How Academic Research Contributes to China's Decision-Making

“Thoughts on scholarship based on experience in govt work” - Jiang Xiaojuan's reflections.

Today’s Pekingnology features a part of the《江小涓学术自传》Academic Autobiography of Jiang Xiaojuan (Mandarin, JD.com), sharing her thoughts on the role of academic research in China’s policy-making.

江小涓, Jiang Xiaojuan, is a scholar turned Chinese official who served as 副主任Deputy Director (2004-2011), 国务院研究室 Research Office of the State Council, and then 副秘书长 Deputy Secretary-General (2011-2018), 国务院 State Council, two ministerial roles at the Chinese government cabinet.

She is currently a vice-chairman of a committee of the 13th National People’s Congress and a member of the Standing Committee of the 13th NPC.

Pekingnology published the translation of one part of her book on June 27, 2021, sharing her thoughts on foreign investment, accession to the WTO, and industrial policy.

On Oct. 31, 2021, Pekingnology published the translation of Jiang’s article Overcoming the Baumol Effect with Digital Technology, her explanation of the Baumol Effect which was mentioned by Vice Premier Liu He a short while ago.

Pekingnology thanks Jiang for agreeing for her writing to be translated and published here.

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In 2004, I was transferred to the 国务院研究室 Research Office of the State Council as 副主任 Deputy Director. When I left the Chinese Academy of Social Sciences to take up my new post, I went to ask an old leader of the Academy for advice on how to do my new job well.

He saw my hesitant look. He not only did not encourage me but also said, in a serious manner, to me "you can not see the new position as a stage to show your theoretical knowledge. You go there to serve the State Council and the Party Central Committee. Put away your ideas; look, listen, learn, and understand in a serious and humble manner."

This reminder has a considerable impact on correcting my attitude toward my new position, and should be described as my "first lesson in the job".

In 2011, I was transferred to the post of 副秘书长 Deputy Secretary-General of the State Council. Administrative work experience is not the focus of this book [Academic Autobiography of Jiang Xiaojuan in Mandarin], and I am not sure what I can and cannot talk about. Therefore, I would like to talk about some experiences and insights related to academic research.

1. The will and resolution of the top leadership are very important

There are not many important decisions that are fully agreed upon by all parties, and (the parties on) many issues cannot be persuaded by theories and ideas, so the top leadership has to decide after fully listening to the opinions of all parties. I know very little about the decision-making process in the earlier days of the reform and opening up, but without a high-level decision, it would be difficult to break through the barriers of ideas and interests or to bear the costs of reform.

In recent years, for example, environmental protection measures have been very strong. Bad environmental incidents have been taking place, and, as reflected in public opinion, all sides have problems with the environmental damages and there is an urgent demand to speed up oversight of the environment.

But when it comes to real action, there are many concerns and questions, such as the impact on economic growth, (unduly) increasing investment, and the excessive undertaking of international responsibility. Each of these arguments has its own reasoning and position. The reasoning can still be discussed, but the position is not easy to change, and reasoning does not solve the differences. Moreover, the scholars' views are not consistent, and their premises and conclusions are not the same.

One side argues that strict environmental protection measures are neither economically nor socially equitable. The logic of affecting economic benefits is well understood, and the logic of affecting social equity is that the rich are concerned about the quality of life, while the poor need more income, so environmental protection favors the demands of the rich.

On the other side of the argument, the rich have ways to protect themselves, such as drinking only bottled water, eating only imported food, or even moving to other countries, while the poor have to suffer the consequences of pollution.

In the end, it was not the unified understanding of the parties in the controversy, but the determination of the highest level that went on to solve the serious environmental pollution problem and came to the judgment that “绿水青山就是金山银山” "lucid waters and lush mountains are invaluable assets", which led to the introduction and effective implementation of strict environmental protection measures.

In recent years, for example, the government has promoted departments and regions to “简政放权、放管结合、优化服务”（简称放管服）” streamline administration and delegate power, improve regulation, and upgrade services.” But most of the power-holders of the authority to grant approvals believe that there is a reason for their existence, and the “letting go”/hands-off approach will create new problems.

However, the top leader(s) believe that the government has too much control and improper management, which has reduced the motivation and capacity of market entities, which is the prominent problem and the principal contradiction at present. The top leader(s) resolutely promoted the reform so the situation has changed significantly.

2. Pilot/Experimental program is an important way to promote reform in China, and it is also a characteristic of China's public policy and management

In China's 40-year reform and opening-up process, pilot projects have played an important role. In addition to the basic concept of "respecting local and grassroots experience, wisdom and originality," there are several reasons for this emphasis on pilots.

First, the effect of the implementation of a new system or policy is not yet visible, hence the need to conduct small-scale field tests to observe the effectiveness and improve the (potential) reform program. Most of the pilots fall into this category.

Second, a piloting program shows that the matter is only on a small-scale trial, leaving room for advancement and retreat. That makes it easy to reach a compromise with those who hold different views. [Pekingnology: translate, opposing views.]

Third, it allows regions to promote reform based on local conditions. With wide disparities in local conditions and their different stages in development and relevant work, some policies may not be suitable for all places or cannot be started at the same time, so they are piloted in different batches and phases.

For example, the 高考 college entrance examination reform in recent years requires a solid foundation and educational layout locally, so we let the willing provinces and cities pilot/experiment in the first batch.

Fourth, some though very few pilots are in fact stalling tactics by some departments. That happens when there is a strong call for reforms, and the pressure to reform is big from above the departments, so they would initiate “pilots” to relieve the pressure, and then depending on the situation decide on the follow-up moves.

Fifth, still at the department level, there are some though very few pilots which are in fact a way to set "rent-seeking". This kind of pilot often includes built-in preferential policies or the implementation of the pilot would reflect well politically. (Crucially) The department has the power to grant the pilots (to which regions). And then some regions will come and “seek rent.”

I’ll forgo the examples for the two last scenarios.

To summarize, pilots (enable us to)accumulate experience, test the effect, break through the barriers, or relieve pressure. They are an effective way to promote reform. There are some problems with the pilots, but so far not mainstream.

In recent years, the government has made great efforts to promote ”streamline administration and delegate power, improve regulation, and upgrade services.”, and the power of the departments has been reduced a lot. Very few departments seem to begin to show signs of set "rent-seeking" through the pilots, and I hope that this will not become a trend.

The pilots are so important in China's reform process, but scholars have done relatively little analysis of them. From a theoretical perspective, the fact that pilots work well does not lead to the conclusion that they will work equally well when implemented on a large scale.

For example, moving from a local pilot to a nationwide rollout is a classic market equilibrium problem. A small-scale pilot changes only the local equilibrium and does not change the nature of the market as a whole, and market prices can be considered constant. But the full-scale implementation will certainly lead to changes in the overall equilibrium, which will affect the market price or factor supply equilibrium and produce different results from those in the small-scale pilot.

For example, when a small-scale PPP project is piloted, the project is more manageable due to the fine management and attention. But when the pilot is rolled out on a large scale, there is a risk of corruption, etc. I had thought there should be a lot of research on the "evaluation of differences between effects from pilots and scaling up", but in fact, I could rarely find such literature.

3. The opinions of academics have relatively strong power in aiding decision-making

When most scholars have definite opinions, policymakers tend to listen and treat them seriously. I remember that in 1999 when the document on the reform of state-owned enterprises was drafted for the Fourth Plenary Session of the 15th Central Committee, hundreds of research reports, opinions, and suggestions were written by research institutions and individual scholars for the drafting group, and the vast majority of them agreed that there must be substantial progress in reforming the state-owned economy and that it should not compete with other types of enterprises in general industries. This "opinion package" had an important impact on the decision to reform.

In addition, there are rare and highly specialized situations in which the relevant authorities feel less certain about the state of affairs and the consequences of particular dispositions, and in which the well-researched professional advice of scholars can play an important role.

For example, there was a time when a certain form of academic integrity problem became a major issue in the domestic academic community and caused bad publicity internationally. However, the nature and extent of the problem were not easy to judge, and the relevant departments have not come to a conclusion for a while, and there are even signs of "letting it go". Professor 薛澜 Xue Lan of Tsinghua University made an in-depth analysis of the problem and opined that it needed to be dealt with seriously, and made suggestions, which effectively promoted the relevant work.

Another situation is that when there was a high demand from various parties to formulate some kind of unrealistic and unsustainable welfare policy, economists sometimes raise questions, and such opinions tend to be taken seriously and accepted by policymakers.

In recent years, with the increase in information disclosure and the increase of channels for the public to express their opinions after the popularization of the Internet, the opinions of scholars are often criticized and challenged. For example, in the process of the health care reform, many experts in economics and sociology were criticized for lacking compassion for patients when they disagreed with the opinion that the basic level of coverage should be set high and that the reimbursement rate should be raised too high.

Now there seems to be a tendency for experts to be more cautious and subtle in expressing their views, or to use "both sides" to balance them. I remember an important issue on which several experts had clear opinions, but when they spoke publicly, they all talked about "both sides".

So I asked them.

我问他们的意见是“既要……，也要……”，还是“既要……，还要……”，或者是“既要……，更要……”，他们想了想说是“既要……，更要……”，由此表达了他们的倾向性。

I asked them when they said “A and B”, did they mean an equal emphasis on A and B, an emphasis on A, or an emphasis on B? They thought about it and told me they meant an emphasis on B, thus expressing their preference.

However, it seems that our scholars have done less research on the effects of reform proposals or policies. Yet such research is much needed. Having identified policy goals, one needs to test whether the multiple goals are compatible with each other or whether the means to achieve them are appropriate and sufficient, etc.

[Pekingnology: It’s become increasingly apparent that some policies now demand not only A, but also B, and C as well, even if A, B, and C are not always easily compatible, if not outright contradictory.]

I remember around 2004, Mr. 刘遵义 Lawrence Juen-yee Lau published a paper in the journal 《比较》Comparative Studies on the financing and sustainability of different plans of social security reform, with rather detailed calculations and data. I happened to be drafting a document at the time that had a social security component, and I showed Mr. Lau’s paper to a leader, who lamented that it would be nice if there were more studies of this kind and that we all knew that we should build a social security system, but it would not be responsible to start pushing it without clear accounting.

During my tenure as 副秘书长 Deputy Secretary-General of the 国务院 State Council, I have been inspired by the results of many academic studies in connection with education, science and technology, and health care reform. However, on the whole, there was more reasoning and less detailed calculations. This situation largely (negatively) affected the acceptance and usefulness of their ideas.

There is also a situation where scholars put forward some major proposals that are relatively "thorough" and "fundamental", with a thorough understanding of the issues and correct thinking and reasoning. However, policymakers would also like to see an analysis of the problems that may be encountered in implementation and an assessment of the costs of implementation, so that they can prioritize their measures.

For example, some scholars now criticize the Chinese government's efforts to bail out enterprises after the 2018 international financial crisis, which prevented the market from playing its role in eliminating excess capacity and problematic enterprises, leading to big problems later.

However, at that time, many governments behaved similarly. There was cooperation between countries, but it was more of a contest. There were both "beggar-thy-neighbor" and "build a dam for oneself", and huge amounts of money were invested to prevent their domestic industries from being affected, leading to a global monetary easing.

Everyone knew that this would be problematic, but they all wanted to keep their own companies alive while other countries' companies fell first. When there is a huge debt chain between enterprises and banks, governments were bound to worry about domino-like problems, and inevitably let the "invisible hand" and the "visible hand" swing together. Scholars at the time and later put forward many proposals but there were’’t many complete, calculated, operational proposals that would avoid the worst-case scenario.

There are, of course, many examples of experts who had reasoned well enough to make a significant or even decisive impact.

4. It is not easy to determine whether government intervention is reasonable

Market economy and opening to the outside world are the sources of our 40 years of prosperity. Our economy and society continue to develop at a high rate. And when it goes fast, it is easy to be unstable. So the need for regulation is stronger than in countries with stable development. Local governments, especially under the pressure of a GDP-based competition, have both the drive and ability to intervene inappropriately in businesses and empower them to enter the market and enhance their competitiveness.

Even Alibaba, Tencent, and Baidu, the giant companies of today, received much support from local governments in the early stages of their growth.

The position and views of foreign-invested companies are interesting, as they have long received more tangible and intangible care from local governments, which they did not accuse of being inconsistent with market rules at the time. In recent years, when we emphasized equal treatment for domestic and foreign investors, some foreign investors complained about the deterioration of China's investment environment.

In private, I think the things they have to follow the procedures to get done today were what they used to get done by directly "going to the mayor". Although the investment environment needs to be further improved, there is nothing wrong with this principle of equal treatment for domestic and foreign investors.

Over the past few decades, the situation has changed rapidly, and the "bad" policies that people later criticized are often the "good" policies that have had implemented for too long. So in principle, it is right to say that government intervention should be reasonable. But in dealing with each specific issue, sometimes the line is not clear.

Another thing that struck me was that in 2009, the Party’s Department of Organization (Pekingnology: in a way, the Party’s HR department) organized a training group for cadres to receive two months of training at Tsinghua University's School of Public Administration and Harvard University's Kennedy School of Government, and I was the head of the class.

During my time at Harvard, crisis management and emergency management was a major course, with case studies as the main focus. After a teacher explained several cases in the first class and started discussing them, a Party Secretary of a Chinese city came on stage and said, "There are so many types of crises, your set is too complicated and usually focused on one thing but missed so many others. We do things in a simple way. As long as the Secretary is there, they find whoever should be found, tell whoever is responsible to go address the situation, and mobilize whatever resources needed. A plan is just a baseline. There are too many issues to be handled accordingly on the spot." The Secretary also spoke of an example in their own city. Once this started, the Chinese Part Secretaries and Mayors took to the stage to tell their stories. The class got very lively, and even the teacher found it very interesting, calling the teaching assistant to listen together. They found that China has another set of institutions and mechanisms, which sometimes work quite well.

Later, one of the Party Secretaries told me proudly that the class turned out very useful. After he came back to China, he once gave a "very theoretical" talk on emergency management at a conference, and everyone praised him for his "Harvard" level.

I was reminded of Ronald Coase's comment that he had been a civil servant for a while, and his boss never accepted his advice, but he still persevered, because he believed that when people asked his boss to give instructions, his boss must need to say something different, and would remember what he said. It turned out to be true.