Date: Sun, 20 Oct 1996 20:44:08 -0400 (EDT) From: louisgodena-AT-ids.net (Louis R Godena) Subject: M-I: Economic Management in CPEs: China Under a traditional Centrally Planned Economy (CPE), administrative supervision and product allocation are of great importance in determining the balance of economic control between the center and the local governments. Since the market plays little or no allocative role, bureaucratic coordination relies greatly on administrative means. In principle, local governments are in charge of making product allocations for the enterprises over which they have administrative supervision; likewise, the central ministries allocate products for their own enterprises. Prior to the reforms, the Chinese economic system, unlike its Soviet counterpart, placed a significant share of enterprise control (and product allocation responsibility) in the hands of local governments. China thus had a type of "decentralized planned economy." The economic reforms of the 1980s gradually rendered enterprise control and product allocation less important. Instead, emphasis was placed upon organizing and financing investment activities, control over money, and interregional trade policies. The investment role of China's local governments, much like their general economic role, has traditionally been quite decentralized, with local officials performing many of the functions that normally belong to central ministries in a typical CPE. Chinese economic management, in fact, had a strong local component even before the economic reforms of the late 1970s. The economic reforms, however, have deepened and varied the local roles in production, goods allocation, investment and finance. Indeed, at the end of the 1970s Chinese economic planners came to recognize a fundamental reality: that much of the economic management was decentralized and the costs of recentralization were prohibitively high. Due to the Cultural Revolution and other factors, China had very weak central planning capabilities on the eve of the reforms. When Chinese policy makers attempted to implement an investment program that required a high degree of superministerial and provincial coordination, as Hua Guofeng did with his Ten-Year Development Plan, the result was massive macroeconomic dislocations. China's post-Mao leadership was simply unable to re-assert the kind of centralized investment management that they were able to restore in the early 1960s. Ironically, much of the reform program that China policy makers undertook in the late 1970s was driven less by a grand vision of an ideal economic system than from the absence of a meaningful alternative. To understand economic management in China it is important to consider the institutional and formal aspects of Chinese administrative governance, including the cadre management system, the information channels, and the specialized government units that the central government employs to monitor the behavior of its cadres. In the Chinese system, cadre management refers to the nomination, appointment, removal, and evaluation of cadres. The Communist Party is still very much the boss in these matters, maintaining control through the Department of Organizations (DOO)--directly under the control of the Central Committee--and the Ministry of Personnel (MOP), under the State Council. Cadres are chosen and promoted by a frankly political criteria, the nominating unit investigating and reporting on the "political performance" of each candidate, especially one's activities during the Cultural Revolution and the Tiananmen movement. Her/his views on the Four Cardinal Principles are included as a matter of course. Following appointment, cadres are closely monitored for political and economic performance by a number of regional and local agencies, the findings of which are then scrutinized at appropriate levels within the central bureacracy. Despite the decentralized nature of much of the Chinese economy, the central authorities have retained a firm grip over the vital aspects of personnel allocations. They have been able to do so for two reasons. One is that the Party's principle of management stresses ideological conformity and gives the Chinese Communist Party dominant control over appointment decisions. For example, the cadre evaluation process, although not always able to detect the best people in a technical sense, soon weeds out those with questionable backgrounds by placing a premium on political performance. The process also ensures a continuous role for the central authority (DOO) in making personnel adjustments. The second reason is that cadre management is centralized. The Center directly controls the top ministerial and provincial officials, retains appointment authority over secondary officials (who preside over vital functional units such as provincial bureaus of the DOO and MOP), retains veto power over the appointment of bureau-level officials and aggressively collects data and develops reporting procedures about those appointment decisions it no longer directly controls. This, in a nutshell, is the scaffolding with which the reforming Chinese economy is being built. The central/regional/local dichotomies are continually being revised, tested, revised again with a remarkable degree of flexibility. By stressing performance as well as prior political "reliability", the Chinese authorities have been able to exercise a remarkable degree of control over their burgeoning status as a world economic power. Louis Godena Yasheng Huang, *Inflation and Investment Controls in China: the political economy of central-local relations during the reform era* (New York, 1996: Cambridge University Press) Roderick MacFarquhar, "The Succession to Mao and the End of Maoism, 1969-82," in MacFarquhar (ed), *The Politics of China, 1949-1989* (New York, 1993: Cambridge University Press) Hong Yung Lee, *From Revolutionary Cadres to Party Technocrats in Socialist China* (Berkeley, 1991: University of California Press) --- from list marxism-international-AT-lists.village.virginia.edu ---
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