A New Power Paradigm in China

M.V. Rappai,Res. Fellow,IDSA


It may be a mere coincidence that the two major Asian nations got their new governments in the third week of March this year. Both these nations, India and China are passing through crucial periods in their nation building process. China is fully immersed in the development of her economy while India is still experimenting with the development process of her democratic values. However, this article will be concentrating mainly on the tremendous changes that took place in Beijing. The just concluded First session (March 5-19, 1998) of the 9th National People's Congress (NPC), the supreme legislative body of China, has installed a new team of administrative heads in place. The overall team chosen by the Chinese Communist Party (CCP) and approved by the NPC does not include any big surprises. But the agenda set for them definitely includes some daunting challenges. As a popular Chinese parable says that even though the road maybe a highly winding and arduous one yet 'the coachman not only appears to be efficient, but his sense of direction also seems to be correct'. In reality, the coachman is the new Premier Zhu Rongji.

As Andrew Chen, an analyst on China, working with the Jardine Fleming put it, "This is a critical moment for China. If China can achieve all it has now set out to do, then it will emerge as a stronger country and a stronger economy." But the odds are really heavy. Can the new 'Boss', as Zhu is popularly known amongst his colleagues and subordinates, do it? His track record suggests that it maybe possible, yet the imponderables are numerous, ranging from domestic discord to international pressures.

Before delving deep into the personnel changes, let us take a look at the main agenda set by the NPC. Following the guidelines set by the Party Congress the main concern of China revolves around domestic and international economic problems. These can be summarized as a streamlining of the administrative machinery, downsizing of bureaucracy, separation of administrative and economic functions in certain fields and the reform in state owned enterprises (SOEs), as well as China's plans to integrate itself more with the international economic system. The State Councillor, Luo Gan presented a detailed plan for institutional restructuring of the 'State Council' (Cabinet). According to it, the existing 40 ministries and commissions would be restructured into 29 ministries and commissions. 'The objective of the current institutional restructuring is to build an efficient, coordinated and standardized administrative management system, improve the state public servant system, form a contingent of qualified, professional administrators, and gradually build an administrative management system with Chinese characteristics which is adapted to the socialist market economy.'

On paper it may look as a perfect policy statement, but in reality it is going to be a tough proposition. Ever since China launched her reform movement and began opening to the outside world under the able leadership of Deng Xiaoping in the late 1970s, she has launched three major initiatives for streamlining her administrative system. The first initiative was taken in 1982-85, a second one in 1988 and the most recent one was during the 1992-95 period. The result however, of all the 3 measures were not very encouraging. Basically due to vested interests of a large number of incumbent cadres and bureaucrats, as well as owing to a long tradition of a centrally planned economic tradition, these initiatives produced only limited results. Generally, at the beginning of each initiative a certain number of jobs got reduced, but later on the machinery again started bloating in different directions owing to various reasons. However, this time the prospects seem to be far more hopeful, and this precisely forms the biggest problem for the central leadership.

The reform package aims to reduce 15 existing ministries/commissions, as per the detailed plan (please see Note-I for further details) presented and ratified by the current session plans to merge the present functions with that of the existing ones or in certain cases plans to form new mega ministries. As a result, according to the redundancy factor as calculated by the central administration, some 4 million employees would have to be retired or rehabilitated in other sectors. This in itself is a stupendous task. An immediate need will be the separation of functions, between the routine administrative and other financial ones. Therefore, a possibility is to rehabilitate many of these surplus staff in the economic entities after necessary training and fine-tuning of their skills. As Zhu Rongji has already pointed out that the 'government officials are the precious jewels of the country' and the leadership "should properly arrange their new jobs one by one." However, everybody in the administration does not share this optimistic view. According to Li Boyong, the outgoing Labour Minister, 'the restructuring will be ruthless, but we will try our best to ensure a sympathetic relocation.' As China already has a large contingent of unemployed and under-employed people who are migrating to prosperous cities for new avenues, the Central authorities have to cater for them. Hence, the current wave of retrenchment and rehabilitation needs to be managed without adding further tension to the tethered social sinews of a fast changing society. This is going to be a crucial test for the economic wizard, Zhu. One possible advantage for the Chinese leadership maybe his lack of a wider base in the party apparatus which can make him a spendable force.

The real test of Zhu and his team will be in successfully implementing the enormous task of restructuring and redeeming China's 100,000 odd SOEs. It is estimated that nearly 70 per cent of these are loss making ones. As this is a highly sensitive issue which can affect the social fabric of China, the report prepared by Premier Li Peng plans to solve this vexed issue by following the, "guiding ideas and basic tasks for the reform of SOEs," which are as follows:

(1) Taking reform of SOEs as the central point in economic restructuring, we will take practical measures to change the way enterprises operate, with the establishment of a modern enterprise system as its orientation.

(2) Guiding enterprises according to their type and aiming at improving the state sector of the economy as a whole, the government will carry out a strategic reorganization of SOEs by learning to manage large enterprises well while relaxing control over small ones.

(3) Exploring and developing various forms for realizing public ownership, with the "three conducives" as the criterion.

(4) The government will combine its efforts to reform state enterprises with efforts to reorganize, upgrade, and exercise more effective management of them.

(5) Encouraging mergers, standardizing bankruptcy procedures, redirecting laid-off workers, and increasing efficiency by reducing staff and implementing re-employment programmes.

(6) Promoting supportive reforms which focus on the establishment of a social security system.

"These reforms are going to be crucial not only for the social stability and steady growth of China's economic development but also for the overall stability in the region. The currency crisis in some of the Asian nations has proved the fragility of a globally interlinked economic system and its repercussions on various sections of the society. Another underlying aim of the Chinese leadership in introducing these sort of sweeping changes, both in SOEs and in administrative field, seems to be its eagerness to integrate itself more closely into the international community by taking its rightful place in bodies like WTO etc.

Apart from these broader policy changes, most of the heads of key ministries also have been replaced (see Note -II for a list of China's new cabinet). Alongwith the new Premier Zhu Rongji, perhaps with the exception of Ministry of Defence and People's Bank of China, all other key ministries have a new incumbent. The promotion of Hu Jintao, a younger generation hard-core communist and a pragmatist in economic policies maybe an indicator to the future of China. Another underlying current of the personnel changes obviously seems to be the intention of China to play a more crucial role in the international arena. The retention of veteran foreign policy expert Qian Qichen as Vice Premier and the promotion of the wily trade negotiator Madame Wu Yi to the rank of a senior cabinet minister indicates this. According to some observers, "most attention was focused on the new economic team, since China has embarked on a major restructuring of its state industries and its banking system. Continuing as Central Bank Governor is a protégé of Mr. Zhu's, Dai Xianglong. Serving with Mr. Sheng will be Wu Yi, a rare senior-level woman known to Americans as a tough trade negotiator, who has been promoted to the post of state councillor. She will be replaced as Minister of foreign trade and economic cooperation by Shi Guangshen, a deputy trade minister."

As per the constitutional provision for two terms in a particular ministerial post, Qian (69) was replaced by his deputy Tang Jiaxuan (60). Tang, an expert on Asian and Japan affairs, is also closely linked with India. Since the 1993 visit of former Prime Minister P.V. Narasimha Rao to China he has been associated with the annual Joint Working Group (JWG) meetings. During its 10th meeting in August 1997 Tang led the Chinese delegation. This may turn out to be a positive sign, in view of the newly constituted Bharatiya Janta Party (BJP) government's intention to forge better solidarity with the Asian nations.

It will be also noteworthy to study the reply of the newly appointed Premier Zhu at the first formal conference to a question from a correspondent of Press Trust of India (PTI) in Beijing. When he was asked that "As India's new Prime Minister is going to take over today, what sort of message have you sent him, especially since he has decided to re-evaluate India's nuclear weapons programme?" Zhu replied, "I sent a congratulatory message to the newly elected Prime Minister of India yesterday (March 18, 1997). I hope very much to meet him in due course so I can seek his advice. I visited India in 1994. The main purpose of my visit at that time was to attend the World Energy Conference. I left with the impression of India as a beautiful country. I hope to extend through you my best wishes to the head of the Indian government and the Indian people." This reply seems to be a positive one in today's context. But the Chinese Premier conveniently forgot the controversial issue of nuclear weapons. This is worth considering. The Chinese leadership is also in search of a new phase in their dealings in international diplomacy. They intend to enhance their avowed cause of a multi-polar world to check the hegemonic tendencies of certain nations. On the other hand this also hints at the intention of the Chinese leadership to enhance their diplomatic maneuverability at a wider level. In the Sino-Indian bilateral context, this maybe an appropriate time to take some bold initiative with an aim to end the long-standing issues between the two neighbours.

If we take a closer look at the portion covering "the international situation and diplomatic work' in outgoing Premier's report on the 8th NPC to the current session, it gives some clear indications towards the thinking of the current leadership. Basically, the pattern has remained the same during last year. When Li Peng submitted his report to the fifth session of the 8th NPC, he serialized China's priorities as Russia, Korean Peninsula, ASEAN, Southeast and South Asia, Europe, USA etc. But in the current report the priorities are US, Russia, Japan, Europe, ASEAN, Koreas, South and Central Asia etc.

Further, the stress on developing countries also remains. One notable feature is that it took note of the recent Iraqi crisis, 'China greatly appreciates the mediation efforts made by UN Secretary General Annan to solve the crisis over weapons inspections in Iraq. China holds that the memorandum of understanding reached between UN Secretary General Annan and the Iraqi government should be carried out to the letter.'

All these concerns clearly indicate a possible major role envisioned by the Chinese leadership. Some of the points which will be noteworthy from the Indian point of view will be the deliberate attempt by the Chinese Parliament to stick to the proviso for not giving a third extension to anybody in a particular administrative post and its decision to implement the job cuts inspite of severe pressure from incumbent lobbies. Therefore, it is time for us to formulate India's response to an emerging China in Asia and the world at large.

According to China's Central budget for 1998, passed by the current session of it's National People's Congress (NPC), the allocation for national defence stands at 90.99 bn Yuan (RMB). This is an increase of nearly 12.9 per cent over last years figure of Y80.57 bn. At the same time, the amount spent by China during last year has been revised and put at Y80.651 bn by Finance Minister in his implementation report for 1997. For other heads the budget noted that, 'in 1998, the total revenue is expected to be up by 12.1 per cent over last year; and total expenditures up by 10.3 per cent, 1.8 percentage points lower than revenue growth.' In real terms, this means a higher allocation to the defence over and above the national average.

Assessing the actual defence expenditure of China is a highly complicated exercise at the best of times. In a year like the current one, it becomes all the more complicated. It is a well known fact that now, apart from Premier Li Peng's reiteration of China's decision to reduce her military strength, he has also proposed a highly ambitious plan to streamline her administrative machinery and cut down its strength. As per the detailed report submitted by State Councillor Luo Gan to the NPC 'the forty existing ministries and commissions will be reduced to 29. The designated commissions also include the merger and renaming of the apex Defence science and technology establishment viz. the State Commission of Science, Technology, and Industry for National Defence.' All these factors can enhance the proportionate availability of funds for actual spending.

Li Peng's work report states that, "we should complete on schedule the arduous task of reducing the armed forces by 500,000 people in the next three years. We should make proper arrangements to help demobilized service members find new jobs, and actively readjust and reform the national defence industry; attach importance to defence related scientific research; gradually improve our weapons and equipment; upgrade the army's defence and combat capabilities under the conditions of modern technology, especially under high-tech conditions." Even if the proposed measures get partly implemented during the current year, then China will be spending less on its armed forces than last year. Further, we have to take into account two other important factors: firstly, that, as per official estimates China could contain her inflation at a very low level; secondly, due to the impact of the currency crisis in the East Asian region there is a virtual glut in a variety of products which can bring down the actual procurement price for a large number of goods.

Generally, China does not follow the conventionally accepted system of accounting for her defence expenditure. This complicates the process of calculating her defence spending. Normal items like money spent on procurement of a variety of arms and other logistical items do not form part of its defence expenditure. Apart from this, currently the People's Liberation Army is running a number of business enterprises, ranging from karaoke singing and dance parlours to heavy industries. The income from these business concerns is spent and appropriated at the respective command levels. This also does not form a part of the defence spending.

Owing to the above factors, making a correct assessment of the actual defence expenditure (ADE) of China involves some studied guesstimates. This is a problem faced even by the well-equipped agencies of USA and other advanced nations. As a result of this, the three concerned US agencies, viz. the Central Intelligence Agency (CIA), Pentagon and the Arms Control and Disarmament Agency (ACDA) give three different estimates. The other authorities in the field like the Stockholm International Peace Research Institute (SIPRI) and the Military Balance published by the International Institute for Strategic Studies (IISS), London also do not agree on this issue. According to Military Balance, in 1996 the real outlay for defence expenditure was US $35 bn (the official figure for 1996 was Y80.6 bn ($9.7 bn). India's Institute for Defence Studies and Analyses (IDSA) estimated that, 'the real defence expenditure for 1997 is close to Y291.73 billion ($34.73 bn), instead of the official figure Y80.57 bn.' These figures give a good idea about the defence expenses in China.

Further, one hopes that the above figures will cajole our leaders and thinking elite into paying some heed to the growing needs of our defence forces. It is high time for the economic pundits to come out in the open and discuss the symbiotic relationship between the defence capabilities and the overall nation building endeavour. The experiences of a whole lot of advanced economies including that of USA have proved that their effort, at a certain point of time, in making huge investments in the national security oriented institutions and infrastructures has become beneficial for a steady growth of their economies. But in India, this is going down steadily since last few years and neither does there exist a coherent view on this subject.

Another point which is notable from the Indian viewpoint is the consistency with which the Chinese leadership has been pursuing its goal of defence modernization. The current policy of reduction in force is perfectly in tune with China's current strategic concept of an 'active defence.' Through this, China intends to maintain a qualitatively trained superior manpower along with a matching improvement in their weaponry as far as possible. This is a definite change from the old dictum of 'people's war' under modern conditions.

Note - I

Plan for State Council

In accordance with the requirements of the 15th CCP National Congress and the Second Plenum of the 15th Central Committee, the objectives of State Council institutional restructuring are: establishing a highly efficient, coordinated and standard government administrative system; improving the national civil service system; setting up a quality specialized administration team; and gradually establishing a government administration structure with Chinese characteristics suited to the socialist market economic structure. The principles of reform are: in accordance with the demands of the socialist market economy, government functions will be changed to realize the separation of the functions of government from those of enterprises; in accordance with the principles of streamlining, unity and efficiency, the government institutional structure will be adjusted to implement streamlined administration; in accordance with the principle of the unity of authority and responsibility, government departments will be adjusted to clearly define the responsibilities of government departments and to improve the administrative mechanism; and in line with the requirements on managing state and government affairs according to law, the administrative legal system will be strengthened.

After reform, the State Council will comprise 29 ministries, commissions, administrations and bank, in addition to the State Council General Office.

1. The PRC Ministry of Foreign Affairs ***

2. The PRC Ministry of National Defence ***

3. The State Development Planning Commission (formerly named the PRC State Planning Commission) **

4. The PRC State Economic and Trade Commission ***

5. The PRC Ministry of Education (formerly named as PRC State Education Commission) **

6. The PRC Ministry of Science and Technology (formerly named the PRC State Science and Technology Commission) **

7. The PRC Commission of Science, Technology and Industry for National Defence *

8. The PRC State Nationalities Affairs Commission ***

9. The PRC Ministry of Public Security ***

10. The PRC Ministry of State Security ***

11. The PRC Ministry of Supervision ***

12. The PRC Ministry of Civil Affairs ***

13. The PRC Ministry of Justice ***

14. The PRC Ministry of Finance ***

15. The PRC Ministry of Personnel ***

16. The PRC Ministry of Labour and Social Security *

17. The PRC Ministry of State Land Resources *

18. The PRC Ministry of Construction ***

19. The PRC Ministry of Railways ***

20. The PRC Ministry of Communications ***

21. The PRC Ministry of Information Industry *

22. The PRC Water Resources ***

23. The PRC Ministry of Agriculture ***

24. The PRC Ministry of Foreign Trade and Economic Cooperation ***

25. The PRC Ministry of Culture ***

26. The PRC Ministry of Public Health ***

27. The PRC State Family Planning Commission ***

28. The People's Bank of China ***

29. The PRC Auditing Administration ***

* newly formed

** renamed

*** retained

Fifteen ministries and commissions to be abolished:

1. The PRC Ministry of Power Industry

2. The PRC Ministry of Coal Industry

3. The PRC Ministry of Metallurgical Industry

4. The PRC Ministry of Machine Building Industry

5. The PRC Ministry of Electronics Industry

6. The PRC Ministry of Chemical Industry

7. The PRC Ministry of Internal Trade

8. The PRC Ministry of Posts and Telecommunications

9. The PRC Ministry of Labour

10. The PRC Ministry of Radio, Film and Television

11. The PRC Ministry of Geology and Mineral resources

12. The PRC Ministry of Forestry

13. The PRC State Physical Culture and Sports Commission

14. The PRC State Commission of Science, Technology and Industry for National Defence (The newly formed Commission of Science, Technology and Industry for National Defence will absorb its predecessor's functions of managing the defence industry, the functions of the State Planning Commission's National Defence Department, and government functions assumed by various corporations in the defence industry)

15. The PRC State Commission for Restructuring the Economy (To strengthen State Council leadership over economic restructuring, the State Commission for Restructuring the Economy will be upgraded and become an institution for discussion of official business, headed by the premier, the Commission will comprise relevant ministers and will no longer be listed as a State Council department.

Source: Ta Kung Pao, March 7, 1998, as quoted in Summary of World Broadcast (SWB) - Part - III, March 13, 1998)


Note - II

List of the Newly Appointed Ministers:

Premier - Zhu Rongji.

Vice Premiers - Li Lanqing,

Qian Qichen,

Wu Bangguo,

Wen Jiabao.

State Councillors - Chi Haotian,

Luo Gan,

Wu Yi (female),

Ismail Amat (Uighur),

Wang Zhongyu.

Secretary-General of the State Council - Wang Zhongyu (concurrently);

Minister of Foreign Affairs - Tang Jiaxuan;

Minister of National Defence - Chi Haotian (concurrently);

Minister in charge of State Develop- ment Planning Commission - Zeng Peiyan;

Minister in charge of State Economic and

Trade Commission - Sheng Huaren;

Minister of Education - Chen Zhili (female);

Minister of Science and Technology - Zhu Lilan (female);

Minister in charge of Commission of

Science, Technology and Industry for

National Defence - Liu Jibin;

Minister in charge of State Ethnic

Affairs Commission - Li Dezhu (Korean);

Minister of Public Security - Jia Chunwang;

Minister of State Security - Xu Yongyue;

Minister of Supervision - He Yong;

Minister of Civil Affairs - Doje Cering (Tibetan) (concurrently);

Minister of Justice - Gao Changli;

Minister of Finance - Xiang Huaicheng;

Minister of Personnel - Song Defu (concurrently);

Minister of Labour and Social Security - Zhang Zuoji;

Minister of Land and Natural Resources - Zhou Yongkang;

Minister of Construction - Yu Zhengsheng;

Minister of Railways - Fu Zhihuan;

Minister of Communication - Huang Zhendong (concurrently);

Minister of Information Industry - Wu Jichuan;

Minister of Water Resources - Niu Maosheng (Manchu) (concurrently);

Minister of Agriculture - Chen Yaobang;

Minister of Foreign Trade and Economic

Cooperation - Shi Guangsheng;

Minister of Culture - Sun Jiazheng;

Minister of Health - Zhang Wenkang;

Minister in charge of State Family

Planning Commission - Zhang Weiqing;

Governor of People's Bank of China - Dai Xianglong;

Auditor-general of National Audit Office - Li Jinhua.

Source : SWB - Part - III, March 19, 1998