinese government has learned to respond to the wishes of the people, in some cases better than in others. In general, one expects that the higher the level of government, the more sophisticated the leadership, the less tied for promotion to enhanced local GDP, the more willing leaders will be to listen to the local view.
Zhejiang Province is a key example. Rich, experienced, open to the world, and innovative, Zhejiang has long been in the forefront of administrative reform in China. The Zhejiang model of land reform, allowing for transfers of development rights (TDR) within and between local governments, is well known (Wang, Tao, and Tong, 2009). And more recently, Haining has been selected as a pilot for land reform, allowing mortgages of village property and sales of farmer land to those outside the village; and Wenzhou has established a “rural property rights service center, that in theory allows sales of village land to citizens from within the county.
As far back as 1995, the Yantai Service Promise System, in Shandong Province “drawing on the New Public Management approach to administration,” represented a serious attempt to make the bureaucracy more customer oriented and professional (Foster, 2006). Fifteen government departments were required to provide service delivery promises to citizens, and the local government leaders appeared to consider citizen complaints and survey results quite seriously in individual leader evaluations.
A version of the Yantai system was begun in Jinhua in 1996,
and in Wenzhou, in 2003. Other cities – Beijing, Guangzhou, and others - have implemented more open communications with citizens, and provided a survey mechanism to review the performance of government departments.
....
I haven't kept up on this. Experimentation is most certainly not dead, but I don't know how much it is pushed now.
Constructive criticism: your stuff strikes me as reform era heavy. Now that 60-75% of the economy has been privatized (depending on whether you use academic or financial sources ifaict), and a sh**on has been invested in infrastructure, what other reforms will Xi do?
Zhejiang has many small (1-5M population cities; small by Chinese standards) cities which have many factory employees from other parts of China. The big question will be how to deal with these migrant employees? This boils down to making changes in the hukou registration system which disallows migrant employees from getting local benefits such as education and healthcare. It will be interesting to see if Xi proposes changes to the hukou registration system so that migrant workers are able to tap into the local hukou system.
The demographic disaster has been building for many years, obviously, and researchers are certainly aware. But pension problems are even more immediate (what with stolen and misappropriated funds - how like American private equity in corporate takeovers!) and China cannot afford the unrest from unpaid promised pensions. Raising the retirement age will help a little. Social services are provided by provinces, mostly. The central government had to take over pension in dongbei, the northeast, because of mismanagement, the decline of manufacturing companies in the northeast, and the early retirement of workers circa 1999 in the fiscal crisis. Perhaps some nationalization of pension systems either fiscally or administratively or both would help. So would reallocation of funds from physical infrastructure to social capital - the Chinese equivalent of "build one less B1 bomber." I think health care could be a big problem (as it is in the US). The benefit to the government is that rural people's expectations are so low that some improvement in coverage will be welcomed. My crystal ball is not working right now, but my guess is that Chinese foreign involvement in capital projects will have to be curtailed a bit over the next couple of decades as the various social funding crises start to bite.
I think you hit the nail on the head here when you said capital investment will have to be curtailed in the extreme if they want to dramatically increase social services to be more on par with developed nations.
As ever with China in my opinion, the political economy question is ignored, and due to the successes of Chinese policy in the past several decades, whatever pronouncements are made, it’s taken as gospel that they’ll be achieved. Of course, it would be amazing for the people there if Zhejiang really could become a prosperous, modern, developed area in its entirety (I lived there! Love that place, and some of the most independently minded people in China IMO, really enjoyed it), but being honest about what that takes isn’t equivalent to hoping it doesn’t happen.
The two obvious questions are state-owned enterprises and political power. 25-40% of the economy (the state-owned portion, as always I’m open to more exact numbers, 25% is the number I see academically, 40% in financial articles) is state owned and currently spent on infrastructure projects, so it’s possible that connecting Lianyungang, and Yancheng, and Huaian in Jiangsu to the 300 km/hr rail network (up from the 200 one now) is absolutely vital to the development of those areas, and that’s what’s holding those areas back, but there’s no discussion of that (I use them as examples, I can’t find an actual map of the 2035 expansion plan has it been released yet? In any case it will have to be cities of that size as all larger cities are connected already, basically), of whether day those areas wouldn’t benefit more from that money going into higher salaries or benefits for the people, just a pronouncement from China rail group that that’s what will be happening. In other words, the political economy—who controls the resources and decides how they will be used—is completely off the table for discussion (and of course in practice, this is why jingoistic nationalism is encouraged by the party, so that any criticism of its policies is taken as a personal offense by the population who then direct their energies against foreigners rather than asking questions about domestic political economy).
The history of over investing (in infrastructure usually, or other areas) is decisive and obvious to anyone who has looked at it—you desperately need to stop it and transfer those resources to consumers before it’s too late. But there’s no discussion of that issue, just anger at those who bring it up.
The other issue besides misallocation of resources is political power—again the evidence is overwhelming that an impartial state that can ensure vigorous domestic competition is vital to creative destruction and hence economic growth, but one of the tenets of socialism as practiced in China is the party controls the commanding heights of the economy, which by definition will not be allowed to be outcompeted (no matter how much soe “reform” is encouraged, and you see this with the increase in college grads looking to work for soe’s compared to say the Hu era, the new grads aren’t suckers they know what’s up), so again you have a political economy problem—how will the party encourage competition when it controls 25-40% of the economy and will not let it fail or change tack?
These are the real questions facing China, in my opinion. Of course, the USA has massive issues with lobbying and bailouts as well, just different ones and with a much better rule of law and resource distribution foundation.
Perhaps we are seeing a new version of Socialism with Chinese Characteristics. My idea is that both the US and China will need to spend the next couple of decades on social capital - health care, pensions, education. Zhejiang is an excellent province in which to run some tests. This has to mean money for primary schools, health care and insurance, and a trustworthy pension system. I believe Shaoxing enacted a pension system for farmers about six or eight years ago. It was pretty small, though - a thousand or couple of thousand yuan a month. Zhejiang has completed (I think) reconciling the university pension system so that it is part of the provincial system. Before, each school had its own pension system. There was insurance for farm crop
losses, but a lot of farmers didn't buy it. And typhoons are pretty common.
Dunno if it would make sense to make it mandatory somehow - although that
would probably have to cross provinces to make it stronger. The list of illnesses
covered by rural health insurance is pretty short - could greatly expand that
with heavy subsidies. As it is, urban areas generally provide social services for their residents, and rural areas do the same. Perhaps greater services in rural areas fit with Xi's overall centralization ideas, and the central government will help Zhejiang with new social service costs.
Super interesting questions—putting aside the soe share of the economy which to me is the most pressing issue, to focus on other (still very crucial) issues, to what extent is there room for “better governance” somewhere like Zhejiang? In terms of healthcare, social security, hukou, rural land rights, etc.
In other words, creating benefits through efficient administration and incentives and policy and anti corruption versus resource reallocation from the soe sector.
There are - or at least, were, up to about 2014 - plenty of local government experiments in better governance and service provision. These had to do with citizen comment and complaint procedures and greater efficiencies in service provision. One experiment, the Yantai experiment in Shandong, has been copied in Zhejiang and elsewhere. In 2014 I wrote a paper on changes to government land use policies that was published in the Zhejiang Province School of Administration Journal (CCP Party School Journal). Couple of paragraphs from that august work -
The Chinese government has learned to respond to the wishes of the people, in some cases better than in others. In general, one expects that the higher the level of government, the more sophisticated the leadership, the less tied for promotion to enhanced local GDP, the more willing leaders will be to listen to the local view.
Zhejiang Province is a key example. Rich, experienced, open to the world, and innovative, Zhejiang has long been in the forefront of administrative reform in China. The Zhejiang model of land reform, allowing for transfers of development rights (TDR) within and between local governments, is well known (Wang, Tao, and Tong, 2009). And more recently, Haining has been selected as a pilot for land reform, allowing mortgages of village property and sales of farmer land to those outside the village; and Wenzhou has established a “rural property rights service center, that in theory allows sales of village land to citizens from within the county.
As far back as 1995, the Yantai Service Promise System, in Shandong Province “drawing on the New Public Management approach to administration,” represented a serious attempt to make the bureaucracy more customer oriented and professional (Foster, 2006). Fifteen government departments were required to provide service delivery promises to citizens, and the local government leaders appeared to consider citizen complaints and survey results quite seriously in individual leader evaluations.
A version of the Yantai system was begun in Jinhua in 1996,
and in Wenzhou, in 2003. Other cities – Beijing, Guangzhou, and others - have implemented more open communications with citizens, and provided a survey mechanism to review the performance of government departments.
....
I haven't kept up on this. Experimentation is most certainly not dead, but I don't know how much it is pushed now.
I hear you Clyde, thanks for the detailed answer.
Constructive criticism: your stuff strikes me as reform era heavy. Now that 60-75% of the economy has been privatized (depending on whether you use academic or financial sources ifaict), and a sh**on has been invested in infrastructure, what other reforms will Xi do?
Zhejiang has many small (1-5M population cities; small by Chinese standards) cities which have many factory employees from other parts of China. The big question will be how to deal with these migrant employees? This boils down to making changes in the hukou registration system which disallows migrant employees from getting local benefits such as education and healthcare. It will be interesting to see if Xi proposes changes to the hukou registration system so that migrant workers are able to tap into the local hukou system.
The demographic disaster has been building for many years, obviously, and researchers are certainly aware. But pension problems are even more immediate (what with stolen and misappropriated funds - how like American private equity in corporate takeovers!) and China cannot afford the unrest from unpaid promised pensions. Raising the retirement age will help a little. Social services are provided by provinces, mostly. The central government had to take over pension in dongbei, the northeast, because of mismanagement, the decline of manufacturing companies in the northeast, and the early retirement of workers circa 1999 in the fiscal crisis. Perhaps some nationalization of pension systems either fiscally or administratively or both would help. So would reallocation of funds from physical infrastructure to social capital - the Chinese equivalent of "build one less B1 bomber." I think health care could be a big problem (as it is in the US). The benefit to the government is that rural people's expectations are so low that some improvement in coverage will be welcomed. My crystal ball is not working right now, but my guess is that Chinese foreign involvement in capital projects will have to be curtailed a bit over the next couple of decades as the various social funding crises start to bite.
Hi William,
I think you hit the nail on the head here when you said capital investment will have to be curtailed in the extreme if they want to dramatically increase social services to be more on par with developed nations.
As ever with China in my opinion, the political economy question is ignored, and due to the successes of Chinese policy in the past several decades, whatever pronouncements are made, it’s taken as gospel that they’ll be achieved. Of course, it would be amazing for the people there if Zhejiang really could become a prosperous, modern, developed area in its entirety (I lived there! Love that place, and some of the most independently minded people in China IMO, really enjoyed it), but being honest about what that takes isn’t equivalent to hoping it doesn’t happen.
The two obvious questions are state-owned enterprises and political power. 25-40% of the economy (the state-owned portion, as always I’m open to more exact numbers, 25% is the number I see academically, 40% in financial articles) is state owned and currently spent on infrastructure projects, so it’s possible that connecting Lianyungang, and Yancheng, and Huaian in Jiangsu to the 300 km/hr rail network (up from the 200 one now) is absolutely vital to the development of those areas, and that’s what’s holding those areas back, but there’s no discussion of that (I use them as examples, I can’t find an actual map of the 2035 expansion plan has it been released yet? In any case it will have to be cities of that size as all larger cities are connected already, basically), of whether day those areas wouldn’t benefit more from that money going into higher salaries or benefits for the people, just a pronouncement from China rail group that that’s what will be happening. In other words, the political economy—who controls the resources and decides how they will be used—is completely off the table for discussion (and of course in practice, this is why jingoistic nationalism is encouraged by the party, so that any criticism of its policies is taken as a personal offense by the population who then direct their energies against foreigners rather than asking questions about domestic political economy).
The history of over investing (in infrastructure usually, or other areas) is decisive and obvious to anyone who has looked at it—you desperately need to stop it and transfer those resources to consumers before it’s too late. But there’s no discussion of that issue, just anger at those who bring it up.
The other issue besides misallocation of resources is political power—again the evidence is overwhelming that an impartial state that can ensure vigorous domestic competition is vital to creative destruction and hence economic growth, but one of the tenets of socialism as practiced in China is the party controls the commanding heights of the economy, which by definition will not be allowed to be outcompeted (no matter how much soe “reform” is encouraged, and you see this with the increase in college grads looking to work for soe’s compared to say the Hu era, the new grads aren’t suckers they know what’s up), so again you have a political economy problem—how will the party encourage competition when it controls 25-40% of the economy and will not let it fail or change tack?
These are the real questions facing China, in my opinion. Of course, the USA has massive issues with lobbying and bailouts as well, just different ones and with a much better rule of law and resource distribution foundation.