What Does Xi Jinping’s Top-Down Leadership Mean for Innovation in China?

A ChinaFile Conversation

One of the hallmarks of Xi Jinping’s leadership has been a centralization of power across a whole range of areas of domestic politics. This week, the Chinese Communist Party’s leadership meets in Beijing for the sixth plenary session of its 18th Party Congress, a meeting where the focus, according to Chinese state media, will be on managing internal Party discipline. Working with our colleagues at Mercator Institute for China Studies (MERICS) in Berlin, we asked contributors about the potential impact of Xi’s shift toward increased top-down leadership on political life, governance, the economy, and other aspects of Chinese society. —The Editors


From Deng Xiaoping to Hu Jintao, China’s leaders have been known for their legendary pragmatism. The Chinese Party-state displayed a remarkable eagerness to learn and proved its ability to adapt to changing conditions by relying on the initiative and creativity of millions of local cadres. This has changed dramatically under Xi Jinping. His leadership style and a number of new processes and central institutions threaten to undermine the system’s adaptive capacity.

China’s social and economic development over the past three decades benefited from an arrangement that gave local Chinese Communist Party (C.C.P.) and government officials considerable room for experimentation. New solutions were tested locally, and only the successful ones were later rolled out on a national scale. Examples reach from the privatization of state-owned enterprises and industrial policy over land use to the extension of social security. Progress was slow, but steady. The risk of failure was low, as policies could easily be reversed and negative effects contained.

The rigid top-down approach established under Xi Jinping under the headline “top-level design” set an end to this practice. While it may help correct past distortions caused by uneven policy implementation and resource distribution, it also risks to stifle innovation and to decrease effective governance. Local officials struggle to interpret central directives and live in fear of retribution for veering off the officially sanctioned path. The ongoing anti-corruption campaign is omnipresent and has led to paralysis on the local level. Competing for national recognition in the field of policy innovation seems to be no longer en vogue. The C.C.P.’s Central Compilation and Translation Office counted 50 cases of “policy innovation” in 2012, but only a handful in 2015. The number of provincial-level documents that reference “experiments” or “policy piloting” in 2015 was not even half the number of 2012—the last year of the Hu Jintao- Wen Jiabao Administration.

The high degree of centralization of policy-making bears several economic and political risks. First of all, it increases the costs of policy failures. If centrally devised solutions fail to solve local problems, the reversal will be a long and costly process. Secondly, being directly involved in the policy-making process, Xi has more skin in the game than his predecessors who constrained themselves to the comfortable position of picking and lending endorsement to the best performing solution. Third and lastly, ineffective policies can trigger protests and a backlash against the bureaucrats in Beijing.

Whether the changes that Xi Jinping’s rule has brought to leadership styles, structures, and processes are going to endure remains an open question. If the newly established top-down system fails to deliver in important areas such as economic restructuring and improving the social security system, the current centralization and rigidity in policymaking might be short-lived.

Yes, China’s political leadership under Xi has centralized policy initiative. And yes, in doing so it has narrowed the room for bottom-up innovations. But that does not automatically mean the end of adaptive local policy implementation.

Discussions about recent changes in central-local relations in China tend to focus on the top political leadership and, in particular, the persona of Xi Jinping. But from the perspective of local cadres, the degree, or consequences, of centralization may appear a little different.

Local Chinese Communist Party and government officials have always been part of a complex power structure and they are subject to a rigid cadre management system. Local governments have never been fully autonomous. At the same time, local cadres enjoy an enormous degree of discretion. This allows them to divert or sabotage policies, engage in corruption, and other predatory behavior. But the same discretion is also the backbone of China’s remarkably adaptive political regime and the foundation of effective policy implementation.

We are now observing that the (re-)centralization efforts initiated under Xi Jinping seriously curtail local governments’ political autonomy and cadres’ level of innovative activity. But it may be a bit premature to assume that this also heralds the end of China’s overall adaptive governance regime, which rests on a foundation of continuous and complex reforms over the past three decades.

Even China’s long-standing “experimentation” practice has always happened within certain limits, or as Sebastian Heilmann has put it, “under hierarchy.” This grassroots trial-without-reporting-the-error mode most often answers to macro political programs and tunes in with major policy initiatives and slogans of the day. And while policy adaptation by local governments is intended and pervasive in Chinese politics, outright “innovative” behavior is molded by the overall political climate and it has been encouraged to various degrees by different C.C.P. leaders. When “innovation” or “being innovative” (chuangxin) is stressed in Party speak and political programs, of course, local leaders go to great lengths to embrace it, as it helps them make a name for themselves. This happened to an extreme degree under the leadership of Hu Jintao and Wen Jiabao, when it produced both positive and negative consequences: expanded local deliberative governance models alongside wasteful image-building projects, for instance.

Now, one main goal of the Xi administration’s centralization efforts is to redirect implementation activity toward those measures and programs it wants to see executed, emphasizing “coordination and harmonization” (xietiao tongyi). In this political climate, any diversion from these core policies is understood as a distraction or even deviation. As being overly creative—or rather, talking about it—does not help further one’s career anymore, local leaders have little incentive to show off to trumpet their innovations. This could be one explanation for the decrease in the number of reported “real” innovations, including, in particular, the more unconventional ones that made localities eligible for the C.C.P.’s Central Compilation and Translation Office’s “local governance innovation award.” It’s not that experimentation and pilot projects have been abandoned as policy tools, but rather are employed in a more rule-based and controlled manner. Local governments’ ideas for experiments and innovations need to be approved by superior levels before they can actually be launched under close monitoring. These approval-seeking proposals have to be even more aligned with specific policies and increasingly need to take into account later emulation elsewhere.

But, after all, much more common and crucial is the everyday smaller scale adjustment of policies to local conditions. As programs and guidelines issued at central and provincial levels are often quite abstract and deliberately vague, they need to be concretized when they travel down the governmental hierarchy. And this has not fundamentally changed yet. It remains as a kind of adaptation without innovation. Beijing’s streamlining efforts in this regard are much more difficult to grasp: for instance, a reform of the intergovernmental transfer system and the expansion of the list of items for local administrative approval gives local governments even more discretion in deciding on budgets and measures, while the emphasis on judicial reforms and a “rule-based” administration further constrains their agency. In addition, oversight is increasing, and the sweeping anti-corruption and disciplinary campaign causes anxiety among local cadres, while they have to spend an increasing amount of their time in ideological training sessions.

Exactly how this all affects adaptive governance in China has to be scrutinized by empirical analysis of policy implementation where it actually happens and of local governments’ agency under changing circumstances.

Reports of policy experimentation have declined under Xi Jinping’s rule, and many speculate that this is due to his efforts to recentralize political power and authority, as well as to the ongoing anti-corruption campaign. Both have reduced policy experimentation by restricting the perceived space for innovation and increasing the risk of experimentation for local officials.

In addition, many local officials below the provincial level report a substantial increase in the need to file work reports to supervisors who are concerned with meeting new guidelines for central supervision. (They also are concerned with not attracting the attention of anti-corruption investigators.) Increasing perceptions of risk at the local level are creating what one county-level official described as a “work report culture.” Although actively engaged in policy experimentation previously, he complained that he no longer had time to analyze problems and develop solutions, but instead had to focus constantly on filing work reports with supervisors.

Although all of these are part of the explanation for reduced local discretion, we also must remember that many local officials still are engaged in policy experimentation; however, they are no longer advertising this to supervisors in many cases, and the type of innovation has shifted. Many local officials are still experimenting, but rather than designing programs or large-scale initiatives, they are “tinkering” with existing programs in response to local governance problems. This is better understood as a form of process innovation, or perhaps “survival experimentation,” done in order to govern, rather than many of the more transformative experiments seen in the past, such as direct elections in Sichuan, deliberative mechanisms in Zhejiang, and the original special economic zones on the coast.

Despite this post-2012 period characterized by high risk, uncertain reward, and little time, many local officials either have a strong personal desire for experimentation (“innovative personalities”), or work in areas with threats of social instability that may be mitigated by adapting existing policies. Thus, I expect that local officials will continue to experiment with policy; however, most of this will be on a smaller scale and address more local issues than seen previously. Much of the policy experimentation under Hu Jintao addressed difficult governance challenges for China, and hopefully Xi Jinping will recognize the benefits of a more flexible system and encourage local policy innovation.

Against all appearances, Xi administration has not changed the basic structure of the central-local relations game, one that has been in place since the Maoist rulebook was thrown out in 1978.

The game has three basic rules for at least the economic aspects of decision making:

  1. The central government sets a handful of general economic goals that it expects the local governments to pursue.

  2. As local governments choose how they pursue these goals, the central government signals the boundaries of an envelope that constrains their choices. These constrains primarily relate to what they cannot do rather than what they can do.

  3. The central government monitors the local government and, within the limits of its capacity to monitor, it rewards those who succeed in achieving the goal, and punishes both those who don’t success at the goal, as well as those who push the envelope too hard

Within the rules of the game, local governments remain free to choose their own strategies of pursuing the goals. They can add other goals as long as the original goals are also successfully met. They are free to innovate within the boundaries of the often-unclear boundaries of the envelope. And since monitoring is imperfect, they can try to cheat at the rules.

Despite appearances, these rules have not changed under Xi Jinping. Yet, even as the rules of the game have remained intact, many variables within these rules have changed. It is often difficult to tell the specifics about these variables, but patterns have emerged. Economic goals have changed. Monitoring is stricter. But most of all, the size of the envelope has constricted.

First, the economic goals of the game have shifted over time. Quality growth has replaced whole-hearted pursuit of economic growth. Urbanization has been prioritized. New goals, such as the complete elimination of rural poverty, have emerged.

Second, the size of the envelope has varied considerably. Like the U.S. stock market, the policy space under Deng, Jiang, and Hu’s eras waxed and waned over discernible periods, although the envelope’s size has generally grown. Under Xi, the envelope has been tightened considerably.

Finally, monitoring has gotten stricter. The rewards have reduced. The punishments have gotten more common and more severe.

So although the goals, envelope, and monitoring have changed, the basic game has not. Under the current parameters, local governments’ moves in the game are quite constrained. But this is probably not due to a shift in the game, but rather a resetting of the parameters. The game continues, and as it does, the parameters will shift again and again.

How could China, a centralized unitary system with the world’s largest population and fourth largest territory, have ensured high-speed socioeconomic and political development over the past four decades? One key explanation proposed by China scholars focuses the active, (semi-)autonomous, and valuable contributions from Chinese local governments. Given such a prevailing emphasis on the salience of local initiative and innovation, the Xi Jingping administration’s recent promotion of top-level design (dingceng sheji) has been interpreted by some as dramatically constraining or even eliminating the room for bottom-up reform innovations, which, in turn, some scholars have argued, could seriously undermine the Chinese system’s adaptive capacity in its future governance.

Such concerns notwithstanding, the basic dynamics of central-local relationships in contemporary China remain essentially unchanged. The procedures for policy-making, also have remained comparatively stable. Both will continue to facilitate the integration of bottom-up initiatives and experiences and top-down preferences in China’s socioeconomic and political reforms.

For a straightforward empirical test of this conclusion, we can compare the priorities of reforms during the so-called bottom-up era (i.e., dominated by local initiatives) to the so-called top-down era (i.e., emphasizing central designs and guidance) to see if there are meaningful and significant changes. Since the beginning of 2014, the Central Leading Group for Deepening the Reform (zhongyang shenhua gaige lingdao xiaozu, CLGDR) has held 27 group meeting. On average, four to six reform plans or policy documents were discussed and issued for each meeting. As of October, 2016, excluding the general rules regarding the working procedures of the CLGDR, 162 policy documents had been issued. Meanwhile, the China Center for Comparative Politics & Economics (CCCPE) at the CCP’s Central Compilation and Translation Bureau has collected more one thousand local innovation cases since the 1990s. We can use the same scheme of classification to compare the reform priorities of central-led (using the 162 documents issued by the CLGDR) and locally-initiated reforms and innovations (i.e., using the cases collected by the CCCPE). Systematic analysis reveals that the central-led and local-initiated reforms share top priorities, that is, rule by law, public service, and socioeconomic development. It seems that, despite recent emphasis on top design for its future reforms, China’s central and local authorities share beliefs on what should be prioritized in practice. Therefore, such a gear-shifting should be expected to have limited influence on the nature of forthcoming reforms in China.

But there are also are nuanced changes. For instance, comparatively speaking, a higher priority has been assigned to rule by law in the central-led agenda than in the local-initiated one. This might be interpreted as evidence (though this is still debatable) for the shrunken space for local governments and cadres in China’s future reforms, given the central government’s leeway and autonomy in making and interpreting laws. But even if that’s the case, it shouldn’t be attributed to the Xi administration. Actually, it was first stressed and stipulated as the part of the institutionalization, standardization and normalization of socialist democratic politics (shehuizhuyi minzhu zhengzhi zhiduhua guifanhua chengxuhua) by the 16th CCP Party Congress in 2002.

It is important to remind keep in mind that the overarching framework that encourages local innovation by empowering local governments with a degree of discretionary power and is the muddling through logic embodied in Deng Xiaoping’s formulation of “crossing the river by feeling the stones” (mozhe shitou guohe). This system has also contributed to the rise of “image projects” (xingxiang gongcheng), which have resulted in resource waste and unsustainable development in some localities.

After some four decades of “spontaneous” reforms, a degree of guidance from top-level design is necessary for China’s future reforms, especially given that most low-hanging fruits have been picked and more challenging and large-scale reforms are needed. However, reforms proposed by the CLGDR in the mode of top-level design clearly would grant more power to the central government at the expense of local autonomy and flexibility. Given China’s imbalanced socioeconomic development and multicultural features, how to strike an effective balance between local initiative and central guidance is a serious and major challenge for China’s political leaders.