Opinion & Commentary
Over-governed China is the worst governed
The ink is hardly dry on official Chinese gross domestic product figures for last year and analysts are spending almost as much time second-guessing Beijing's statistics as they are working out what the official figure means for China and the world. No one, including China's National Bureau of Statistics (NBS), really knows whether the true figure is above or below the official one of 6.8 per cent growth in the most recent quarter, and by how much.
Cynics might suggest that it is whatever the Chinese Communist Party decides it needs to be. But the uncertainty in Beijing's numbers is symptomatic of a deeply dysfunctional Chinese economy and society.
Every quarter, the NBS goes through the same ritual. Statistics come in from all over the country. The provinces take around two weeks to compile them, three times as fast as many developed economies with much more efficient processes of data collection.
The NBS sorts through them, "consults" with senior government officials, applies a mysterious methodology to trim them into shape, and then spits out a figure that is then diplomatically endorsed by organisations such as the World Bank.
The economic debate then begins. A few years later, provincial data is tediously gathered and meticulously studied, and official figures are revised.
Significant discrepancies are discovered and condemned. Then as if on cue, Beijing promises to severely punish local officials found guilty of falsifying data.
This quarterly ritual offers an insight into how China is actually run and into a fundamental weakness that plagues the country.
During the Tang Dynasty (618-907), there was one official for every 2,927 people. During the more recent Qin Dynasty (1644-1911), there was one official for every 299 people.
In modern China today, there are up to 40 million officials, amounting to about one official for every 35 people. Its bureaucracy certainly cannot complain about being understaffed. Yet, while modern China is the most over-governed land in Asia, it is also one of the worst governed.
Beijing rules over 34 provinces and administrative regions, which in turn administer around 1,450 counties. These counties then oversee around 770,000 villages and townships. China was decentralised following reforms because, in theory, local authorities (county level and below) should be better placed not only to efficiently allocate public money but also provide better enforcement and implementation of rules and laws.
Local governments account for about three-quarters of public expenditure, and even monies spent by central governments are largely administered by local authorities.
But while China has been decentralising and officials have multiplied, it is not building institutions that encourage public accountability.
For example, it's hard to build "rule of law" when the party controls both the courts and tribunals, and enforcement of laws. It's hard to have transparency when the party controls the media. It's hard to make local officials accountable when Beijing relies on them to maintain the party's hold on power in far-flung places.
There is also another problem. The state remains a significant player in the Chinese economy.
State businesses receive over three-quarters of the country's capital. The state owns over 60 per cent of the country's fixed assets. And it is overwhelmingly local officials who influence the running of these state businesses.
Local officials have a unique advantage. They control the dispensation of capital, land, and sometimes even labour.
If they want to obstruct businesses with red tape, they can, and there is little recourse.
The explosion of officials in China has seen the explosion of unaccountable bureaucrats each getting a slice of power, money and influence.
The problem of corruption is much worse and harder to root out when you have tens of millions of unaccountable officials compared with just a few hundred or thousand unaccountable ones at the top.
This also means that Beijing relies on local officials to generate revenue and jobs. Even if it wanted to, the Politburo simply cannot strip away the immense power of the country's small-time bureaucrats.
Climbing the greasy ladder of status and wealth within China's vast political and bureaucratic network depends on results. And results are usually defined by the economic performance of one's township, city, or county.
Despite 30 years of development, the growth of robust bureaucratic institutions in China has been stunted. Local officials have massive incentives to exaggerate performance, as that is the basis for their promotion, and there is little chance they will be caught, let alone punished, for dishonesty.
It is no wonder that growth statistics handed over to the NBS by local authorities for the vast majority of counties are always above the official average of all the counties -- a statistical impossibility.
Beijing will do its best to convince its people and the world that its figures are accurate. But authoritarian politics is one thing. Issuing official statistics determined by fiat and political priorities is something different altogether.
Dr John Lee is foreign policy fellow at Australia's Centre for Independent Studies
