What will China’s leadership reshuffle mean for economic policy?
Ahead of the cadre shuffle in China next week, most attention will be reserved for the changing of the guard in the Politburo Standing Committee. However, it is important to remember that leadership of party and state leading groups is what really drives policy process and change in China. While a variety of formal and informal power structures define policy fermentation and transmission in China, at the core is a hierarchic system of committees, or leading groups, a 21st century manifestation of the 1920s Leninist Party structure. The committee system effectively fulfills the function of the legislature in common and civil law systems of governance.
These leading groups are institutionalized from the highest organs of power to the lowest village organization. The policy portfolios of leaders are fluid arrangements, likely to morph over the course of a five-year administration. The policies which these committees output are interpreted and implemented vertically downwards, moving from vagaries in proto-policy at the central level to specifics in production catalogues, tariff rates, and insurance regulations.
Party leading groups, over state leading groups, are the pre-eminant decision-making fora. Xi Jinping’s Comprehensively Deepening Reform Leading Group, in charge of change, is now the most powerful, while Liu He’s Financial and Economic Affairs Leading Group, in charge of money minders, sets key economic agendas. State leading groups, which set functional policy, are currently dominated by Zhang Gaoli, China’s top vice premier, but will necessarily morph and institutionally evolve after the 19th Party Congress, with new personnel to staff the central trade and industry policy apparatus which defines the subnational government and state-owned enterprise (SOE) production system.
Zhang Gaoli directly or indirectly ran an almost obscene amount of leading groups through the 2012-2017 period, including the Belt and Road Leading Group. Zhang was effectively running China’s economy through the various energy and industrial policy leading groups, and his expected departure at the 19th Party Congress will leave a policy implementation gap.
