李世默：这个百年，这个党（6）

Contemporary China is no exception. In its 64-year history, the party’s governance model in terms of central and local relations has gone through at least three phases. The first was Soviet-styled centralization between 1949 and 1956. Driven by the need to consolidate the newly established political power and resuscitate a long paralyzed and disparate economy, the party imported the model from the Soviet Union in which virtually all powers were centralized in Beijing. However, beginning in the late 1950’s, China’s founding leader Mao Zedong changed course and led the nation through a long period of devolution of power. He launched this dramatic turn-around with the publication of one of his most important treatises on Chinese governance, “On the Ten Imperative Relations”, in 1956. In it, Mao proposed an across-the-board decentralization of power from Beijing to provincial and local governments. According to him, such devolution was urgently needed to release the productive forces of the economy and revitalize local political initiative. This process intensified through the end of the Cultural Revolution in the late 1970’s when tax collection, control of state owned enterprises, and even the management structure of the military were devolved to regional levels. The remnants of that period continued in the first phase of Deng Xiaoping’s reform era. In the eighties, the central government was at times so strapped for cash that it had to demand financial support from provincial capitals. Many characterize Mao as the ultimate centralizer of political power. Such views are gross over-simplifications.

It was not until the early 1990’s when the party began to rebalance this critical relationship between the central and the regional. Former Premier Zhu Rongji formalized this process in 1994 by shifting taxing authority back to Beijing. However, nearly three decades of decentralization was difficult to reverse. By the time of the Third Plenum, only half of the central government’s 20 trillion RMB annual tax collection was under the fiscal budget. The single standardized national budget that would unify revenue and spending announced in the Third Plenum is a most impactful re-engineering of the core of Chinese political governance in decades. Under this new system, the central government will assume nearly full authority on national spending. Administrative responsibilities are to be clearly delineated between Beijing and regional and local governments. Rules on transfer payments will be standardized. Direct monitoring and management of local government debts are now vested in central government ministries.

In the coming decade, many of these changes will prove critical to China’s long-term development blueprint. The new tax revenue management system and debt control mechanism will address the issues arisen from misallocation of resources driven by short-term and localized economic targets. With this rebalancing of power, the central government is now able to implement policies on a nationwide basis in pursuit of cross-generational national strategies. Urbanization tops the list. China plans to urbanize 13 million people a year over the next 20 years. The rural-urban divide and the large newly urbanized migrant population in limbo have long been persistent problems in China’s development model. By doubling its control over the purse string, Beijing will be able to manage allocation of national resources to expand the provision of public goods such as healthcare, welfare, and education that are pre-requisites for realizing the aggressive urbanization goals for the next phase.