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Re-Governing China

BEIJING – This year’s China Development Forum in Beijing revealed the clearest vision yet of how China’s leaders intend to deliver the “Chinese Dream,” which President Xi Jinping has described as “national rejuvenation, improvement of people’s livelihoods, prosperity, construction of a better society, and military strengthening.” The question is whether the government can follow through on its ambitious reform and development plans.

Last November’s Third Plenum of the 18th Central Committee of the Chinese Communist Party produced more than 330 major reforms in 60 areas for implementation by 2020 – a package of unprecedented scale, depth, and complexity. Orchestrating China’s transformation from a manufacturing- and export-based economic model to one driven by consumption and services – and that is inclusive, environmentally sustainable, and creates more than 13 million jobs annually – is a massive undertaking. Add to it the challenge of upholding financial and social stability – and accomplishing all of this while managing one of the world’s largest bureaucracies – and the task ahead becomes truly mind-boggling.

Consider the effort last summer to assess the government’s financial condition. The National Audit Office had to mobilize 55,400 staff members to review not only the central government’s accounts, but also those of 31 provinces and autonomous regions, five central municipalities, 391 cities, 2,778 counties, and 33,091 rural communities. The investigation covered 62,215 government departments and agencies, 7,170 local-government financing vehicles, 68,621 public finance-supported reporting units, 2,235 public business units, and 14,219 other entities – responsible, altogether, for 730,065 projects and 2,454,635 items of debt.

Clearly, public-sector governance in China is radically different from that in the West, where the rule of law, democratic elections, and free markets are structural norms. And, though 35 years of major reforms have brought about considerable change, with the private sector now accounting for the bulk of job creation, there remains much to be done – exemplified in the fact that the state, especially local governments and state-owned enterprises, still command most of China’s credit resources.