How to restrain the power of local governments?

On the Third Plenary Session of the 18th CPC Central Committee, the next step reforms have been deployed in detail, but the reforms of the economic system and policy improvements finally can not be separated from the reforms of the governance mechanism of the government. We may say that the current major problems of China’s economy are all closely related to the unrestrained powers of local governments. If making a breakthrough to some extent is intended to be realized for future economic reforms, the premise is that the power of local governments should be under restrictions. This needs the respect for rights of civil society, the reinforcement of civil society on the supervision on the government so as to promote the political system reforms.

In a unitary system, if the government dominates above other all social organizations and citizens, its powers are not restricted by judicature, then the rights of citizens and other social organizations must be violated, and if things continue this way, social dissatisfaction will accumulate in a large amount. Only relying on the personnel appointments by the central government from top to bottom is not enough for effectively restraining local governments.

1、Under current China, the independent judicatureshould firstly be considered.

The basic thinking is that at the level of the central government, the supreme leadership of the Party on judicature should be insisted; at the level of local governments, the judicial system that is independent to local Party committees and local governments should be established step by step with grading. For courts at various levels, they can only be restrained by the superior courts in the aspects of personnel affairs and finance etc., and for daily judicial operation, it should be completed independently. The procuratorate system still should be led by local Party committees and governments, but it should return to the role of public prosecutor, in front of courts, its judicial status should be equal to other organizations and citizens. Because the Supreme Judicial Court still obey the leadership of the Party, such a reform will not be harmful for the leadership of the Party, but at the same time, restraints can be enhanced on local governments from the judicial point of view. Only when the government and citizens are all restrained by the same legal system, can “the rule by law” be really implemented.

2、Secondly, legal control should be strengthened.

The so-called legal control refers to bringing the behaviors of local governments into legal frame with means of legislation and law enforcement. For example, the Law of Land Administration has provided the standards for land management behaviors of local governments. Naturally, it requires that reforms should be carried out for China’s legislative procedure and legislative institution.

3、Besides, fiscal restraint should also be carriedout for local governments, letting them be responsible for their own economicbehaviors.

This requires reassigning fiscal revenues and expenditures between the central government and local governments. Viewing globally, powers are tending to shifting from central government to local governments, reflecting the natural advantages of information and incentive system for local governments in handling local affairs, and it is in tune with the trend of democratization. Currently, China’s central government undertakes a few fiscal expenditures: even if including the transfer payment, the percentage of the central government spending occupying the governmental total expenditure is only around 15%, far lower than the average level of other countries in the world. Except foreign affairs and national defense, other functions should also be undertaken by the central government, for example, the governance of cross-basin big rivers, food safety, trans-regional economic disputes, social insurance, statistics, education, monetary policies and financial supervision etc..

After reducing the expenditure responsibility of local governments, local government debts should be extended and gradually securitized. For the sources of government borrowing, it should be regulated the proportions of direct and indirect financing. Therefore, from the legal perspective, local governments should be allowed to issue bonds. Furthermore, banks should responsible for their lending to local governments, and should bear the related loss in the process of local government debt extension. To avoiding the potential financial risks led by such a measure, the relevant authorities should take good supervision for aspects of capital adequacy ratio etc.

4、The governance structure of local governments alsoneeds to be reformed.

The principles of “the accountability for decision-making, the performance for execution, the civilian supervision and information openness” should be followed. Accordingly, the large ministry reforms also need to be carried out for the central government.

5、Supervision from civil society is very important.

Civil supervision can most effectively help the central government to supervise local governments. Therefore, the management on civil associations should be properly relaxed, allowing the establishing of more social organizations; the management measurement for media should be properly relaxed, allowing the media to express opinions freely; all departments of local governments should open performance data, and the promotion of local officials should be related to the assessments of local citizens instead of GDP data. For example, the independent market research companies can collect satisfaction data of residents as an important basis for governmental performance assessments.

6、Reforms should also be carried out for the systemof National People’s Congress.

National People’s Congress members who possess the politics ability with professionalism and independence should be strived to be cultivated. Of course, the premise is that the openness and transparency of relevant governmental information should be opened as far as possible.

Published on the 12th issue of 2013 of China Reform | 2013-12-1