New Economy Will Require a New Official

Caixin | Until recently, Chinese officials could rest assured that their path on the bureaucratic ladder went only upward, unless they were punished for some reason, usually corruption. No more. A policy passed in June 2015 by the Communist Party’s second-highest decision-making body, the 25-member Politburo, stipulated that officials should be demoted for failing to meet the requirements of their post.

Six months later, 584 officials at and above the county level in the mainland’s 31 provinces and regions have been removed on account of poor performance, data from the party’s personnel department show. The positions were filled by, hopefully, more capable successors.

Last week, the government of the central province of Hubei said it demoted 28 officials, who were “not suited” for their jobs. More of the same can be expected elsewhere, as local governments implement the party’s new approach.

It is no coincidence that the changes came shortly before official data showed that services and emerging industries had grown, helping to offset a decline in traditional manufacturing sectors, which have lost their ability to fuel GDP expansion. This would not have happened unless the right officials were in place to make sure the central government’s policies were being implemented.

As China seeks a more balanced and sustainable model of growth, creating a flexible, merit-based bureaucracy that rewards the ambitious and punishes the lazy is essential to making progress because the new model requires high-quality human capital and technologies more than ever.

The New Economy Index (NEI), recently launched by the Caixin Insight Group and BBD, a big data firm, shows that the output of the new economy, encompassing 111 items across nine industries, accounted for nearly one-third of all economic activity in March. The future of China depends on the new economy getting stronger.

This will not happen unless the government relaxes rules that hinder the sector’s growth. Emerging new industries should be governed by a “negative list” approach, and the whole idea of officials making decisions on whether an investment is worthwhile or not should be abandoned.

Efforts have been made over the past two years to reform the functions of government and reduce the intervention of officials in the market, but there is still a long way to go.

Pushing forward with supply-side reforms should be a priority. Local officials should be evaluated less on GDP growth rates and more on their ability to provide public goods and services, budget wisely and govern democratically and with accountability. This means raising the bar for officials. Growing differences in regional economic performances indicate that some are living up to the challenges while others have struggled.

The inaction of officialdom has become common, replacing graft as the most severe problem hindering economic growth in some places. The central government has repeatedly warned officials against muddling along. The Politburo listed lacking initiative, perfunctory performance and failing to fulfill one’s duties as among the behaviors cadres must not exhibit, just as they should not accept a bribe.

Creating a mechanism that allows for unsuitable officials to be replaced by able ones is essential. It should be institutionalized and come with necessary guidelines and operating rules, lest some officials set about firing people just to show they can.

Assessments will be pivotal. Such a mechanism will require that officials be properly evaluated, and that cannot happen without clear rules and transparent procedures. The standards of assessments should be practical, measurable and suited to different jobs at different bureaucratic levels. Outside opinions, especially the public’s views, should be incorporated into assessments. Meanwhile, it is also important to reward officials who handle pressure and excel.

Who gets promoted is often a sign of where policies are headed. A renewed emphasis on promoting reform-minded officials, as recent actions by top decision-makers have indicated, can and will have a significant impact on the economy. Only by relying on people who are willing to take risks and responsibility can we truly bring reform to life, encourage innovation and build the new economy.