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What Tianjin Means to China's Political Reform
August 31, 2015
The
recent explosions illustrate the need for -- and difficulty of --
complying with safety and environmental regulations, particularly at a
time of economic transition.
Forecast
- Following the Tianjin explosions, Chinese authorities will intensify efforts to make local officials comply with environmental and work-safety regulations.
- Slowing economic growth, falling profits, and local officials' strong incentive to maintain high employment will stymie efforts to enforce regulations that will raise costs.
- In the years to come, China's leaders will struggle to improve governance while maintaining economic and employment stability.
Analysis
The chemical explosions at a warehouse in Tianjin on Aug. 12,
which left well over 100 dead, at least 700 injured and an additional
70 missing, were tragic but not unprecedented. Less than three months
ago, 434 people died when a cruise ship capsized on the Yangtze River.
In 2011, 40 people died and another 192 were injured when two high-speed
trains collided on a bridge near Wenzhou. And these are only two of the
more prominent recent incidents. According to official statistics, 931
people died in coal mine accidents in 2014, and each year smaller-scale
industrial disasters across China lead to thousands of deaths.
In
a country as complex and prone to industrial accidents as China, it is
sometimes difficult to grasp the greater significance of events like the
Aug. 12 explosions in Tianjin. The explosions were not exceptionally
large or deadly. Neither are they likely to upset China's social and
political status quo. Certainly, they alone will not alter China's
economic trajectory. The question is how and to what extent they relate
to the broader narrative of China's geopolitical evolution.
The Struggle for Compliance
To
understand the significance of the Tianjin blasts, as well as the
numerous large- and small-scale industrial accidents that preceded them,
it is helpful to place them in the context of the Chinese government's
struggle to improve local officials' compliance with and enforcement of
laws and regulations. This struggle reaches back deep into Chinese
political history. One of the perennial difficulties of Chinese rulers
has been to exercise control over regions whose interests often diverge from those of the center and to directly shape the policies of those regions. The country's inherently fragmented
regional geography, culture, politics and economy, in turn, define this
divergence. The more the center's will contrasts with local interests,
the more difficult it is to ensure local officials comply with laws.
It
is no coincidence that the explosions in Tianjin were caused by
undertrained firefighters that were unaware that the warehouse on fire
stored hazardous chemicals that react to water. It is no coincidence
that the warehouse's location was in illegal proximity to residential
areas, multiplying the damage and casualty count. Nor is it a
coincidence that the warehouse had operated for nearly a year without a
proper license to house hazardous materials — or that a state-owned
enterprise executive and the son of a former police official own the
company that controlled the warehouse. Non-compliance with central
government regulations, often with help from participating or permissive
local officials have caused most of the recent man-made disasters in
China. The Yangtze River cruise shipwreck was in many ways the logical
outcome of a largely unregulated industry beset by continuous
price-cutting pressures, just as shoddy construction of schools and
other public buildings (not in compliance with government requirements)
dramatically increased the death toll from the 2008 Sichuan earthquake.
In
these and many similar cases, failures in enforcing safety,
environmental and other regulations had tragic — and potentially
socially and politically destabilizing — consequences. In almost all
cases, local businesses, supported by local governments, avoided
complying with rules to cut costs. For local government officials
accustomed to working in an institutional and political structure that
rewards economic growth above all else, reluctance to enforce
regulations that would raise costs for local businesses and hurt local
economies is natural. This is especially the case now, as growth slows
and profit margins decline nationwide. The central government may
embrace environmental protection and improved work safety as goals, but
it is much more difficult for local governments responsible for ensuring
economic stability and high employment rates to meet those goals.
Yet
it is China's economic slowdown that makes compliance with
environmental, safety and other regulations politically crucial now.
This slowdown is a symptom of Beijing's attempt to move away from an
unsustainable economy driven by state-led investment and low-cost
exports and toward an economy grounded in strong domestic consumption. As
the pace of China's economic growth begins to slacken, its government
will be forced to deliver on the promise of ever-rising material
prosperity that has undergirded social stability and political
legitimacy in post-Mao China.
In
the short term, Beijing can use stopgap measures like the
anti-corruption campaign and nationalist or anti-foreign propaganda (not
to mention old-fashioned coercion) to mobilize public support and
manage large-scale social unrest. But ultimately, to preserve the
central government's security and legitimacy, it must develop new foundations on which to stake that legitimacy.
The Importance of Reform
To
promote robust domestic consumption, high value-added manufacturing and
high-end services industries, these new foundations will require
reforms already standard in most advanced industrial economies: stronger
protections for private property; improved social, health and
educational services for China's large and growing urban middle class;
and a generally higher quality of life. Cleaner air and water, safer
workplaces and higher-quality infrastructure are all important
components of a better life. In short, achieving China's long-term
reform goals (and thus long-term political stability) will require
better government. China will need more efficient provision of public
goods, more effective enforcement of regulations, more transparently
fair adjudication of civil disputes and the like.
None
of these conflict with Beijing's pledged reforms and are in fact
critical to President Xi Jinping's agenda. Beijing is aware of the
long-term economic, social and political benefits of effective and
impersonal administration, as well as the risks that come with poor
governance of a distrusting public in a weakening economy. Numerous
pledges to improve the rule of law, fight environmental degradation,
expand the social safety net and promote private property rights attest
to that. But as the Tianjin explosions show, the gap between central
government ambitions and actual enforcement in many localities is still
wide. And as growth slows and falling profit margins make compliance
with costly regulations more difficult for local businesses and
officials, that gap will likely grow too.
Xi
has called for including environmental protection among the metrics by
which local officials are evaluated for promotion — a move that could
improve local compliance with environmental laws by incentivizing
protection rather than economic growth and employment. But to be
effective, the measure probably will need to be combined with other,
more difficult reforms, such as changes to the fiscal relationship between local and central governments.
Localities rely on land sales to cover their costs, as local
governments account for upward of 85 percent of all government
expenditures but take home roughly half of all tax receipts. Reforms
would relieve this reliance. Measures must also be combined with
concerted, systematic efforts to change the culture of China's civil
bureaucratic institutions. The process likely will entail not only
increased costs, such as higher salaries for public officials to reduce
the need to accept bribes, but also changes to the education system and
beyond.
For
China's leaders, the stakes for improving the country's administrative
institutions are high. With growth slowing but public demands for better
governance rising, both the need to better enforce new regulations and
the difficulty of doing so will rise in the years to come.
Simultaneously, economic weakness and rising real unemployment or
underemployment will force local and central governments to sustain
social and political stability through other means. If the core question
for China in the past 20 years was economic, in the next five to 10
years it will be political: whether or not China's political
institutions can adapt to the country's evolving social and economic
situations effectively and efficiently enough to prevent a breakdown in
public support for the Communist Party government.
Tianjin,
though a relatively minor event in the grand scheme of things, does not
bode well for the government's success. Certainly improvements have
been made. Chinese state-run media have covered the Tianjin explosions
with a degree of transparency, partly a result of the anti-corruption
campaign, not seen in coverage of the 2011 Wenzhou train wreck. But as
China's leaders slowly introduce measures to improve government
responsiveness to public needs, local government will resist them to
maintain the soundness of the Chinese economy.