Assessing the New Public Management in the Emerging China

Assessing the New Public Management in the Emerging China

Abstract. This study assesses what some refer to as the New Public Management (NPM) in China in reference to ongoing administrative reform in that nation. Inquiry here incorporates a recent essay by H. George Frederickson—that characterizes the NPM in the U.S. as an unappealing recipe—as a springboard for analyzing NPM-like reform in China. The thrust of this study involves (1) stipulating some defining assumptions from which to assess the NPM “recipe” in the Chinese (in contrast to the American) context and (2) assessing the three main “ingredients” (cutting red tape, increased privatization and contracting-out, and downsizing) in the context of China’s tradition and ambitious priorities. Conclusions of early NPM outcomes in China stress successes in reinventing the Chinese Communist Party and in stimulating favorable economic performance, as well as critical problems related to social inequality and unemployment.

As figurative food critic, H. George Frederickson scrutinizes the ethical

implications of the new managerialism “recipe” in a recently edited volume on ethics and

public management (<<TO BE PROVIDED>>Frederickson and Ghere, 2005 165-183).

This recipe calls for ingredients that various advocates of the New Public Management

recommend for improving the “taste” (that is, performance) of government:

First, sharply reduce governmental regulations and red tape;then mix this

with

privatize and contract-out many public functions thought heretofore to be

primarily governmental;

now reduce significantly the directly employed governmental

workforce;

do not train a cadre of government employees to be competent

contract managers;

now mix all of this with the widespread application of market logic,

particularly the idea of institutional competition (165).

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In effect, NPM doctrines relate to the following principles: government productivity (do

more with less), marketization, service orientation, decentralization, policy improvement,

and accountability (Frederickson and Smith, 2003 215). As could be expected,

Frederickson judges this NPM dish against American standards of taste—that is,

according to U.S. public service values and professional norms. He eventually detects the

bitter aftertastes of heightened public-private corruption and diminished concern for

fairness, ultimately deciding that the recipe leads to unappetizing fare.

Inquiry in this paper applies Frederickson’s approach to an assessment of post-

Mao administrative reforms, regarded by some Chinese scholars as NPM initiatives,

ongoing in the People’s Republic of China (PRC). At first glance, imagery of a

Communist regime championing free-enterprise ideology makes for great contemporary

irony. Nonetheless, intrigue over the transplantation of managerial ideas from one

national setting to another has deep roots in scholarship on governmental administration.

For example in his essay “The Study of Administration,” Woodrow Wilson used the

often-quoted passage,

If I see a murderous fellow sharpening a knife cleverly, I can borrow his way of

sharpening the knife without borrowing his probable intention to commit murder

with it; and so, if I see a monarchist dyed in the wool managing a public business

well, I can learn his business methods without changing one of my republican

spots…,

to commend large-scale government authorities for infusing business procedures into

their operations (1887 209; also see Doig, 1978). (The twist here is that PRC leaders

assume the first person in Wilson’s analogy—with an appropriate substitution for

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“republican.”) And for another, John Gaus recommended that questions of administrative

practice—including the importation of management systems—be understood within a

political ecology, wherein functions of government are shaped by interactions among

people, place, physical technology, social technology, wishes and likes, catastrophe, and

personality (1946, 1-19).

The organization of this study for the most part parallels that in the Frederickson

essay. The first section provides background on post-Mao administrative reforms as

parallel to NPM initiatives in the U.S. and elsewhere. The second part stipulates some

defining assumptions from which to assess the NPM “recipe” in China—as contrasted to

those related to governance in the U.S. A third focuses on Frederickson’s three main

ingredients—cutting red tape, increased privatization and contracting-out, and

downsizing—as they pertain to the Chinese setting. The fourth offers a brief appraisal of

contract management competencies connected to “NPM-like” initiatives in the PRC.

Finally, the conclusion summarizes some comparisons between ongoing administrative

reforms in China and New Pubic Management initiatives in the U.S.

Is There NPM in the PRC?

Taken together, several papers presented at a 2005 public administration

conference in Chengdu, China1 document the adoption of particular administrative

reform initiatives patterned from New Public Management ideas. The case that

the NPM (or at least, a recognizable variant of it) is shaping PRC government is

better understood within the current economic and social transformations in

China. That nation’s “peaceful rise to great-power status” comes at a time when

population is still increasing—not expected to peak until 2030 when the figure

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will reach 1.5 billion (Zheng, 2005 18). In 2002—the year before it entered the

World Trade Organization (WTO), China ranked first as a recipient of foreign

direct investment. But even with the third-highest foreign trade, China joined the

WTO as the only major trading nation not classified as an advanced industrial

economy (Zheng, 2005 18; Fung et al., 2006 xi). Hence, China’s transition2 will

continue for another half-century, and societal reforms will be introduced

incrementally during that period (21).

In the United States, the NPM took root in government as Vice President Al Gore

emerged as its champion in shepherding the National Performance Review Process that

decreased and simplified administrative rules at the federal level. Chinese scholars

identify Zhu Rongji—premier from 1998 to 2003—as the figure most responsible for

instituting “NPM-like” policies in the PRC central government. Although it cannot be

confirmed that Zhu actually read Osborne and Gaebler’s Reinventing Government (1992),

descriptions of his official persona and style, as “economic tsar” and “rectifier,” (Luo,

2005 732) qualify him as one who could effective, separate government from its state-

owned enterprises (Lan, 2005 9). Zhu’s policies led the central government to convert

state-owned enterprises to privately-owned firms expected to re-employ displaced

workers (Hughes, 2002 189), thus “smashing the iron rice bowl”—the Communist

Party’s commitment to provide cradle-to-grave security for all citizens (5).

Zhu’s actions can be understood within an emerging definition of “urban

governance” that appears nearly synonymous with entrepreneurial initiative3. Bao

suggests the fundamental irony of local government in China—on one hand it exercises

little formal power in a unitary system, but on the other “it owns its autonomy,” due

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largely from its direct interface (and thus, revenue-creating capacity) with citizens and

businesses (2005 15-16). Correspondingly in rural areas, entrepreneurs emerging in the

post-commune economy have by necessity undertaken political roles (such as lobbying

and constituent representation), thus laying the groundwork for local activism (Gilley,

2002 73-81). Thus, it is appropriate to regard the NPM in China as locally-driven (Bao et

al, 2005 418-419). Nonetheless, the mandates calling for market reforms are generally

national and global in nature—for example, the imperative to abide by free trade

obligations resulting from WTO membership.

Zhu’s administrative reforms take on meaning within the traditional entanglement

of the Chinese Communist Party and government service, both in terms of personnel and

authority structures. To simplify some of Zhong’s discussion in Local Government and

Politics in China (2003), it can be said that the overlap between party membership and

administrative office-holding has been pervasive at all levels. An intriguing dilemma

therefore arises: On one hand, Zhu’s reforms are intended to remove the Party from the

day-to-day operations of government, as later mandated in the 1992 constitution (Lan,

2005 7; Hughes, 2002 188). But on the other, “Zhu made it clear in an interview with

CNN during his visit to Washington in 1999 that China would stick to the one-party

system, because only the Communist Party and socialism could save China” (Luo, 2005

734). One feasible explanation around this quandary is that the “Chinese-styled” New

Public Management involves (a) reinventing the Communist Party in tandem with

reconfiguring the administrative structures of government as well as (b) improving the

public image for a “smaller,” actually more accessible, government (San, 2005 182-187;

Wang, 2005 349-351).

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Reform policies in the PRC are exacting significant social costs. Economists

probe whether policy actions themselves account for sharp increases in income inequality

apart from economic growth (see Risken et al., 2002). Clearly, the traditional economic

dimensions (urban-rural, regional differences) add to the complexity of this empirical

question. Nonetheless, one set of studies generally answers in the affirmative—“it was

not economic growth per se that caused increasing inequality, but reform policies,

according to the data” (Risken et al., 2002 9). In summarizing the analyses in their edited

volume, Risken and his colleagues moderate this assertion by acknowledging that the

policy intended “to bring into play market forces expected to stimulate faster growth” (9).

Still, there is evidence that a number of policy factors causes what Zhao Renwei calls

“disorder changes” that have a “pernicious effect on the distribution of income” (Riskin

et al., 2002 8; Renwei, 2002 25-43). Knight and Song maintain that in adopting reform

policies, government pushed economic growth outcomes over all else, reasoning that

prosperity to some would eventually reach the rest—“prosperity to some, to most, and

then to all” (2002 120).

Understanding the NPM in the PRC: Starting From Different Assumptions

Efforts to forecast the outcomes of NPM-like policies on Chinese governance

need to stake out some beginning assumptions about the character of PRC government. In

this regard, it is instructive to draw upon Frederickson’s defining assumptions of

relationships between NPM ideology and governance in the United States as points of

departure for appreciating the basic ecological differences between these two settings.

Frederickson’s first assumption (or axiom) associates government corruption in

the U.S. with the intersection of public and private interests:

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Most forms of government corruption--conflicts of interest, bribery, fraud,

kickbacks, skimming, trading on the prestige of office--occur at the point of

transaction between officials who formally represent government authority and

the use of public money, on the one hand, and individuals or organizations who

seek money, favor, or influence, on the other hand. In this assumption the key is

the point of transaction at the boundaries of a jurisdiction or agency between an

agency official and a contractor, a client, a regulated firm, and so forth (2005

166).

His first axiom aligns well with comparative analyses of systemic corruption among

global regions (see for example, Caiden, 2001 26-30). Caiden cites “entrepreneurial

politics” as a major source of corruption in North America and then adds that

“Nonetheless, definite limitations on corruption are imposed by constitutionalism,

growing professionalism, legal-rational norms, effective public management practices, a

vigilant mass media, and watch-dog pressure groups” (27). In contrast, Caiden

characterizes systemic corruption in Asian nations as endemic within governments (29;

my italics).4

Nonetheless, what might be regarded as endemic and entrepreneurial corruption

(through Western eyes) merge in the midst of opportunities afforded by the current

Chinese economic transformation. In their CSIS-IIE study5, Bergsten et al. report that

Transparency International’s Corruption Perception Index rates China as a “3.2 on a scale

on 1 to 10, with 10 as the least corrupt, and ranks [it] 78th out of 158 countries

surveyed”(2006 43). Yet such increased corruption—linking opportunity with broad

societal goals—occurs within cultural and structural contexts in a way that defies

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boundary setting and blurs points of transaction, and that instead encourages more

informal networks of influence (from the tradition of guanxi discussed below).

Furthermore, the flexibility and informality of these associations, alliances, and ventures,

can be understood as supportive vehicles for integrating diverse interests toward common

pursuits (44).

Still, the opportunity unleashed by this post-Mao economic boom drives the quest

for economic advantage to “get a piece of the action.” McGregor argues that Mao’s

egalitarian ideology now fuels a pervasive self-interest stemming from the right to “eat

from the emperor’s grain,” or to cash in as entrepreneurs on China’s economic

achievements. In some cases, this impetus moved citizens to establish “home-grown”

family businesses encouraged by the Party to relieve unemployment (Wu, 2006; Gold,

2006 122-124 [my italics]). Neil Hughes, a World Bank economist, suggests that this new

economic freedom “stimulated the spontaneous privatization of state assets”—such that

“millions of private citizens entered the economic arena, resulting in a vast expansion of

traditional guanxi [that is, exchange of favors] networks and the corruption that often

accompanies them” (2002 188). Thus, the way to achieve success, whether as a nation in

international alliances or as individuals (even peasants), is to establish leverage within

informal networks. By contrast, it follows that contractual formality needed to define

boundaries and limits of transactions would require a rule of law to support proprietary

rights. Yet Hughes comments elsewhere that “without a clear concept of property rights

to define ownership, increasing autonomy simply allows economic actors to pursue their

own ends on a grander scale and with less risk of getting caught” (25).

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From an American business perspective, McGregor highlights the trepidations

foreign businesses confront in investing in China’s expanding markets. His chapter

“Same Bed, Different Dreams” relates how the China International Capital Corporation

(a government entity) adroitly positioned itself in a network of U.S. investment banks so

as to pit one prestigious firm (Morgan Stanley) against another (Goldman Sachs) to

maximize governmental control of the investment venture.6

But McGregor also characterizes the dark side of entrepreneurial networks absent

the protections of rule of law. In exercising rule by (as opposed to of) law, government

can apply existing laws against individuals (citizens, entrepreneurs, bureaucrats)

selectively to achieve particular purposes—in this regard, Hughes contends that the Party

relies on rule by law as its prime instrument of control (2002 187). If, as suggested above,

entrepreneurs need extensive networks for success, they compound their vulnerability to

arbitrarily imposed law in assuming the sum-total of individual vulnerabilities within

their network. Thus, authorities can work through the various individual parties to

implicate the individual target sought out.7 Thus, networks pave the road to economic

success, but they also loom as vehicles for demise within this authoritarian society.

Frederickson’s first axiom that associates corruption with points of transaction

between government and business certainly bears out in the Chinese context. Yet, the

vocabulary of “boundary” and “point of transaction” presupposes a definitive, legalistic

relationship—as an ethical ideal frequently breached—that is intentionally avoided

within some government-business relationships (particularly, those entrepreneurial in

nature) in the Chinese quest for finding niches that can leverage advantage. (Indeed,

Lucian Pye identifies the propensity “to shun legal considerations and instead stress

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ethical and moral principles” as a key cultural characteristic of Chinese negotiating—

1992 23). But, by comparison to the American context in which businesses tend to profit

from corrupt practices at the expense of government, the Chinese setting allows

government entities not only to engage businesses who seek entrée into expanding

markets but also to apply a rule by law that can tailor the venture to favor the interests of

government and/or bureaucratic entrepreneurs. As Pye indicates, Chinese negotiators

realize that “in horse trading, there’s always a loser” (1992 80). In effect, negotiation

within networks allows for extremely wide intersections between government and

business that make Frederickson’s first axiom all the more salient.

The second assumption put forth by Frederickson speaks to self-interest as the

driver of individual and (private) corporate behavior, an especially potent motivator in

the absence of democratic laws and norms as checks on that behavior.

Absent laws, rules, social conventions or social reciprocity, rational persons and

firms will act on the basis of self interest. Here I accept the rational, utilitarian

assumption and argue that it is democratic laws, rules, and social conventions

that cause or influence both individuals and firms to adjust or adapt self-

interested behavior in the direction of collective interests (2005 167).

In the American context, the inference here is that NPM initiatives that eliminate

procedural rules will maximize self-interest in the conduct of government operation while

sacrificing capability to facilitate public values, such as equity and due process. Yet, in

the PRC, institutional constraints on government are abjectly under-developed if they

exist at all. Some liberalists expect a “natural” evolution of a rule-of-law and other

democratic features to accmpany the emergence of a viable private sector in an emerging

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context (Monshipouri, 1997 237-242). Yet the supporting evidence for this claim,

particularly in the Chinese context, is contestable (see Pearson, 2002 130-155). U.S.

Supreme Court Justice Anthony Kennedy (speaking at the International Rule of Law

Conference in November, 20058) argues that a rule-of-law can only take root if regimes

take specific actions to institutionalize it. In conversation with Kennedy (at this

conference), Justice Stephen Breyer added that such institutionalization depends upon the

willingness of a regime and society to “take a gamble” that a rule-of-law will offer

significant societal benefits—presumably, that gamble would involve willingness to

surrender a considerable measure of governmental power. Hughes adds that the PRC’s

unwillingness to let go of rule by law impedes market liberalization policies called for by

WTO membership—“[needed regulatory] laws lack a sound supporting structure to

enforce them, because legal institutions and regulatory agencies are neither independent

or effective” (2002 196).

Nonetheless, Frederickson expresses his second axiom in terms that may

distinguish two cultural contexts in which government and business interact in a couple

different ways. First, his initial sentence aptly conveys that in the U.S. social norms must

be imposed to curb self-interest. Yet there are indications that in China self-interest and

collective wellbeing flow together as merging streams rather than opposing forces. As

especially evident in foreign affairs, the Chinese appear more adept working with

ambiguity than Americans to seek stable outcomes through collaboration among diverse

interests. Yet it is within the grist of such cooperative effort (common good) that strategic

opportunity to advance self-interest arises. Referring to the contemporary Sino-U.S.

relationship, Jisi relates: “As this complex dynamic suggests, trying to view the Chinese-

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U.S. relationship in traditional zero-sum terms is a mistake and will not guide policy

well: indeed, such a simplistic view may threaten both countries’ national interests.

Black- and-white analyses inevitably fail to capture the nuances of the situation” (2005

47). Thus, it has been suggested that PRC leaders chose to squelch their opposition to the

U.S. war on Iraq to gain strategic advantage in subsequent dealings with the Bush

Administration (Jisi, 2005, 42: Bergsten et al., 2006 141).

Applied to government and business, strategic opportunity steers the Chinese

toward joint ventures established on trust as a cooperative arrangement that can be

leveraged over time. In the context of working with U.S. business, PRC government

officials—perhaps due to China’s historic sense of vulnerability to outsiders—want to be

“understood” and respected by those with whom they deal (McGregor, 2005 85-91; also

San, 2005).

Second, Frederickson’s reference to utilitarianism as central to the necessary

adjustment of behavior toward collective interest warrants some comment. Connected to

reluctance toward contract is an aversion to the explicit instrumentality of terms,

stipulations, “strings,” and preconditions in governing cooperative relationships. In

foreign policy, there is evidence that China claims the moral high ground in claiming

lasting adherence to cooperative affairs in contrast to the U.S., viewed as acting through

the prism of current expediency, such as “fighting the war on terrorism” (Bergsten, et al.,

2006). Yet more generally, reform in various organization contexts—even within state-

owned enterprises—need not be rule-directed (Meyer et al., 2002 268-270). In fact, Xin

et al. suggest that goals of “accountability to society” and “national enterprise

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revitalization” are especially powerful in spurring on worker innovation in state

enterprises (2002 440).

This leads to an especially important third point—the business-government nexus

in China is better understood as symbiotic rather than dichotomous (as in the West).

Schoonover advises that the term “private firm” may mislead since it comprises various

hybrid forms of businesses representing different phases of evolutionary ownership and

corresponding government involvement (2006 300). In this sense, Tsui et al. refer to this

symbiosis as the “entrepreneur-bureaucracy connection,” wherein “the emerging private

economy was born out of and continues to live on business-official ties” (2006 8). Since

local entities typically grant corporate property rights (Li 2006 136-137), self-interests

flow both ways. “Private” entrepreneurs seek out local politicians to serve on corporate

boards in order to control local markets, thereby restricting competing entrants—on the

other hand, those officials could divert corporate assets or take bribes in return (Tsui et

al,. 2006 16; Chen et al., 2006 149).

Suffice it to say then that Frederickson’s second axiom indeed has relevance in

affairs of business and government in China. Clearly, entrepreneurs and politicians tend

to act rationally within calculated, symbiotic relationships as extensions of guanxi

(traditional social networks). Nonetheless, explicit controls (rules and contracts) to

counteract such self-interest (as often imposed in the West) may be viewed as

impediments to the strategic opportunities these connections promote.

In reference to China, the third assumption presented appears closely related to

the second. Frederickson lays out this axiom as follows:

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Under democratic conditions, government institutions are more public-regarding

than are either nongovernmental institutions or public firms. It follows, then, that

the values of justice, equality, and equity are greater in governmental institutions

than in nongovernmental institutions or private firms (2005 167).

“Public-regardingness” as an ethical abstraction can take on a number of

meanings in Chinese government, three of which are worth mentioning here. First, the

lowest rungs of the Communist Party (for example, the neighborhood committee) address

communitarian concern for the accomplishment of public tasks within the immediate

community—even though some might object to the nature of those tasks (e.g., limiting

family size) and the means of accomplishing them (e.g., forced sterilization—see

Johnson, 2004 195-196; Zhong, 2003 134-135). Second, democracy—especially as it

relates to NPM initiatives—could be taken as an intentional governmental responsiveness

to certain external groups or even individual citizens. Some forty ICPA papers spoke to

the innovation of e-government, particularly as it expedites the needs of new

entrepreneurs navigating their ways through the requisite regulatory hurdles.7 In reporting

on these process-oriented technologies, these scholars place a strong faith in information

technology as the key to improving the quality of governmental decisions—thereby

“rolling back the bounds on rationality” [their words in specific reference to Simon’s

work (for example, Tu et al., 475-485)]. And thirdly, with regard to morality and virtue in

government office, it can be said that the Chinese Communist Party has traditionally held

office-holders to stringent standards of personal conduct.8

“Public-regardingness” in government could then be understood in the contexts of

communitarian concern, responsiveness to “customers,” and official virtue. Yet suffice it

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to say that in the Chinese experience, it does not typically embrace those public service

values, revered in the U.S. public service, that are committed to procedural fairness and

benevolence for all—especially the marginalized and vulnerable in society. Nor does it

embrace a robust sense of external (legal and political) accountability in support of

citizen rights (Mao, 2005 1068-1069; also Hughes 2002 23-25).

Still, the first sentence of Frederickson’s third assumption—that “under

democratic conditions…government institutions are more public-regarding…”—raises

crucial speculative questions about the future of government bureaucracies should

China’s economic and social transformations succeed. Could these momentous

achievements lead to a stronger sense of public regardingness in government? If it is the

case that government officials stake a moral claim on the fruits of this new market

economy (or on the “emperor’s grain”—McGregor, 2005 96) yet face sanctions if their

deals turn sour, then this transformation reinforces private-regardingness as a pervasive

ethos in government and society. Yet interestingly, this egalitarian individualism to cash-

in on economic prosperity coexists with a strong sense of social accountability within

worker-organization relationship (as discussed above).

Finally, Frederickson concludes his discussion of “defining assumption” with a

last “prime” axiom, which states the following proposition:

Over time, for every increase in jurisdiction boundary-spanning transactions

there will be a corresponding increase in the probability of government

corruption (2005 167).

More than likely, this assertion will generally hold true as the private sector expands over

time in China. In comparative perspective, it appears significant that the PRC government

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takes the lead in widening boundary-spanning transactions in its preference for flexible

joint ventures (at least with foreign business) over clear-cut contractual terms. The irony

here is in the presumption that NPM-like reforms can counteract the tradition of endemic

corruption in government. Rather, a select body of elite bureaucrats, accountable for their

negotiating skills, seems to be replacing a bloated cadre whose advantage accrued merely

through their Party membership. Thus, it appears that economic reforms, although

perhaps reducing some endemic corruption, set the stage for external corruption in

expanding the government-business boundary to seek advantage through successful joint

ventures.

NPM Ingredients in a Modified Recipe

Clearly, the primary ingredients of the NPM recipe—cutting red tape, increased

privatization and contracting-out, and downsizing—can be found in the Chinese

adaptation as well. Nonetheless, the appeal for each of these initiatives needs to be

understood within the PRC experience, given defining assumptions (above) underlying

its governance that vary from those in the U.S.

Cutting Red Tape

As in the United States, the prospect of cutting red tape appeals to government

leaders and academics promoting entrepreneurism in the new China. Yet it is important to

identify the particular form of red tape impeding business as that having stemmed from

the multiplicity of overlapping bureaucratic authorities at various levels of Chinese

government. It is in this context that information technologies and government affairs

service centers (see note 9) are so highly touted as innovations that can eliminate red tape

(Zhang and Ruan, 2005). In the U.S., red tape of such a structural nature can be largely

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explained as institutional constraints limiting and decentraling government power. In the

PRC however, the dense and overlapping bureaucratic structure of government has

traditionally mirror-imaged the organizational composition of the Communist Party—in

such a manner that party members serving on particular programmatic committees can be

easily recruited into counterpart offices in government (see Zhong, 2003 57-62; 94-127).

Thus, it appears that cutting red tape in the PRC amounts to wrestling day-to-day

authority away from the old-Party apparatus to be placed in the hands of more

professionalized administrative core in government.

By contrast, the red tape that results from governmental obligations of due

process, fairness, compassion and protection—of which Frederickson speaks in reference

to the U.S. context—has been historically absent from Chinese governance. In fact, a

crude form of performance contracting (called the bao jia system) used first in the twelfth

century still provides a template for the local implementation of the central government’s

domestic policies (such as rural taxation). Very little red tape can be found in the bao jia

system—instead, central government officials hold their local agents accountable to

performance targets. Principals do not typically scrutinize the means by which town or

village officials fulfill those contracts (Zhong, 2003 21-22; 156-157), and local agents

could shirk (that is, lie or cheat) in how they account for their local circumstances. In the

current period of economic transformation, bao jia takes shape as a performance

discipline that holds business-savvy government officials accountable for their

effectiveness in negotiating entrepreneurial deals (see Pye, 1992 64-65).

It is ironic but understandable that the economic transformation that requires

cutting the red tape connected with bureaucratic overlap needs procedural red tape to

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support its new professional apparatus. Certainly, the various civil service acts of the

1990’s (adopted in an incremental fashion) facilitate a modern workforce that can

integrate information technology and attract entrepreneurial talent into its ranks (Wang,

2005; Worthley and Tsao, 2005). Not surprisingly, the Party has invoked similar

procedural rules for restructuring its cadre system “making cadre more revolutionary,

more educated, more professional, and younger,” presumably to maintain its influence on

government (Zhong, 2003 98) and to acquire sophistication in business finesse (Pye,

1992 64-65). In summary, it appears that China has traditionally lacked red tape

associated in the West with rule-of-law but has suffered from that resulting from the close

interface between the Communist Party and government. Although the Party now

depends on some red tape to guide professional development—as well as to phase-in of

new corporate property rights (discussed below), government officials tend either to steer

clear of red tape in negotiating joint venture arrangements with businesses or to use it

selectively to shape the course of privatization.

Privatization and Contracting Out

In the American NPM recipe, the privatization ingredient in large part accounts

for the ethical aroma of the dish—in essence, it focuses upon what Frederickson calls the

“point of transaction,” or the specifics of the “deal” between government and contractor.

This terminology makes good sense in the “buyer-seller” imagery deeply ingrained in the

American psyche and the long history of government contracting for capital projects

(such as buildings and roads) and defense weaponry (Frederickson, 2005 170). In the

Chinese experience, there is evidence that local government has used subcontracting as a

means of improving management in state enterprises for some time.11 Anthropologist

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Eugene Cooper describes the use of cheng bao contracts as the basis for such a practice

observed in a particular county, recounting that these contracts (with entrepreneurial

artisans) called for an explicit distribution of contractor profits due to local governments,

managers as bonuses, and reinvestment accounts (1998, 24-25 and 178). Cooper

understands these subcontracting practices as precursors to the current privatization thrust

of economic reform (discussed below as “creeping privatization”). Additionally, Doug

Gutherie characterizes the interaction between state enterprise managers and

entrepreneurs in terms of a shared commitment toward innovative risk-taking, whereby

governmental managers appear as assertive in advancing innovation as private

entrepreneurs (2002 178-164)—although respective leadership skills may vary (lower

among state managers; see Tsui et al., 2002 369).

In the American NPM experience, privatization typically allocates public

responsibilities to autonomous firms with long-standing property rights, such that the

contract sets the conditions for transactions between a governmental entity and

autonomous business. Walder indicates that such an arrangement is possible in China but

as the extreme of a continuum between full-scale privatization and traditional state

ownership. Various points in-between depict successive stages of “creeping

privatization” wherein government officials use management contracts as means to

allocate rights of asset control, income, and sale to firms in phases--hence the above

references to “phasing in” property rights (2006 322-326). Within a global perspective,

Walder shows the performance (in growth of real GDP between 1990 and 200l) of

China’s creeping privatization significantly outpacing transitional economies of Central

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Europe and Russia where market conversions were relatively sudden and immediate

(2006 312).

Associating the success of this phase-in strategy with the Communist Party’s

intended new role in macro-management (mentioned elsewhere), it follows that the

Party’s entrepreneurial elites will likely rely on similar contractual tools to exercise their

regulatory and re-distributional authorities as the economic and social transformation

progresses in the PRC.

“Downsizing”

What is in a word? That is the question that George Frederickson asks of

“downsizing” as an ingredient in the American recipe for NPM. Does it mean “cutting

out” public programs, agencies, and net jobs, or is it more a matter of “hiding” them in

the private and voluntary sectors via government contract? Reasoning that the latter more

accurately depicts the NPM reality in the U.S., Frederickson argues that hiding

bureaucracy does not necessarily reduce the number of people or programs in the public

sphere—and may in fact increase those numbers.

In the PRC, the Post-Mao reform experience has been presented as stories of

numbers—perhaps confusing and in dispute. Pointing to Zhu’s tenure as premier, one

account tells of “Zhu dramatically reducing the number of ineffective government

institutions (from 45 ministries to 35) and the number of government employees (from

100,000 to 60,000—Wang and Zhang, 2005 164 [no explanation of “ineffective”

provided]). Yet scholarly commentaries11 on administrative reform since Mao offer a

broader perspective that reveals oscillating patterns of bureaucratic shrinkage and

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expansion (both “downsizing” and “up-sizing”), generally reflective of the varying

political agendas of successive government leaders (see Lan, 2005; Shen et al, 2005).

In recent years, the word “downsizing” takes on specific meaning as load-shedding,

or the wholesale reduction of government (and Party) jobs. At least in part, the CSIS-IIE

Report characterizes downsizing as a response to China’s accumulating (although

perhaps implicit) fiscal obligation and contingent liability of various institutions (and in

particular, banks) at different levels of government (2006 31-33). Hughes portrays the

traditional role of banks as mere conduits through which government and Party leaders

have “pushed money” toward state enterprises—rather than as market-competitive

investment institutions. A causal chain between weak banks (not subject to government

audits [40]) and downsizing generally follows this path—government/Party directs funds

through bank loans to state enterprises, those enterprises lack capacity to repay loans,

government “bails out” state enterprises with subsequent “loans” (loans disappear “like

stones dropped in the sea”), and thus government engages in massive downsizing to

eliminate the staggering indebtedness from repetitive bailouts of state enterprises (see

Hughes, 2002 39-65). Financial reforms adopted since China’s entry into the WTO are

intended to make banking more market-competitive (see Fung and Liu, 2006; Liao,

2006).

From a values perspective, Party members can no longer expect their loyalties to be

rewarded by long careers. Beyond this, the downsizing of state-owned companies results

in substantial increases in unemployment and swelling of the urban labor supply (32).

Along with the accompanying curtailment of basic government services (such as pension

support, housing, and health services), these economic adversities account for citizen

21

unrest as manifested in recent demonstrations of citizen confrontations with

governmental authorities (Bergsten et al., 2006 41-42). The PRC faces a monumental

dilemma—it cannot continue its wholesale downsizing agenda for fear of the political

upheavals likely from shutting down “hundreds more” obsolete state enterprises.

Currently, the urban areas suffer from legions of redundant workers unemployed from

downsizing (Hughes, 2002 193-194).

The tradeoff for a more fiscally-sound PRC market against the losses of jobs and

services—as well as sharp increasing in inequality—has already provoked some thought

about the ethics of NPM in China (see Wang and Qin, 2005) and the necessity of a third

sector in Chinese governance (see Cao, 2005; also Cai, 2005 317-318). Wang and Qin

suggest that NPM-like efforts scaling back Party influence leaves an ideological, moral

void needing to be replaced by a value system compatible with the new public

management—how else might citizens enduring sacrifices be expected to bestow

legitimacy on this radically new approach to governance? (2005 1116-1118) And in his

related essay, Cao argues the need to “cultivate the third department of the society

[presumably the equivalent of a nonprofit or nongovernmental sector] to undertake the

service duties for the society disintegrated from the government [and] the effective way

to save the government and market out of the state of being out of work” (2005 401).

Along similar lines, Guo and Ai use the term “intermediary organization” as that “making

up the shortage from the government and the market,” suggesting that this third sector

needs to “activate” social power (2005 188-189 [no explanation given for how]).

The CSIS-IIE Report corroborates Cao’s and Guo and Ai’s appeal for a vibrant

voluntary sector to attend to the social welfare void resulting from the PRC’s

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abandonment of these functions (Bergsten et al., 2006 50). Although referring to a wide

spectrum of organizations, that report speaks to the growing number (2005 estimates in

excess of 8 million registered and unregistered) nongovernmental organizations in China:

“These growing numbers of social entrepreneurs are essential to China’s future not

simply because of they services they provide, but because they are forming the

foundation of a more vibrant civil society. While environmental NGOs were the

vanguards, other major areas of social entrepreneurship have opened up, including health,

legal aid, and rural development and poverty alleviation” (61-62).

Competent Contract Managers?

After reviewing the implications of NPM ingredients for American governance,

Frederickson asks “Are we training a cadre of government employees to be competent

contract managers?” (2005 175)—and then concludes that we are not. Implications about

such evaluative competency in the Chinese context draw upon three assertions raised

above. First, the Chinese Communist Party is reinventing itself as a core of business-

savvy, technologically adept elites, poised to macro-manage government toward its

economic, social, and political goals. Second, those elites involved in negotiating joint

ventures with private firms are held individually accountable for the successes and

failures of the deals they craft. And third, with regard to the wholesale downsizing of

state industries and governmental functions, recent accounts provide evidence that

government officials rely on managerial contracts and evaluation as means of holding

firms at various stages of “creeping privatization” accountable to a prescribed conversion

process.

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Assuming their new macro-management roles, the emerging core of Party

entrepreneurs take on dual roles as sophisticated negotiators in joint-venture deals and as

proficient contract managers. With regard to the latter, it is significant that they are

expected to perform proactively in shaping new private firms rather than simply

assuming a reactive posture in monitoring behavior against the terms of a full-blown

contract (more often the case in the U.S.). Based on comparative evidence of China’s

market conversion success thus far (Walder 2006), it appears that these new Party elites

are becoming proficient contract managers in directing the shift of state- to private-

ownership in particular firms. It also seems likely that the skillful macro-manager will

need to integrate this contract development proficiency within a broader array of

coordinative and regulatory competencies.

Conclusion

The thick context of issues, forces, and motives surrounding administrative

reforms casts some doubt as to whether the PRC government actually “borrowed” the

West’s “way to sharpen the knife” in reforming government. Indeed, Gaus’s framework

of particular ecological circumstance appears a bit more apt in examining linkages among

a driving economic motive, need to streamline the Party apparatus, high rates of foreign

investment, and the imperative to realign (and radically reduce) the roles of government.

Although it offers a less than perfect fit, Woodrow Wilson’s “sharpening the knife”

passage still invites an instructive comparison between outcomes of New Public

Management initiatives in the U.S. and administrative reforms supporting China’s drive

to achieve a global economic presence.

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In the U.S. setting, the NPM serves as a rubric for (politically conservative)

doctrines to stimulate the economy through expanding private participation, and

correspondingly reducing government’s direct role, in the provision of public services.13

For Frederickson, the NPM rubric essentially translates to a global public management

reform, advocated by the Organization for Economic Cooperation and Development, to

privatize state enterprises and reinvent government by emphasizing market competition.14

Yet in the American setting, there are few state enterprises to privatize in the first place,

so it has been argued that the net effect of NPM reforms has been to stretch government’s

responsibilities to meet public demands while constraining its administrative capacities

and resources (see Kettl, 2000 488). Yet generally, the observations discussed above

suggest nearly the opposite to be the case in China—NPM-like administrative reforms

have allowed the PRC government to abandon many of its critical public responsibilities

while strengthening the Party’s capacity to maintain its elite status in shaping governance

and even to benefit from the fruits of the global marketplace.

Clearly, China’s drive for great economic power status forces government to

confront the many political and social problems associated with a national imperative of

this magnitude. Yet it also has provided the stimuli for the Party to reinvent itself to

maintain its elite role at the macro-level coordinating market forces. From the Wilson

passage, it appears that governmental leaders have used administrative reform as a “way

to sharpen…” not only to facilitate economic and social transitions but also to assure a

significant presence for the Party in the future. Inclinations to dismiss the Party’s

reinvention efforts simply as rear-guard actions against the forces of market liberalization

and democratization would overlook a number of key issues raised in this inquiry, among

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them—the continuing reliance on rule by (not of) law as a controlling mechanism over

the market (and society); the competitive drive for status among a smaller, more

sophisticated elite cadre; the cultural strength of guanxi (relationship) as the basis for

social action; and the political resolve to control foreign direct investment in becoming a

strong global player. Thus, it appears that the PRC government has enlisted reform

techniques from New Public Management doctrines shaping policy in the U.S. (and

elsewhere15) without changing many of its authoritarian spots.

So how appealing is this Chinese adaptation of the NPM dish as compared to

more traditional fare? Keying in specifically on the ethical implications (as Frederickson

did), the differences may not be all that noticeable. Indeed, government priorities upon

leveraging joint business ventures invite greater external corruption in addition to historic

patterns of internal governmental abuse stemming from authoritarian power unchecked

by a rule of law. Yet from a broader governance standpoint, the difference in taste

becomes more detectable—some welcoming it as more satisfying while others finding it

bitter. The new cuisine appeals to those of an entrepreneurial bent (even among peasants)

intending to cash in on new business opportunities. The highly-educated and

technologically skilled benefit from career opportunities not available in the past16,

certainly not during Mao’s cultural revolution. On the other hand, PRC reforms have

been especially distasteful for segments of the urban population having lost jobs and

basic welfare services provided by the state and for farmers in the countryside

traditionally exploited by government. Both suffer from the sharply rising inequality

accompanying governmental reform and the lack of employment possibilities due to the

accumulation of surplus labor in urban centers—the reason why city authorities act to

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restrict entry into their jurisdictions. These aftertastes appear to be mobilizing citizen

discontent and unrest of critical proportion, such that the fate of the PRC’s economic and

social transitions may depend upon improving the recipe in the immediate future.

Notes

1. Some twenty delegates from the American Society for Public Administration (ASPA) attended the 2005 International Conference on Public Administration (co-sponsored by the Chinese Public Administration Society, ASPA, the School of Public Administration of Moscow State University, The University of Electronic Science and Technology of China, and the Chinese Public Administration Journal) in Chengdu, China, October 21-22, 2005. A published proceeding from that conference (that includes the 191 papers delivered there) offers a modest but informative set of commentaries about NPM-like initiatives prepared by Chinese scholars.

2. Zheng adds that national policies affecting this ambitious transformation address three fundamental strategies (or “three transformations”): The first of these transformations pursues a new form of industrialization “based on technology, economic efficiency, low consumption of natural resources relative to the size of population, low environmental pollution, and the optimal allocation of human resources…to build a society of thrift” (22). The second is to emerge as a great power through visibly peaceful means instead of an aggressive nation vying for global domination (22). And third, the PRC intends to transcend its pervasive pattern of social control “to construct a harmonious socialist society” (22).

3. It is noteworthy that Kenneth Foster (2005) speaks—in a tone reminiscent of Daniel Elazar’s classic work on American federalism (1974)—of democratization as a grass-roots phenomenon sparked by municipal experimentation in governance.

4. In analyzing the Chinese setting, Stephen Ma reveals an historically endemic, pervasive kleptocracy that is “entrepreneurial” in so far as it has enabled government personnel with exclusive entrée to office by virtue of their Communist Party membership (2001 141-147). Against this backdrop, Ma devotes most of his commentary to Deng Xiaoping’s post-Mao reforms that link modernization to reforming the administrative structure, especially those institutionalizing a civil service.

5. The Center for Strategic and International Studies (CSIS) and Institute for International Economics (IIE) are nonprofit, bi-(or non-)partisan policy research organizations that jointly sponsored Bergsten et al., China: The Balance Sheet (2006).

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6. In essence, the Chinese proverb “Two people sleeping in the same bed but having different dreams” refers to the goal misalignment and divergent interests—not simply as contractual (principal-agent) problems but as logical outcomes of a cultural preference to find advantage within fluid relationships. McGregor’s chapter here speaks not only to a cultural preference for fluid networks of relationship, but also to the PRC’s immediate need to check its dependence on multi-national corporations given its steep foreign direct investment (see Zhang, 2006 23-35),

7. In this regard, McGregor relates how Premier Rhongi, gaining office through a pledge to crack down on smuggling, set authorities in motion to trap a well-known entrepreneur—one who as a peasant began his fortune as a cigarette smuggler—in order to “send a message” of making good on the political promise. Police apprehended family members and other individuals in Lai Changxing’s network who had in some way partaken of “the emperor’s grain” (and were at least marginally guilty) to get to Lai—despite his escape to Canada to seek political refugee status (2005 94-125).

8. The International Rule of Law Symposium, sponsored by the American Bar Association, was held in Washington, D.C. in November of 2005. Specifically, three U.S. Supreme Justices (Kennedy, O’Connor, and Breyer) spoke at the symposium session “The Role of the Judiciary in Promoting the Rule of Law”—access http://www.pqhp.com/aba-ceeli-05/.

9. Such an interpretation of emerging democracy is embodied in the creation of “government affairs service centers,” local government buildings that are streamlined as “one-stop-shops” (adapted from the Thatcherite model in Britain) as a convenient means for citizens to interface with government (Zhang and Ruan, 2005). On a similar note, Zhang and Yi advocate for the diffusion of what they call “government process reengineering,” or digital government (2005 168-176). Citizen satisfaction is often mentioned as a priority in the current scholarship (for example, Guo and Ai, 2005; Guo et al., 2005).

10. Zhong relates how virtue serves as a major criterion in evaluating job performance: ”Virtue refers to one’s political loyalty to the Communist Party. Specifically, local cadres are required to closely identify with central Party and government policies and positions, and faithfully carry out central government policy in both word and action. Virtue also includes one’s clean official behavior (i.e., free from corruption) and one’s private lifestyle” (e.g., free from adultery; 2003 113-114).

11. Historically within government, buyer-seller (or principal-agent) relationships have traditionally taken on meaning with regard to interactions between officials at different levels of government. In a unitary system, one might well expect highly structured accountability relationships in the way officials answer to their counterparts at higher levels of government. Yet hierarchical accountability has

28

borne the strains of governing in such a vast and diverse domain. Given geographic distance and cultural variation, the buyer-seller (transactional) reference in agency theory takes on meaning, especially in the context of implementing central government policies in remote areas. With tongue-in-cheek, one could dispute claims about the NPM as “cutting-edge” by linking it back to the twelfth century when the Northern and Southern Song dynasties introduced bao-jia as a performance system to keep their military agents honest in thwarting opposition forces in the hinterlands (Zhong, 2003 20-21).

12. For example Lan’s commentary on “administrative reform” includes (among others) the following explanations related to the size of bureaucracy: (A) Between 1977 and 1981, many of China’s veteran bureaucrats who had been pushed aside during the “Great Cultural Revolution had their positions restored. In 1978, the State Council alone housed forty-eight administrative units…By 1981, it was expanded to 100 ministerial-level units (6). (B) In March1982, [the standing committee of the Fifth People’s Congress approved reforms] aimed at (1) clarifying the job responsibilities of various units and personnel, (2) selected talented and competent leaders (revolutionary, young, knowledgeable, and specialized), (3) establishing a systematic retirement system for the veterans, (4) strengthening cadre training, and (5) reducing the ministerial cabinet department from 100 to 61 (6). (C) On March 10, 1998, [the Ninth People’s Congress approved the plan] to streamline the central government’s bureaucracy by cutting cabinet ministries from forty to twenty-nine, to reduce the size of the civil service, and to change some of the major functions of the government (8). And (D) The trajectory of China’s administrative reforms shows that China has traveled a torturous and difficult road during the past fifty years. Its reform practices have always been top-down. They have often repeated a cycle of downsizing, expansion, downsizing again, and expanding again. These reforms kept China’s system of governance as well and its economy alive. China’s bureaucracy has proven to be extremely buoyant (8).

13. Specifically, Shafritz and Russell characterize NPM as a rubric of “the romance of managerialism”—with managerial heroes to “slay the dragons of self-serving unions and inefficient bureaucracy”—embraced by right-of-center interests (2003 258-270).

14. See Frederickson’s reasoning here in Frederickson and Smith (2003 110-114; 214-219).

15. NPM reforms have reshaped governance in Western European nations, as well as in New Zealand and Australia.

16. John, a twenty-some year-old college student—a marketing major—served as tour guide for the author’s 2005 visit to the Great Wall. When asked what he thought of ‘democracy’ and the 1989 Tiananmen Square massacre in particular, he responded as follows (paraphrased): “The West makes a much bigger deal of

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Tiananmen than it actually was. Democracy is a good thing, but what is more important for our country now is stability so that we can prosper in the future.”

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