Yuen Yuen Ang has a good talk here (see also this talk) where she describes the Chinese model as one of "directed improvisation". It draws from her first book How China Escaped the Poverty Trap.
It is a combination of top-down direction provided by the central government in Beijing with bottom-up improvisation using local resources by numerous local governments. It happens within a system of single-party autocracy. In other words, "top-down direction with bottom-up participation, within one-party system". It leads to diverse solutions tailored to local conditions and stages of development.
Yuen claims that her model is the real China model for two reasons. One, she draws her inferences from numerous field surveys with direct stakeholders, including bureaucrats, over a period of ten years on various aspects of Chinese development, thereby reflecting realities than any theoretical or ideological considerations. Second, it's a comprehensive model in so far as it draws on the complexities and diversities of China as well as the wide variations in progress and development across the different parts of the country.
She rejects the notion of Chinese success as one of success of autocracy. Instead she describes the Chinese political system as one of "autocracy with democratic characteristics". Deng Xioaping substituted political reforms with bureaucratic reforms, which partially achieves the following benefits - partial limits on power, bureaucratic accountability, bottom-up participation, experimentation and feedback, competition, and locally tailored solutions. They created the conditions for economic growth. He eschewed political reforms to ensure political stability and retain the control of the Communist Party.
In fact, Yuen identifies partial limits to power (collective leadership, term limits, no personality cult, mandatory retirement), accountability (report cards of local officials that measured economic performance and not loyalty), and competition (public rankings of officials) as the three critical democratic characteristics that China under Deng adopted. But it did not adopt formal checks and balances, competitive elections, and freedom of press. She describes this arrangement as "autocracy with democratic characteristics. She argues that these reforms are now being roll-backed during the Xi Jinping era.
For example, in the eighties and nineties, the government faced the challenge of implementing capitalist policies using a communist bureaucracy. It adopted a very unconventional approach by enlisting bureaucrats to recruit investors using personal relations (including recruiting them from Taiwan, Hong Kong and from the diaspora) and take a cut (or sales commissions) of the investments made. It monitored this arrangement by fixing concrete targets to governments at different levels, and using this metric for promotions and performance management. This arrangement, implemented under the disciplining umbrella of a powerful Communist Party, was very appropriate for the context.
Over time, the norms evolved to form a professional bureaucracy with institutionalised market enabling practices. Accordingly, she describes a three-step development process followed by China which took whatever was given as the starting point and worked on creating the right set of incentives for them. She makes the distinction between "building" and "preserving" institutions.
Step 1 - Harness normatively weak institutions to build markets.
Step 2 - Emerging markets stimulate strong institutions.
Step 3 - Strong institutions preserve markets.
This requires local actors to both have considerable discretion and also be very proactive in responding to public issues. This required the central government moving away from the role of a dictator to that of a director who would create the enabling conditions for local actors to participate effectively in the development process.
Yuen argues that even an autocracy needs democratic characteristics to succeed, and China proves the point. It is not autocracy, but the democratic qualities that Deng put into practice that made China great. She stresses on democratic characteristics as being the primary driver of China's growth. Therefore she also worries that China under President Xi Jinping is now turning back from this.
On the issue of allowing local discretion and encouraging experimentation, she points to the dilemma that all central governments face around delegation and centralisation. Too little flexibility leads to rigidity, and too much to chaos. Therefore, the challenge facing administrators in Beijing is, how do I grant autonomy, but not too much and not always? How to align incentives of local government officials with national development goals? Beijing achieves this by issuing decrees on issues with varying degrees of clarity.
Yuen points to three types of political and bureaucratic commands that come from Beijing - red, black, and grey - that varying in their degrees of clarity. Red commands are directives that come from Beijing that very clearly forbids local actors from taking particular actions. For example, limits on land quotas which indicate how much land a local government can sell is a good example. The local governments cannot mess around with this. See the graphic from here.
Grey commands are deliberately unclear. It helps that the Chinese language is particularly useful in saying things which are subject to multiple interpretation. Grey commands allow for "bounded experimentation". It neither prohibits nor informs what is to be done, but leaves the choice to the local official to experiment. If such experiments succeed, then it produces policy feedback which often goes right back up to Beijing on whether the experiment should be scaled up or not. If they decide to go ahead and scale, then Beijing issues black commands which are very clear and sanctions a particular course of action.
As an example, the collective enterprises in in the name of township and village governments emerged as a compromise to allowing private enterprise in a communist country without private property rights. In the eighties, from 1980-84, this happened very cautiously. The central government collected feedback and observed its impact. Once its success became evident, Beijing issued black commands to establish such TVEs.
Yuen collected data on commands/signals issued by the State Council, the highest authority of Chinese administration, and classified them into the three categories. There is very large variation in these commands across sectors. The sector with the highest share of grey commands is the emerging sectors and technologies. The sector with the highest share of red commands is foreign affairs, public security, and banking and financial market regulation. Another sector with the lowest share of ambiguity is Special Economic Zones (SEZs), possibly because they are aimed at foreign companies who prefer clarity in rules.
Three lessons for other countries from China. One, learning is not the same as copying. It is about adapting to local realities. Two, countries should learn from both China's success and failures. Three, they should adapt "directed improvisation" to the democratic contexts.
The last assumes great relevance for democratic countries like India. It is about creating spaces for experimentation and iterative adaptation of best practices and ideas from everywhere.
She also points to the two misunderstandings in drawing inferences from China. One, following the China model means to ignore democracy and governance issues. She argues that democratic qualities were central to China's success. But other countries when adapting them need not adapt their western or Chinese forms. Second, following the China model means to tolerate low-quality growth and clean-up later. She again points to a three stage evolution of Chinese government preferences - the eighties and nineties were characterised by indiscriminate welcome of all investments, which while led to rapid capital accumulation, was messy, uncoordinated, corrupt, and led to massive environmental damage; the 2000s altered the resource allocations and goals of development; and today governments are selective about investments and prioritise quality of growth.
This is a good article on the same topic.
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