Highlights

This Round of Reform of the State-Owned Enterprises Is a Total Failure
    
Originally published by China_Review: http://www.china-review.com/eat.asp?id=36388

Translated by MA Junjie, Researcher, Unirule Institute of Economics

    
The Central Committee of the Communist Party of China and the State Council issued Directive Suggestions on Deepening the Reform of State Owned Enterprises. A new round adjustments is looming upon the biggest employer group in China, the state owned enterprises.
   
Professor SHENG Hong, famous economist and Director of Unirule Institute of Economics, has been advocating for second reform of state owned enterprises(SOE) since 2010. He pinpointed the main problems of Chinese SOEs, such as monopolistic market status, profit handover, and cronyism. Recently, China_Review interviewed him on the new round of SOE reform.

True Reform should Break the SOE Monopoly
   

China_Review: Now that the second round of SOE reform has been announced, what’s your take on it since you’ve been advocating SOE reform since 2010?
   
SHENG Hong: In the last SOE reform, the main focus was for governments to loosen control and let SOEs to keep part of the profit. In the past, SOEs were under heavy constraints. Such a reform stimulated the incentives of SOE executives and staff. But now the situations has changed: SOEs are out of control, and they have not handed over profit to the government for many years. On the contrary, SOEs are deciding how to use the profit that’s supposed to be handed over to the government. Besides, the favourable institutions and policies have facilitated SOEs to get monopolistic market status, to use state owned land for free, to loans with very low interest, and to obtain natural resources at very low costs. The second round of SOE reform should be solving these problems. That’s why I don’t see the point of the new Suggestions and their influence on the new round of SOE reform.
   
China_Review: Why?
   

SHENG Hong: Reforms are meant to solve problems. This Suggestions on SOE reform does not address any of the problems I mentioned, such as the monopolistic market status of SOEs, the free and low cost use of state owned resources, the profit handover issue, and the limitless distribution issue within the SOEs. These are the real problems. What’s even worse, as I see it, is that the very existence of SOE is the problem. It is because of these SOEs that government do not treat SOEs and non-SOEs on equal terms, which destroys the justness of the government; SOE executives and government officials can transform, meaning government officials are the same group of people like SOE executives. Due to these reasons, the government can hardly treat SOEs and non-SOEs equally, which is a breach of fundamental principle of the existence of governments. Governments are supposed to be guardian of justice. As SOEs are granted with favourable policies and monopolistic power, how can private enterprise compete with them on that ground? SOEs are not fair players in the market. SOEs are violating the basic institution of the market economy.
   
Due to the monopolistic SOEs, a big amount of resources are occupied, resulting in a loss of multiple trillion RMB a year. China’s economy is slowing down, and I think a major cause is the existence of SOEs and the shield of SOE monopolies. It is an urgent problem that’s losing us several dozen billions RMB on a daily basis. If this problem is not addressed, then what’s the point of reform?
   

To Make SOEs Bigger and Stronger Is Wrong
   
China_Review: The Suggestions stipulates that “SOEs are to be made bigger and stronger.” What’s your take on that?
   

SHENG Hong: In my opinion, it is absolutely wrong to make SOEs bigger and stronger. Why should SOEs be bigger and stronger? SOEs are not common enterprises. They are not supposed to be competing with private enterprises in profit making areas. I don’t think SOEs should be doing anything that’s profit making. Besides, SOEs get their monopolistic market status by political resources, they get free resources with political power. This is serious harm to the Chinese people.
   
China_Review: So the Suggestions also categories SOEs into commercial and public purpose SOEs?   

SHENG Hong: First of all, the problems we are talking about are not considered problems at all by them. The problems we can hardly deem as problems are considered by them serious and severe. What is the point of the reform plan, then? Different voices and criticisms in the society are totally ignored. To make SOEs bigger and stronger? How can you call it reform at all? This is anti-reform. This is doing something totally anti-reform in the name of reform. This is deceiving the media.
   

The Reform Fails to Reach Interest Groups: Even Idiots can Make Money with Monopolistic Market Power
   

China_Review: This reform does not influence the interest groups in the high level SOE executives.
   

SHENG Hong: It is the key issue that the interest of the interest groups are not influenced at all. I can tell what’s up in their sleeves after so many years of study on the SOE issue. This is what interest groups are good at: they talk about reform to fool the media. The media should cool off a little bit, because this is not reform. It’s not genuine reform at all. So many times, the media and the people are fooled. They’re easily excited by reforms without knowing what real reforms are. Calm down, and take it easy.
   
China_Review: We’ve been expecting this document since last year when 22 provinces handed in SOE reforms plans. However, we are disappointed.
   
SHENG Hong: Right. There is no concrete action at all. At least don’t get fooled by them, and be cool minded.
  
China_Review: Besides monopoly, there is also internal management issues of SOEs. You mentioned before that SOE executives control the distribution of bones and rewards. The Suggestions claims to manage SOEs in a mixed manner, with a combination of appointment and recruitment. Would such measures take effect in terms of influencing the interest of high level SOE executives?
   

SHENG Hong: We can hardly say so, actually. For example, the mixed style management that can be categorised into commercial and public. Let’s start with the commercial SOEs. The performance of the SOEs is used to assess them. However, the performance data is not real. Where do you get profit? As you have monopolistic power, you don’t need to pay land rent, you also get low interest loans, you can obtain the oil extraction grant at RMB 30 per ton, whereas everybody else pays RMB 400 per ton. The terms are totally unfair. How do you suggest I should measure your real performance then?

   
Another area is finance. Banks make a lot of profit, but do you know where the profit comes from? The difference of interest rate for deposit and loans is determined by the central bank, which hasn’t quite changed over the years but only at small margins. The reason is basically to cater to the interest of the interest groups. The interest rate gap between deposit and loans remains 3% over a dozen years. The interest rate gap acts like monopolistic price and price regulation. As the government determines the 3% interest rate gap. But it is not acceptable, because normally the gap should be between 1.5% and 2%. In market economy countries, it is competition that determines this gap. However, in China’s case, it is the administrative departments that determine this gap that is not the real result of competition. Then, how do you really assess if these people, the SOE executives, are really making an effort to make profit? In this condition, even idiots can make profit with monopolistic powers.

Besides, in SOEs like CNPC and Sinopec, there is also a problem of redundant personnel with low efficiency but high paycheques. How do you assess this? How do you suggest I should assess the SOEs’ performance when the market environment is man-made and the performance itself is man-made? The underpaid land rent amounts to at least 1 trillion RMB per year for SOEs. Now that SOEs claim to have made about 1 trillion RMB profit. That basically means, the profit they claim to have made equals the land rent they should have paid. What’s their contribution, then? For any private enterprise, if their land rent is underwritten, their profit would have skyrocketed. It’s simple mathematics. The performance is not real before calculating full cost.
   

The Temasek Model Is Unnecessary: State-Owned Assets Should be Returned to the People
   
China_Review: This time the Suggestions introduced the Temasek Model from Singapore as a model for state-owned assets management, which transforms management of assets to management of capital. A state-owned assess operation centre is set up, and the State-owned Assets Supervision and Administration Commission(SASAC) claims that it will not manage certain operations of the SOEs, but focus on management of the state-owned capital.
   
SHENG Hong: It is suspicious to manage only the capital instead of assets. Other issues regards whether SOEs are affected, whether shareholdings can be sold, whether there’s an exit mechanism for SOEs, etc..
   

China_ Review: What do you think of the Temasek Model?

SHENG Hong: I think the Temasek Model is absolutely unnecessary. It is only mentioned every now and then, because there are some people in China who want to keep SOEs in the game. What’s the point of the Temasek Model? Why do you need state-owned capital to make profits for the people? Totally unnecessary. The exit of state in the market and the leading role of private enterprises should be the best way.
   
China_ Review: Considering the core of the Temasek Model, what has changed?
   

    SHENG Hong: The Temasek Model means operation of the state-owned capital, not state-owned enterprises, operate in the form of private enterprises, while maintaining that the capital is state-owned. What’s at issue is, why do we need the state-owned capital in the first place? Totally unnecessary. The state-owned capital can be returned to the Singapore people since it comes mainly from the revenue of taxation. It does not make much sense to have such a thing discussed further.

The Merger of Centrally-Owned Enterprises(COEs) Is a Disaster. Spin-Off Is Better for Central Management
   

China_Review: You proposed for the demerger of SOEs, to divide CNPC and Sinopec into small enterprises before. However, now we see that after the merger of the Chins South Railways(CSR) and China North Railways(CNR), more and more centrally owner enterprises(COEs) are conducting mergers. What are the likely outcome?
   

SHENG Hong: It can be anticipated that after the mergers and reorganisations, the monopolies will get more powerful, which means no good to the society, consumers, or private enterprises. The logic is simple, when the monopolies get more powerful, it gets harder to control them, or to constrain them. After the mergers of the COEs, the central government will find it more difficult to manage them. The COEs will get more power to come against the central government. We have already seen that COEs such as CNPC and Sinopec are not under control by the National Development and Reform Commission（NDRC）or the National Energy Administration. They are too big to control. You can’t deny that. If the Three Buckets of Oil merged into one big conglomerate, it is impossible for the central government to control. Then what is the central government faced with, a monopoly or a competitor? It is a totally different situation for Premier LI Keqiang to negotiate with the only one monopolistic oil enterprise than with three or five oil companies.
  

I used this example before. When there was only one China Telecom, the negotiation between it and the central government was tough. Then there was China Unicom, the table was turned. If the central government really wants reform, mergers should not be the right path, but demerger. For instance, the CNPC and SINOPEC should be divided into several smaller enterprises instead of merged into one big oil company. If the central government really want to control the SOEs in general, demerger is better than mergers. A scholar named JIA Yi in Han Dynasty once said, “with more vassals, their individual power will be weakened.” In the beginning of Han Dynasty, there were many vassals whom the central government was unable to control.  The “Tuien Order”(推恩令, Power extending order) adopted by Emperor Wu of Han（汉武帝）weakened the powers of vassals. It went like this, if a vassal had three sons, after the vassal died, all three of his sons got to inherit his title, and the land got to be divided into three sections. After several generations, the powers of the vassals got weakened tremendously, which was a good thing for the central government. This applies to the SOEs, too. It is a very stupid idea to have them merged.
   
The Market Is Better than the Party to Control the SOEs
   
China_Review: The Suggestions states that SOEs are to be managed by the Party.
   
SHENG Hong: It is just as before, that the SOEs are managed by the Party. In the past they were managed by the Central Organisation Department of the Party. A lot of problems.

China_Review: But it never said so before. It’s the first time to assert this.
   
SHENG Hong: This statement marks a wrong direction for SOE reforms. History told us that when problems occur, one think more control is needed; however, the more you control, the worse the situation gets. Mechanisms matter, not control. The Great Famine of 1959~1962 was a result of control. Think about it, do you really need to control agriculture? Farmers know how to grow crops, and the market works. DENG Xiaoping did not control to that extent. In the past, the government controlled the production of steel, but the production of steel never exceeded 300 billion tons. Yet now, there is no control over the production, we get over 8,000 million tons of steel on a yearly basis. Besides, there should be institutions even if control is what you want to do. Daily reports never quite work as there will be false information. The alternative is market competition. The market does not deceive. If I were a monopoly, like the CNPC, you would not even know my real cost at all. However, with market competition, the cost is easy to figure. Competition reveals the real cost.
   
China_Review: At least three SOEs are better than one, right?
   
SHENG Hong: The more you control, the worse the situation gets. Reforms are not conducted by control. Take a look at all the industries, which develops from control? It is the market that really matters, along with the incentives of the people, and the wisdom of entrepreneurs. If we fail to recognise this plain fact, the reform is bound to fail. There are so many corrupted officials, however, they were all selected by the Central Organisation Department of the Party, weren’t they? Such as JIANG Jiemin, or the corrupted executives in the CNPC case? The institutions lacks constraints, and then institutional failures would occur.
   

To Break Monopoly with Powers within the Institution
   

China_Review: When the Suggestions came out, we have reviewed the history of the SOEs, such as the CNPC, SINOPEC, China Telecom, and China Unicom which did not exist before. China Unicom and China Telecom came to existence from the former Ministry of Industry and Information. It was former Premier ZHU Rongji who order to have them established to facilitate competition. So do you think the reform is conducted on this direction now?
  
SHENG Hong: In the past, China Telecom belonged to the former Ministry of Post and Telecommunication. Other departments, such as the former  Ministry of Electronics and the former Ministry of Railways, wanted to get involved for interest. China Unicom was a result of involvement of several departments and ministries. To break monopoly with the power within the system is a useful approach, even without the participation of private enterprises. For instance, regarding the reform of the oil system, we proposed that instead of allowing private enterprises to participate and compete with the existing oil SOEs, other SOEs should be allowed for competition first, such as Chemchina, CITIC Group, and China Huaneng Group. These companies also have the motivation to compete in the oil industry. We should support the competition between SOEs in the system, as long as they are not monopolies. The purpose for them is to make profits. This should be the driving force for reforms, just like when China Unicom was created to break the monopoly in the telecom industry.

China_Review: One thing I don’t quite understand is that it seems the marketisation of SOEs in the first ten years of this century has stagnated after the establishment of China Telecom, China Unicom, the CNPC, and the SINOPEC in the late 1990s. What do you think caused this stagnation of SOE reforms?

SHENG Hong: I suppose it is because the interest groups now get a hand of the situation. At first, everybody did not understand what market economy was. Then SOE executives and government officials began to come around and believed they would make more interest for themselves if competitors were kicked out of the game. Another background we should keep in mind is that in the 1990s, the SOEs were in tough situations in general. There was an issue of survival for SOEs. In ZHU Rongji’s time, debt problems even made headlines in newspapers. Around 2000, resources prices were low, including prices of oil, coal, and land. Resource related SOEs were not doing well back then. Then, the SOEs realised monopolies would benefit them, and ZHU Rongji thought it was also a good idea for SOEs to survive. People didn’t quite realise this when the Three Buckets of Oil were established in 1999. The oil price was low, and it was the best time to set up monopolies. The main purpose was to survive, therefore, there was not much objection politically. That is the backdrop. But what’s neglected is how the Three Buckets of Oil is doing. Later, their money surprised people. As oil price went up, the Three Buckets of Oil know where their interest lies, and they went on protecting their monopolistic status. This is the story about SOEs and monopolies.
   

SHENG Hong, Director of Unirule Institute of Economics

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International Seminar on “Economic and Financial Deregulation, Stability and Rule of Law” Held in Beijing

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News

Unirule 10-D Spatial Simulation Planning Model (SSPM)

The Unirule 10-D Spatial Simulation Planning Model (SSPM) is a mathematical and computational model based on economics. It is developed by a Unirule research team led by Professor SHENG Hong. SSPM is designed to simulate the development scale, economic density, industry distribution, resource constraints, ecological preservation, institutional influence, policy effect, and the evolution process in the next ten to twenty years or even longer period for a region. SSPM provides reference for the regional economic development strategy making, which can be directly adopted in the planning on regional economic development, population, land use, industry development, townships, water and ecology.

So far, SSPM has been adopted in the industry planning of Qianhai Area, Shenzhen, and the economic development planning of Yangcheng County, Shanxi Province.

Learn more about the SSPM

Current Researches/ Consulting

Improving China’s Implimentation and Supervision Institution of the Constitution

At present, research on the implimentation and supervision institution of China’s constitution is insufficient. Multiple problems exist in the current studies, such as the lack of a cultural perspective, and empathetic understanding of China’s political tradition; a lack of authentic Chinese perspective and an indulgence of Westernized framework of analysis; and a lack of reflection of the reality and the existing political framework.

The research on China’s constitution review institution should put the protection of civil rights and constitutional construction first, with a reflection of China’s reality and take in the advantages of external researches. A plausible research approach is as follows: 1. This research ought to provide a right relief mechanism; 2. It should take into account that China is a vast country with imbalanced regional development realities which foster unique and differentiated conceptions of the law and politics in general; 3. It should be built upon the current constitutional structure and take into account the interactive system of the power of the party, the National People’s Congress, etc. in order to make it a progressive research, which can enable the elements of constitutionalism to supplement the current constitutional framework; 4. Scrupulous examination should be given to constitutional practices in other regions and cultures, especially those influenced by the Chinese culture or with a similar institutional set-up, such as Taiwan and France; 5. Observations should be made in regard to the traditional Chinese institutions, such as the institution of the expostulation system (“谏议制度”, or giving advice),  supervision system, and the institutions established in this light, e.g., Taiwan’s Control Yuan.

Improving Entrepreneurs' Survival Environment: Abolishing Death Penalties in Relation to Fund-Raising Cases in China

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Unirule Institute of Economics is planning to undertake research on the problems of the crime of “illegal fund-raising” and specific methods to abolish this charge.

It is fit for Unirule to carry out this research project. Unirule Institute of Economics is a non-profit, non-governmental organization, which focuses on institutional economics with expertise in economics, laws, and politics. It has been dedicated to independent research on China’s institutional reforms and public policies as well as the reform of private finance. In 2003, 2011, and 2013, Unirule held seminars on the cases of Mr. SUN Dawu, Ms. WU Ying, and Mr. ZENG Chengjie. These seminars have been very influential before and after the close of the cases.

Unirule Institute of Economics has undertaken research projects in corporate finance and private finance in recent years. Over the years, Professor FENG Xingyuan has been carrying out pioneering research on private finance and private enterprises. He has gained rich experience and published many publications and papers on relevant topics, including “Report on the Freedom of China’s Corporate Capitals”, “Report on the Survival Environment of China’s Private Enterprises 2012”, research on the risks of private finance, etc. In August 2013, Professor FENG Xingyuan and his research team completed and released the “Report on Private Enterprise Fund-Raiding in West Hunan and the Case of Mr. ZENG Chengjie”, which analyzed and assessed the process, nature, problems, and causes of a series of events and proposed policy recommendations concerning the fund-raising activities in West Hunan and the case of Mr. ZENG Chengjie.

Business Ethics Declaration of Chinese Entrepreneurs

Over the last three decades, China’s economy has been embracing rapid growth with entrepreneurs being a key drive. The biggest and most significant structural change is the rise of entrepreneurs who constitute the pillar of the society nowadays. Today, the biggest, and the youngest group of entrepreneurs are going international, bridging China and the world.

However, because of the abnormal political, social and ideological environment of China for the last five decades, Chinese entrepreneurs happen to be widely confused and for the last thirty years, the emerging group of entrepreneurs has been suffering from severe anxiety over identity:

Firstly, due to the long time anti-market ideological propaganda by the authorities, many entrepreneurs believe they have the “original sin”. They are led to believe that their profits are based on exploiting the workers, which further leads to their confusion and anxiety over the ethical justification of their fortune and profits.

Secondly, this anti-market ideology also affects the public; leading the public to envy the fortune of entrepreneurs while disrespect them since their deeds are “unethical” and “dishonest”. This public opinion, in return, affects entrepreneurs’ self-identity. They, therefore, can’t convince themselves of the contributions they make to the society, or identify themselves within the social hierarchy.

Thirdly, Chinese entrepreneurs, especially those whose enterprises have gone international, are bothered with this severe identification anxiety. Chinese people stand out in entrepreneurship, so do Chinese enterprises. But what are the driving forces behind? Thanks to the long time culture break-up from the traditions, and the anti-tradition propaganda, Chinese entrepreneurs find it hard to comprehend and identify their cultural and social roles. This leads to the chaotic and restless mental state of entrepreneurs. This also results in the lack of a cultural supportive pillar for enterprise management in China.

“Business Ethics Declaration of Chinese Entrepreneurs” aims to provide answers to the anxiety over identity for Chinese entrepreneurs, to re-identify them by providing authentic and orthodoxical conceptions, to help them mature their thoughts and corporate social responsibilities.

This research project is committed to establishing a value system for Chinese entrepreneurs. To confront the anxiety over identity for Chinese entrepreneurs, this project provides answers to the three questions below:

1.Do Chinese entrepreneurs have the “original sin”?
2.What do Chinese entrepreneurs contribute to the society?
3.How do Chinese entrepreneurs gain respect?

An Economic Research of Chinese Urban Smog Management

The issue of smog has been on the spotlight in China that no matter government officials, ordinary citizens, or journalists and the press have expressed serious concern and anxiety towards it. Unirule Institute of Economics takes on this research topic and is conducting an economic research on China’s urban smog management.

The urban smog is attributed to multiple factors with many interest parties involved, which also makes it an economic issue. Unirule seeks to find a solution to the management of smog by the design of institutions from an economic point of view.

Fairness and Efficiency of Financial Resource Allocation

The first scale problem of the fairness and efficiency of financial resource allocation is whether the overall tax bearing standard falls within the optimal interval, whether the design of tax kinds and the mechanism will harm the development of the economy. The second scale problem is whether the expenditure structure of the existing financial resource allocation, especially transfer payment, obeys the principal of justice, and the efficiency of financial expenditure especially the general administrative costs.

Unirule Institute of Economics is going to undertake research on the fairness and efficiency of financial resource allocation with the emphasis on the second scale problem. In order to fulfill the ideal of justice in a society, the involvement of financial resource allocation is one of the methods, and a universal one. A state can promote justice by implying financial expenditure in two ways: the direct and the indirect way. When applying the direct way of implying financial expenditure measures to promote justice, financial expenditure is directly distributed to individuals to fill the gap of incomes between individuals.

Among the financial expenditure items of China are pensions and relief funds for social welfare, rural relief funds as well as social insurance funds. The indirect way is by governments' increase in expenditure used for supporting agriculture and villagers, construction of infrastructure, education and medical treatments. This research is on the justice of financial resource allocation and it deals mainly with whether the transfer payment of financial resources obeys the second rule of Rawls's theory of justice, which states that when violation to the first rule has to be made, resource allocation can be towards the poorest group of people. Besides the justice issue, efficiency is also involved in the financial resource allocation. The administrative costs of China have long been above the average standard of other countries in the world, therefore, a big amount of public financial resources are wasted (trillions of RMB per year as estimated). In regard with the efficiency issue of the financial resource allocation, this research deals mainly with the change of ratio of administrative costs by government agencies (in addition to other costs, such as medical treatments of government officials covered by public budgets, and housing subsidies) of financial income. The reform of the fiscal and taxation system is one of the core issues in China's on-going reforms. This research aims not at a comprehensive examination of the fiscal and taxation system, but a specific aspect which is the "fairness and efficiency of financial resource allocation", and evaluating the status quo of China's financial resource allocation.

Research on China's Urbanization on the Local Level

Urbanization is one of the most essential economic and social policies of the new administration. The emphasis of this policy is posed on medium and small cities as well as townships. As noticed, there are thousands of industrialized townships in China with their social governance lagging far behind their economic development.

Firstly, a big population is located in between the urban and rural level, which can't transform into citizens. Hundreds of millions of people have left their villages and moved to commercialized and industrialized towns. They are in industrial and commercial occupations and it is highly unlikely that they would go back to their villages. However, they are not entitled to local Hukou registration, which further leads to the deprivation of various rights, for example, the right of education.

Secondly, public governance in such industrialized and commercialized towns, in general, is at a rudimentary level. The number of officially budgeted posts is asymmetric with the population governed, which leads to the employment of a large number of unofficially budgeted staff and unjustified power to govern. There is a lack of financial resources for the local government to carry out infrastructure construction or to provide public goods sufficiently. Thirdly, the urbanization results in imbalanced development of the structure of society. Since the industrialized and commercialized townships are unable to complete urbanization, urbanization in China has basically become mega-urbanization which is dominated by administrative power. Local governments centralize periphery resources with administrative power and construct cities artificially, which impedes townships and villages from evolving into cities by spontaneous order. Fourthly, industry upgrading can't be undertaken in those industrialized and commercialized townships and the capacity for future economic development is greatly limited. The industry upgrading is, in essence, the upgrading of people. Enterprises ought to draw and maintain technicians, researchers, and investors, to meet their needs for living standards, which cannot be satisfied by townships. Similarly, the lagging urbanization reversely sets back the cultivation and development of the service industry, especially the medium and high-end services.

Unirule Institute of Economics is going to carry out research on urbanization of China on the local level, aiming at improving public governance of the industrialized townships, optimizing the urbanization methodologies, and improving the "citizenization" of migrant workers, therefore further pushing social governance towards self-governance and democracy.

Research on the Public Governance Index of Provincial Capitals

At the beginning of the year 2013, Unirule conducted field survey, including more than 10 thousands of households in 30 local capital cities. According to the field survey, the Public Governance Index was derived. The main conclusions of the PGI report as below:

Three statements summarize the status quo of public governance in provincial capitals. Firstly, public services have generally just gotten a pass. Secondly, protection to civil rights is disturbing. Finally, governance methodologies need improvements. These statements point out the solution: the structure of the society needs to be altered from that with a government monopoly to a civil society with diverse governance subjects. The ranking of provincial capitals in the public governance assessment from the top to the bottom is as follows: Hangzhou, Nanjing, Urumqi, Tianjin, Chengdu, Shanghai, Beijing, Nanchang, Xi'an, Xining, Shijiazhuang, Wuhan, Guangzhou, Yinchuan, Hohhot, Chongqing, Shenyang, Changsha, Jinan, Kunming, Nanning, Haikou, Fuzhou, Guiyang, Harbin, Hefei, Changchun, Zhengzhou, Taiyuan and Lanzhou.

Generally speaking, all provincial capitals are graded comparatively low in the three public governance assessments from 2008 to 2012. Even those that ranked the highest in performance have just barely passed the bar of 60 points. Few provincial capitals with poor public governance got over 50 points.

There is a certain amount of correlation between the changes of ranking and improvements in public governance in provincial capitals. In the short term, should the capital cities be willing to raise their rankings, they can achieve this by increasing transparency in government information and civil servants selection, encouraging local non-governmental organizations, or promoting wider participation in local affairs. There is but a weak correlation between public governance and the local GDP level. However, a strong correlation exists between the rankings and the equity of local fiscal transfer payment. That is to say, a region gets a higher ranking in public governance if subsidies to local social security, medical care, education and housing are distributed more to the poorest residents in that region. On the contrary, a region's ranking falls if such resources are distributed with prejudice to the groups with high incomes. This phenomenon shows that equity is of significance in the assessment of the government by the people.

When residents are not satisfied with medical care, elderly support system, water supply and electricity supply, the situation can be improved when they complain to the government. But when similar situations take place in public transportation, environment greening, heating systems, and garbage management, whether by collective actions or filing complaints to government agencies, residents can hardly be satisfied with what the government does.

According to the three public governance assessments carried out from 2008 to2012, we discovered that the Gini coefficient of residents in provincial capitals was decreasing and the income fluidity was improving. From 2010 to 2012, citizens' comments on protection of civil rights are deteriorating, especially in terms of property and personal security. The request for freedom of speech is also increasing. For the moment, citizens in provincial capitals have a low evaluation on the cleanness and honesty of local governments.

Research on Disclosure of Government Information

Room for reforms is getting narrower as the opening-up and reforms deepen. It also leads to a more stabilized vertical mobilization of the demographic structure with the conflicts in the distribution of interests exacerbating. A collaborative system centering the political and law system and involving close cooperation between the police, courts, petition offices, and the city guards (Chengguan) is developed to deal with social unrest. This system is operated by local governments and finalized as a system of maintaining stability (Weiwen). There have been Internet spats over the amount of Weiwen funds. It is unsustainable to maintain such a Weiwen system, and the disclosure of government information is the most significant approach for this end. The essence of public governance is to dissolute conflicts instead of hiding and neglecting them. And one way to achieve this is by sufficient communication. Public and transparent appraisement and supervision cannot be achieved without transparent government information, otherwise the result will be the exclusion of citizens from public governance.

Unirule Institute of Economics has been undertaking research on the disclosure of government information since 2011. This research is carried out not only from the perspective of the regulations for the disclosure of government information which evaluates whether governments of various levels are obeying the regulations and their performances, but also by examining information disclosure laws in developed countries while looking at the status quo in China. There are seven aspects where government information disclosure can be improved, namely, information disclosure of government officials, transparency of finance, transparency in the decision-making mechanism, transparency in administration, transparency in public services, transparency of enterprises owned by local governments, and transparency in civil rights protection.

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Unirule Biweekly Symposiums

Unirule's Biweekly Symposiums are known in China and throughout the world for their long history of open and in-depth discussions and exchanges of ideas in economics and other social sciences. Over 380 sessions have been held and over 15,000 scholars, policy makers, and students, as well as countless readers on the web, have directly and indirectly, and participated in the Biweekly Symposium for close to 20 years.

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Biweekly Symposium No. 530: 31 st July, 2015
Biweekly Symposium No. 531: 14th August, 2015

Previous Biweekly Symposiums

Biweekly Symposium No. 528: A Philosophical Reflection of Marxism

Lecturer: Mr. LI Zhiqiang

Host: ZHANG Shuguang, Chairman of Unirule Academic Committee

Commentators: XU Qingzhi, ZHANG Shuguang, WANG Zhanyang

Mr. LI Zhiqiang introduced the spread of Marxism in China, its evolution, implications on the Chinese society and the critiques. He thought the study on Marxism not only in class, but also in the society generally, has critical societal, political and economic meanings. From a philosophical perspective, Mr. LI Zhiqiang talked about the relation between sentiment and matters, atheism and religions, and the impact of research of Marxism on China's education.

Biweekly Symposium No. 529: The Methodology-Driven Mainstream Neoclassic Economics and the Lost Positioning: Challenge for Mainstream Economics in the Era of Big Data

Lecturer: Professor MO Zhihong

Host: ZHAO Nong, Vice Chairman of Unirule Academic Committee

Commentators: ZHANG Eryin, XU Jianguo, ZHAO Wenzhe, SHENG Hong 

Professor MO Zhihong introduced her take on the neoclassic economics and the impact of big data on the research of this area. She introduced her understanding of the shortcomings of the paradigm of the neoclassic economics, the fallacies of mainstream analytical frameworks, and the influence of big data technology on reshaping the world.

Editor: MA Junjie
Revisor: Hannah Luftensteiner