Governance models and policy framework: some Chinese perspectives

While the Chinese governance system retains the characteristic of being in the class of ‘administrative progression models’, it has evolved greatly since the Responsibility System was introduced in the late 1970s, and spread from agriculture to SOEs and local governments. As fiscal strains developed, modern institutions and tax and budget systems were introduced from 1993/4 on, and have been evolving since then. While there has been rapid economic growth, stresses have emerged in terms of congestion and pollution in the major metropolitan areas, increasing spatial and interpersonal inequality, as well as risks associated with possible rent-seeking and buildup of liabilities. Additional economic, institutional and legal reforms are needed to strengthen the governance framework, yet policies taken from US-style competition models may not work. Further, dire predictions based on a medieval characterization of the Chinese model are misleading, and fail to take into account the role of institutions and information that have transformed the Chinese governance structure.