Reviewing Cao and Wang’s (2020) study on China’s Tiao-Kuai system
The Inherent Contradictions of Authoritarian Regime and the Tiao-Kuai Relationship in China
by Cao Zhenghan 曹正汉 and Wang Ning 王宁
Cao Zhenghan 曹正汉 holds a professorship at the School of Public Affairs of Zhejiang University. His research notably focuses on China’s governance structure and local decentralization. (Zhejiang University)
Wang Ning 王宁 is currently affiliated to the School of Economics of the Zhejiang University. He previously co-authored together with Cao Zhenghan an article on the Tiao-Kuai relationship in mining areas (see. Cao and Wang, 2019).
To ensure regime stability China’s central government has had to developed different governance capacities. The authors differentiate in this context between capacities related to political control (政治控制能力), resource extraction (资源吸取能力), economic development (经济发展能力) and the governance of public affairs (公共事务治理能力). These different governance capacities are, however, to a certain degree in contradiction to each other. Cao and Wang (2020) argue that China’s central government introduced the Tiao-Kuai 条块 – two parallel governance structures – to control these conflicts by separately assigning conflicting state capacities to different governance structures.
China’s four state capacities
In China’s authoritative system the aim of the political center中央  is to both preserve regime stability and to build a powerful central government. To achieve this, it has to develop different state capabilities 国家能力. Notably echoing Wang Shaoguang 王绍光 and Hu Angang 胡鞍钢, who identify four distinct state capacities – extractive capacity 财政吸取能力, steering capacity 宏观调控能力, legitimation capacity 合法化能力 and coercive capacity 强制能力 (Wang and Hu, 1993); Cao and Wang (2020, p. 82) differentiate between the capacity to exert political control 政治控制能力, carry out resource extraction 资源吸取能力, produce economic development 经济发展能力 and to administer public affairs through public governance 公共事务治理能力.
So as to impose itself over a vast territory China’s imperial and later central government has historically resorted to an indirect governance mode, in which it guided, supervised and controlled local governments, while at the same time bestowing local authorities with the power to govern over the society. Cao Zhenghan captured this governance principle in a previous paper with the slogan: central authorities govern officials, while localities govern the people 中央治官，地方治民 (Cao, 2011). Political control, hence, lies on the one hand in the central government’s capacity to control local governments, and on the other hand in the local government’s control over society.
In order to be able to wield political control, the central government needs to first extract resources. For this the center requires the cooperation of the localities, as it only holds an indirect control over society. Thus, the central government’s capacity to extract resources is tied to its control over local authorities. Moreover, the resources the center is able to obtain are also dependent on the level of economic development. Therefore, central authorities have in the long run an interest in developing capacities stimulating economic development. These include the protection of private property, as well as a degree of decentralization, i.e granting localities the autonomy to manage economic affairs.
Regime stability further depends on the central authorities ability to handle public affairs and provide public goods. As these can either be of national or local nature, the central government has to both directly manage national public affairs and at the same time ensure that localities are dealing with local issues. (Cao and Wang, 2020, p.82-84)
On the one side, the central government’s state capacities can reinforce each other. For example, an increase in the central government’s ability to extract resources reinforces its political control over localities, while reversely the strengthening of its political control enhances the center’s resource extraction capacity. Yet, on the other side, the different state capacities can also be in contradiction to each other. The strengthening of political control through a higher degree of centralization will likely weaken economic development, as well as impede the handling of local public affairs.
Furthermore, while political control and resource extraction rely on centralized (vertical top-down) governance, economic development and the management of public affairs – in particular on the local level – on the contrary necessitate decentralized (horizontal) governance. China’s governance system is hence faced not only with the conflicts between different state capacities but also on a broader sense with the contradiction between centralization and decentralization, as well as vertical and horizontal governance. (Cao and Wang, 2020, p.84-87)
Tiao-Kuai system: the central government’s response to emerging conflicts between different state capabilities
In accordance with Laffont and Martimore’s (2002) crucial insight that in a principal-agent model, where the principal requires its agents to complete multiple conflicting tasks, the principal’s optimal strategy is to assign the conflicting to different agents, the Chinese central government has resorted to assigning conflicting tasks to different entities. Cao and Wang (2020) argue that this has led to the emergence of two parallel sets of governance structures – the Tiao 条 and Kuai 块.
The Tiao-Kuai system or Tiao-Kuai relationship refers to two parallel sets of administrative structures, which exist under China’s political center. On the one hand, the agencies of the central government 中央职能部门 as well as their local branches form the vertical Tiao structure. The authors differentiate in this context between three types of Tiao-systems: first, the military system 军事系统; secondly, the supervision system 监察系统composed of the central and local supervisory organs, such as the National Supervisory Commission; and thirdly, the administrative system of the central government 中央行政系统. On the other hand, the Kuai structures is built around the local governments on the different administrative divisions – i.e provincial 省（自治区、直辖市）, prefecture 市（地 区）, county 县（区、市） and township 乡（镇）(Cao and Wang, 2020, p.93). While in the Tiao-structure the lower level government-units are under the control of a ministry belonging to the central government, in the Kuai structure, however, the party committee on each level holds authority within its own geographical jurisdiction (Saich, 2004, p.123).
The four distinct periods in the Tiao-Kuai power balance
Although following the principle of dual rule 双重领导 both administrative systems are to share power cooperatively, the power balance between the vertical Tiao– and horizontal Kuai- structure has since the founding of the People’s Republic of China (PRC) varied greatly (Lieberthal, 1992, p.286-287). In that context, Cao and Wang (2020, p.94-98) differentiate between four different periods.
- 1949-1954: emergence of the central government’s vertical governance structure
During the early years of the PRC the central government had to rely on the horizontal governance structure (Kuai) – more specifically on the governments of the six Greater Administrative Areas 大行政区 – as the vertical Tiao institutions were still being developed.
- 1955-1979: vertical governance structure dominant throughout the period of planned economy
With the simultaneous repeal of the Greater Administrative Areas and the establishment of provinces as the second highest administrative level, as well as the creation of the State Council 国务院, the central government instated a system of planned economy and assumed large parts the administrative and economic management. Hence, during this period the balance of power was strongly tilted in favour of the vertical Tiao system.
- 1980-2003: economic reform based on horizonal management
The reform process initiated by Deng Xiaoping 邓小平 – Reform and Opening 改革开放 – changed the status-quo drastically by weakening vertical governance structures, in particular reducing the control power of central ministries, and by reinforcing the authority of local governments, especially in economic affairs.
- 2004-2019: power shift towards vertical governance structure
At the turn of the century the central government began to set up institutions tasked with improving market and financial supervision, environmental protection, food safety as well as labour protection. This translated itself in a strengthening of the vertical Tiao-structure in the field of state’s public affair governance capacity. Since Xi Jinping’s access to power in 2012 this trend has been further intensified in the context of the reinforcement of the state’s supervision system.
The strengthening of the vertical or horizontal structure as a reaction to a systemic conflict
According to Cao and Wang (2020), the multiple power shifts between the Kuai- and Tiao- structures can be traced back to attempts by the central government to alleviate conflicts, which have arisen between different state capacities.
Following the example of the Soviet Union, the central government sought to rapidly industrialize and modernize China, as well as to increase its capacity to extract resources by implementing a centrally-steered system of planned economy, which relied heavily on the vertical Tiao-governance structure. This led to the emergence of a systemic conflict, as the Tiao-structure was both charged with the contradictory task of both extracting resources and generating economic growth. In particular, the extraction of resources was built upon state monopolies, which reduced the efficiency and innovative capacity of the economic system and hence impeded economic growth.
Subsequently, during the ensuing reform process after 1978 the central government proceeded to decentralize the economic, administrative and personnel management to local governments, i.e the horizontal Kuai-governance structure. While this decentralization greatly enhanced China’s capacity to generate economic growth and contributed to the country’s fulgurant economic rise, it also brought about a systemic contradiction between the local governments responsibility to firstly generate economic growth and secondly manage public affairs. As especially the soaring of pollution or the recurrence of food safety incidents show, economic growth has oftentimes been prioritized.
To resolve this deficiency the central government has sought to both strengthen its own public affairs governance capacity by establishing and empowering vertical Tiao-organs, as well as to intensify its oversight over the horizontal Kuai-structure (local governments). Furthermore, under the leadership of Xi Jinping the central government sought to consolidate its political control – more precisely its grip on local government – which has waned as a result of the previous decentralisation process. It achieved this by reinforcing the state’s as well as party’s disciplinary and supervision system 纪检监察系统 controlling local officials. (Cao and Wang, 2020, p.103-107)
The current strengthening of the vertical governance structure is focused on the state’s capacity to manage public affairs
In contrast to the period of planned economy (1959-1979), the current reinforcement of the vertical governance structure is not focused on economic management but on the administration of public affairs and the provision of public goods. On the one hand, the central government currently holds authority over only three macroeconomic management institutions  – the National Development and Reform Commission 国家发展和改革委员会, the Ministry of Industry and Information Technology 工业和信息化产业部and the State-owned Assets Supervision and Administration Commission of the State Council 国务院国有资产监督管理委 – while in 1956 they were 31 economic management institutions. On the other hand, central organs charged with the management of public affairs increased from 11 in 1956 to 19 in 2018. These include notably the Ministry of Human Resources and Social Security (MOHRSS) 人力资源和社会保障部, the Ministry of Ecology and Environment 生态环境部 or the National Healthcare Security Administration国家医疗保障局. (Cao and Wang, 2020, p.98-102)
In parallel to the partial delegation of the state’s economic management capacity to local governments, the central government reinforced its control over the country’s tax system (Cao and Wang, 2020, p.101). In particular, through the Tax-sharing reform 分税制改革implemented in 1994 the central government increased its share of the country’s tax revenue as well as its control over provincial tax authorities. Moreover, in 2018 the sub-provincial and national tax system were merged together and placed under the authority the center’s State taxation administration 国家税务总. This process illustrates Cao and Wang’s argument that China’s central government has opted to assign contradictory tasks to different governance structures. While the Kuai-governance structure (local government), are charged with macroeconomic management, in particular spurring economic growth, the extraction of resources through the tax system has been entrusted to the Tiao-governance structure.
The Kuai-Tiao system increases China’s authoritarian resilience
Lastly, Cao and Wang (2020, p.107-108) assert that the existence of two parallel governance structures, as well as the periodic strengthening of either the vertical Tiao-structure through greater centralization or Kuai-structure through decentralization enhances the flexibility of China’s institutions and thus its ability to adapt to newly emerging challenges. This institutional flexibility consequently also strengthens the resilience of China’s authoritarian system.
Cao and Wang (2020) offer not only a compelling analysis of the intrinsic conflicts associated with a comprehensive governance system but also a powerful argument for a nuanced approach to the development of different state capacities. While, on one side, the central government’s political control and its capacity to extract resources might benefit from a higher degree of centralization, on the other side, the capacity to generate economic development and to manage local public affairs seem to increase with a higher degree of decentralization. Although the authors do not formulate any policy recommendation, their analysis should compel China’s leadership to refrain from extending the ongoing process of centralization – consolidation of the vertical Tiao-governance structure – to all state functions. Indeed, some scholars have voiced concerns that the shift towards a more centralized system might hamper Chinese local government’s incentive or even ability to pursue policy experimentation and hence risks to have an adverse effect on China’s economy (see for example Zhang Jun (2018).
 In this context, the center 中央 refers to the core leadership group around the General Secretary of the CCP – the country’s paramount leader 最高领导人. (Cao and Wang, 2020, p.87)
 To these might further be added other political institutions of the central government tasked with macroeconomic management, such as the Central Commission for Comprehensively Deepening Reform 中央全面深化改革委员会 and the Central Commission for Finance and Economy 中央财经委员会.
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