I have blogged on several occasions about "crossing the river by feeling the stones" and "let a million flowers bloom" approach to reforms by the Chinese government. Allow sub-national governments to experiment in a low stakes manner without the threat of recriminations on failure.
Though it brooks no dissent and has a taste for strongman politics and centralised leadership, the Communist Party has shown an admirable willingness to let small areas of the country try out reforms before they are introduced nationwide. These local experiments with reform have been cited by some Western scholars as examples of China’s “adaptive authoritarianism”. This is a way of describing the party’s ability to avoid the fate of its counterparts in other communist-ruled countries by flexibly adjusting policy in order to satisfy public demands for greater prosperity. The pilot system has been an important means of achieving this... In the past, the central government was sometimes ready to devolve considerable power in order to promote experiments with reform. Take the “special economic zones” (SEZs), which the party set up along the southern coast in the 1980s. In these, local officials were given extraordinary leeway to approve foreign investments, grant tax breaks and waive price controls. Their experiments succeeded in producing rapid economic growth. They were, in effect, the pilot projects for the market-oriented policies that helped China become the economic giant it is today. A raft of other experimental reforms followed elsewhere, including the introduction of stock exchanges and greater tolerance of private enterprise. Xu Chenggang of the Cheung Kong Graduate School of Business in Beijing says that in the first three decades of the reform era, which was launched by Deng Xiaoping at a meeting of the party’s Central Committee in December 1978, nearly all the main economic changes began as local pilot schemes...
The decision by China’s legislature earlier this year to establish a national anti-corruption agency, for example, followed the successful piloting of such bodies in the provinces. In 2016 experiments were launched with innovative public-private ownership structures at some of the country’s largest state-run enterprises. Last year five pilot “green finance zones” were established in various parts of the country. These are intended to try out markets for the trading of water- and energy-use rights and, it is hoped, help banks to lend in an environmentally friendly way.
The Economist suggests that this permissiveness may be changing, and it blames Xi Jinping's centralisation and anti-corruption drive for this,
Even before Mr Xi took over, the pace of experimentation had been slowing. Sebastian Heilmann of the University of Trier in Germany reckons that the number of provincial-level policy pilots declined from around 500 in 2010 to about 70 in 2016 (see chart). Over the same period, the share of national regulations with experimental status dropped from nearly 20% to about 5%... Mr Xi’s ruthless crackdown on corruption and demands for unswerving loyalty to himself as the leadership’s “core” have spread fear among bureaucrats. Few want to risk the unwanted attention that might result from reforms going badly. Mr Heilmann says the central government has also become less open to input from below. “Experiences and initiatives put forward by various regions tend to be ignored” under Mr Xi’s more centralised and personality-based leadership, he says... But the growing indifference of the central leadership to feedback from the grassroots is hampering experiments.
I had blogged earlier arguing that China's Achilles Heel may not be the vast volumes of debt or its aggressive foreign policy posturing, but Xi Jinping and his authoritarian rule. It is just that the unintended consequences can be very many, impossible to predict, and deeply harmful.