Current Political Economy Regime in China’s Mainland

Combination of liberalization and authoritarianism

Political economy regime

• Combination of economic liberalization and political authoritarianism

• regime of political economy– public policy profile

• market-oriented reforms and political grip

– political and economic institutions• strong reformist state retreats from economy

– socioeconomic coalition base• co-optation of newly-emerged social sectors

“Reforms & opening up”

• Deng Xiaoping’s reforms since 1978

• economic liberalization– break the monopoly of state sector– “socialist market economy”

• political authoritarianism– the “four basic principles”

• last one is the key: “leadership of the CCP”

– allow no organized opposition to the party

Deng’s handpicked successors

• First two– were selected as economic reformers– were purged for political liberalization

• Hu Yaobang– CCP General Secretary from 1978-87

• Zhao Ziyang– CCP General Secretary from 1987-89

Deng’s handpicked successors

• Last two– were selected as technocrats– politically “reliable”– economic reformers

• Jiang Zemin– CCP General Secretary 1989-2002

• Hu Jintao– CCP General Secretary 2002-2012

From Jiang Zemin to Hu Jintao

• CCP General Secretary (2002)– 16th National Party Congress– Hu Jintao replaced Jiang Zemin

• PRC State President (2003)– 10th National People’s Congress– Hu Jintao replace Jiang Zemin

• the first peaceful and orderly leadership succession in PRC history

Crack down political dissidents

• CCP has allowed no organized opposition to the Party leadership

• Waves of pro-democracy movements– late 1970s: “democracy wall” movement– late 1980s: Tian’anmen Square protests– late 1990s: China Democracy Party– late 2000s: Charter ’08 and Liu Xiaobo– each followed immediately by suppression

Broader programs of reform

• Separate Party from government– halted after 1989 Tian’anmen

• Separate state from economy– market mechanism– de facto privatization

Broader programs of reform

• Separate government from enterprises– reinforced after 2001 WTO– introduce competition– deregulate industries– increase role for law– limit corruption

Price adjusted by market

• Economic liberalization accelerated since 1990s

• in 2001, prices of another 107 kinds of commodities and service were deregulated

State management of economy

• break down bureaucratic interests that have fostered economic paternalism– 1998: industrial ministries were reorganized

as bureaus– 2000: industrial bureaus were eliminated– 2003: State Development Planning

Commission was reorganized as the State Development and Reforms Commission

State management of economy

• Further restructuring of state institutions– 2003: State Economic and Trade Commission

was eliminated– 2003: the Ministry of Foreign Trade and

Economic Cooperation and the Ministry of Internal Trade were merged into the new Ministry of Commerce

• foster professionalism within government

Competition and deregulation

• Introduction of competition into formerly monopolized industries– telecommunications industry– electric power industry– railway industry– airline industry

• break down bureaucratic interests that have fostered economic paternalism

State retreats from economy

• State sector continues to shrink– downsized, privatized, or go bankrupt

• non-state sector continues to grow

Potential challenges

• Potential challenges to the current regime of political economy– globalization– demographic changes– political instability

China Joined WTO in 2001

• Culmination of 15 years of the PRC government’s efforts

Impact of WTO

• Expansion of trade & foreign investment– trade volume $0.6 trillion for 2002

• 22% increase from 2001

– direct investment US$55 billion for 2002• 13% increase from 2001

• Economists estimate WTO membership would add 1.5% to China’s annual growth rate after 5 years

Impact on WTO

• weed out inefficient SOEs

• erode local protectionism

• curtail industrial monopolies

• urban-rural divide

• regional differences

• unemployment

• social unrest

International Covenants

• In October 1997, PRC government signed the International Covenant on Economic Social and Cultural Rights

• In October 1998, PRC government signed the International Covenant on Civil and Political Rights