Governance structure like no other: China (through an Indian lens)

Yogesh Upadhyaya
17 min readApr 22, 2023

It is a country where a political party is more powerful than the government. A country where the army owes allegiance to the political party and not to the country. A country where the party has direct influence on all organized bodies, including businesses, banks, courts, trade bodies, and religion. This is China. This series looks at China through an Indian lens. The two countries are similar in size, diversity, and stage of development. Hence, China is the only country that can be compared to India. However, the countries are very different in two areas. First, China is a manufacturing superpower and India is a laggard. The other big difference between the countries is how they are governed, which is the topic of this post.

Representational Image by arranakhtar from Pixabay

Let’s begin with the formal government structure.

The Party controls the government

Mr. Qin Gang, the foreign minister of China, was in India recently. He met the External Affairs minister of India. I assumed that it was a meeting of China’s top diplomat with India’s. However, Mr. Qin Gang is not the top diplomat in China. As his wikipedia entry says, Mr. Qin Gang is outranked by the politburo member Mr. Wang Yi. Ministers are relatively lower ranked in the country, and this has to do with the power structure in the country.

The leader of the country, currently Mr. Xi Jinping, typically has three posts. He is the secretary of the Communist Party of China (CPC or The Party), the chairman of the Central Military Commission and the president of the state. Many observers believe the third is the least important of the three posts. In fact, as the journalist Ananth Krishan points out in his book India’s China Challenge, ‘the word ‘President’ does not even exist within the lexicon of domestic China politics.’ and that local Chinese media translates it as the ‘National Chairman.’

The graphic below depicts the governance structure.

Under the secretary of The Party is the standing committee of the Politburo. The standing committee is elected from the Politburo. Under the Politburo are many Leading Small Groups (LSGs) that coordinate the policy between the party and the government in different areas. Below the LSG is the State Council that is chaired by the Premier. The State Council looks similar to the Cabinet in India and other parliamentary democracies except that it has many senior officials who may outrank ministers. More importantly, the State Council is clearly subordinate to the Politburo. Government ministers are outranked by many party positions. Of course, government officers and ministers are also members of the CPC.

This subordination of government to the party is at state and city level too. This is perhaps best illustrated by the author Richard McGregor in his book, ‘The Party’. The number of the Shanghai party secretary’s car is 00001; the number of the mayor and deputy party secretary’s car is 00002. These numbers don’t lie.

The primacy of party position over government ones is only a small part of the story. The Party has many other ways to control the country. The power of The Party reaches into every organized sector of Chinese life. The powerful Organisation Department of the party has a hand in appointment of top officials in government, courts, media, public and private companies, universities and religious organizations. As Ananth Krishnan writes

“To understand the degree of omnipresence, consider such a situation in India: the Indian National Congress or the Bharatiya Janata Party is not just the ruling party at the center, but controls every state government, appoints the heads of every Indian bank and major corporation (who will, of course be party members), controls the Indian armed forces and appoints its generals, oversees every media organization and what they publish, controls colleges and schools, decides the curriculum that only teaches the party version of history, has a party cell in every company, whether public or private, and controls every level of administration, right from the top of the village and even your resident welfare association.”

One of the most important controls over organized bodies is the control over the armed forces.

The Party controls the gun

The People’s Liberation Army (PLA) does not owe its allegiance to the state of China but to the CPC. As the general secretary of CPC, Mr. Xi Jinping said, “The party commands the gun.”

This arrangement is unlike any that I am aware of in the West. Of course, this is totally unlike the situation in India, where the army reports to the elected government. Even in our neighboring Pakistan, which has seen the army seize power multiple times, the army formally reports to the President who in turn is bound by the advice of the elected Prime Minister. This allegiance of the army to The Party in China is continually reinforced.

Like in every other organized body, the PLA also has CPC cells. According to Richard McGregor*,

‘Each part of the PLA, at headquarters, in operational units, research institutes, universities and factories, has always had a political department and party committees.’

And

‘As a result, the slimmed-down modern PLA, which has about 2.3 million men and women on its books, now has 90,000 different party cells operating inside it, about one for every twenty-five people enrolled in the force.’*

Additionally, the army has a system of two commanders at senior levels. One of the commanders is a professional soldier. The other is a CPC commissar. This practice was copied from the erstwhile Soviet Union.

Backing these practices is a culture in which politicization of the army is desirable. Depoliticisation of the army is considered a crime. Here is McGregor,

“The gravest sin in the Chinese system, akin to treason within the Party, is not to politicize the army but to depoliticize it, with the aim of creating a national military force.”

Senior commanders in the PLA regularly insist that their loyalty is to the party. For example, here is one of the most senior generals and member of the Central Military Commission, in an article in 2009,

‘We must resolutely resist wrongful thinking such as the de-politicization of the military and the nationalization of the military.’ Li wrote in the magazine Seeking Truth. ‘And make the whole PLA always hold the Party’s flag as its own flag, and the Party’s will as its own will.

I note two things. First, it is inevitable that armies everywhere take on some of the political priorities of the society. For example, the defense forces in the US have focused much more on Diversity Equity and Inclusion (DEI) in recent years and DEI is very much a political priority. Second, it seems that things are changing in China too. McGregor believes that with modernisation, the PLA is becoming more and more professional and less political.

Having said that, there is no doubt the allegiance structure of armed forces in China is very different from any other big country. No other country follows the principle of “The Party controls the Gun”.

The Party not only controls the gun but the businesses that generate money to pay for the guns.

The Party controls businesses

The Party controls businesses through appointment of key personnel in banks and public sector companies and through many different means in private sector companies.

China has long exercised control over its financial institutions. Top executives in banks are Party members and may be moved from government or party positions to the financial institutions. One good example of this is Mr. Guo Shuqing. Mr. Shuqing has been the chairman of important financial institutions such as China Securities Regulatory Commission (CSRC), and of China Construction Bank. He has also been the Vice Governor of Guizhou province and the Governor and Deputy Party Secretary of Shandong province. The appointment of people such as Mr. Shuqing in important positions in financial institutions is to ensure that these institutions run as per the directions of The Party. This control extends to non banking public sector companies too.

In 2004, the Central Organisation Department swapped the top executives of three big state owned telecom companies China Mobile, China Unicom and China Telecom. Two of these were listed on overseas exchanges and it seemed that the Boards of the companies had little say in these moves. A similar reshuffle took place in 2015, when MIIT vice minister Shang Bing was named China Mobile chairman and chairmen at China Unicom, China Telecom swapped posts.

Not only are leaders of public sector giants appointed by the party. They are, most of the time, important Party members. China is reported to have a telephone system that exclusively connects the most important people in the country. This ‘red phone system’ works through operators: the phones don’t have dial pads. McGregor reported that 50 of the leaders of the public sector company heads were important enough to have been allocated the ‘red machines’.

The Party takes measures to ensure that it has a say in the workings of private sector companies too. Large companies have party committees established inside them. WalMart had to grapple with this challenge when it entered China. In 2006, ten years after it had entered the country, WalMart had a party committee in its HeadQuarters. At that time, many of its stores already had a party committee for a few years.

Many homegrown companies don’t see any contradiction in a business having a Party committee. When asked if creation of Party Committees could create a conflict of interest, this is what Zhang Ruimin, the Chief Executive of the white good manufacturer Haier, had to say

“I appointed myself party secretary of Haier. So I can’t have any conflicts with myself, can I?”

In any case it is not trivial to figure out which companies in China are privately held and which are public sector companies. Many entrepreneurs take investment from the government. They believe that such investment is essential if the company wants to become very successful. This deliberate embrace of The Party and / or the state is called ‘wearing a red hat.’

As in the army, there is a tension in businesses between running it efficiently and adhering to principles of communism. The best businessmen have dealt with this tension with pragmatism. Here is Mr. Guo Shuqing, when he was Chairman of China Construction Bank as quoted by McGregor,

“The only way to put the latest communist principles into practice was to maximize returns for shareholders.”

The control over all organized groups in the country by The Party goes beyond army and businesses.

Other organized groups

The Party is diligent in controlling religion. The Party and Vatican have been in a long standing dispute over who has the right to control the appointment of Bishops to the Catholic church in China. The two sides reached a provisional agreement in 2018 and the agreement has been extended for two years twice. Critics have denounced the agreement for being too much in favor of The Party. This is an example of the power of The Party. If this is the influence that the Party has over the most organized and powerful religion in the world, one can only imagine the extent of its influence over more local religions such as Tibetan Buddhism.

Another example of the Party controlling any organized body is that of lawyers. According to McGregor, of the 150,000 registered lawyers in the country, 45,000 were party members.*

All China Federation of Trade Unions is China’s sole legal trade union body*. That workers cannot form independent trade unions in their place of work, speaks volumes of the power of the Party.

If controlling all organized bodies is one pillar of The Party’s power, the other is controlling the narrative.

Party and control of narrative

The Party controls the narrative in the country. This is done by controlling the Internet, the media houses and what is taught in schools and universities.

The party has a propaganda department and all media comes under it. The department can get journalists fired or newspapers closed. Ananth Krishnan points out in his book that international journalists require a special permit to travel to certain areas such as Tibet Autonomous Region (TAR). More importantly, there are restrictions on travel for non journalists. Most importantly, local authorities can detain and send back a journalist even if she has the required credentials from Beijing. If journalists somehow manage to publish a story that is deemed to be inappropriate, the party can prevent it from being widely read because of its control of the Internet.

As is well known, the Chinese portals to the Internet are different from most of the rest of the world. The dominant search engine in the country is Baidu (not Google) and the dominant social media platform is WeChat. Baidu uses tools to influence what is and what is not discussed on the net. So successful are its tools that it sells them to companies that wish to manage their image!

The Party uses technology and paid internet posters to spread its point of view or change the topic. It is believed that it employs people who would post on its behalf on any issue which has political significance. These paid people started getting called the 50 cent army — a reference to the amount they were supposedly paid per post. There is also a ‘voluntary 50 cent army’ — people who agree with the CPC point of view and fight online battles on its behalf.

Perhaps, the most interesting thing that The Party does to control the narrative is shape the way the history of the country is portrayed. For example, an unfettered discussion of the Mao years is frowned upon. History text books and discussions in universities are shaped zealously by the Propaganda department.

All these efforts pay off, at least some times. McGregor reports about a mining accident in the Henan province. When a miner was rescued, according to an official dispatch the first words he uttered were

“I thank the Central Party. I thank the State Council. I thank the Henan province government. I thank the people of the nation.”

In recent years, the CPC narrative has been a combination of pride in economic (and other) successes and nationalism. One of the reasons for China’s economic success is how decentralized it is.

The surprisingly decentralized country

The extent of control of The Party over the government, army, businesses and media gives an impression of a strong centralized entity fully in control of the entire country. This is misleading. China is very decentralized.

As Arthur Kroeber says in China’s Economy, 85% government spending happens at the level of provinces and cities. This is much higher than what you can see in developed western countries. To some extent this is inevitable in such a large country. As a comparison, Even in India, states formed 60% of the amount of national spending in India according to PRS. These figures do not however fully show how powerful the sub national party and governments are.

China watchers believe that a big economic strength of communist China is that provinces compete intensely for business. As Richard McGregor writes in his book

“A locality of 300,000 residents may employ 500 people whose sole job is to solicit investment.”

The localities promise businesses support in land acquisition, getting clearances, arranging finance and in assistance in case of legal disputes. The Party is able to deliver on its promise of land acquisition because of the very weak land rights of rural Chinese. In fact, acquiring land from peasants and selling it at a premium is a significant source of revenue for local governments. It is easy for the Party to deliver on other promises because of its strong control of the government, banks and courts at the local level.

Some China observers believe that there is continuous waxing and waning of the relative power of Beijing and different regions. When regions become more powerful, there is economic growth but also corruption. Let us look at that next.

China and corruption

We know that unchecked power leads to corruption. With so much power resting in The Party how does China not suffer from it? It does.

Many observers believe that The Party realizes that corruption is the greatest threat that it faces. CPC Secretary Mr. Xi Jinping has spoken out at length against it and has taken action. According to Ananth Krishnan, in the four years before Mr. Jinpeng’s ascension, the average number of officials that committed suicide per year was 21. In the next four years the figure nearly doubled. Insiders believe that the actual number may have been even higher. Why is the number of officials committing suicide important? It has to do with how corruption of senior officials is dealt with.

First of all, senior party officials are not investigated by the state but by The Party. The Central Commission for Discipline Inspection (CCDI) carries out this investigation. It rarely begins an official investigation unless it already has a lot of evidence. The officials being investigated may be kept in their homes or in undisclosed locations and can come under tremendous pressure to confess. It may be months before they are transferred to the state legal system. The courts come under the Party and rarely, if ever, pronounce a judgment of not guilty. This entire process — known as Shuanggui — can put tremendous pressure on the accused official. Many times, the officials committ suicide rather than subject their families to this pressure and to shame. The extreme powers that CCDI enjoys helps it to get results. However, its opaqueness also has a downside.

There is a belief that the really senior party leaders indulging in corruption rarely get caught. This may be because of two reasons. The first is that the party apparatus, for example CCDI, cannot really investigate people who are their superiors. Secondly, The Party is positioned as the only body that can provide leadership and governance to the country and a totally independent investigation of its top leadership is hardly conducive to this positioning.

It is extremely difficult to quantify high level corruption in any country. For whatever it is worth, Ananth Krishan quotes estimates from Chinese authorities of 800 Billion Yuan (Rs. 8 lakh Crores) as the amount of money that has been taken out of the country. How has China managed to grow spectacularly with this high level of corruption?

One big reason could be that the incentives of local governments as well as officials are aligned with growth. In her excellent book, China’s Gilded Age, this is what Yuen Yuen Ang has to say

‘In China, local governments are not authorized to create their own taxes, but they are allowed to retain a certain portion of tax revenues according to tax sharing rules.’ (Emphasis added)

Thus, the local government revenues are tied to growth. More importantly, officials working in the local governments get part of this revenue as compensation. Thus, their compensation is also linked to growth. The incentive to be corrupt is at least partially mitigated by the incentive to be pro business. I have covered this issue in detail here.

All this means that although the extent of corruption in China may be as high as that in India, the corruption is business enabling whereas in India it can be business hindering. Additionally, India has pervasive corruption at the low level of the government. As Ananth Krishan says eloquently,

…In China, the tigers may be much fiercer (and far wealthier), but in India, the flies are overwhelming.”

Corruption is one danger of unchecked power. The other is transfer of power. Let’s take a peek at that.

Succession in China

China has seen three orderly transfers of power since Mr. Deng Xiaoping resigned as the Chairman of the Central Military Commission in 1989. Mr. Jiang Zemin, Mr. Hu Jintao and Mr. Xi Jinping became the most powerful leader of the country in peaceful transfers of power. Mr. Zemin and Mr. Jintao made way for their successor in ten years. However, in October 2022, Mr. Xi Jinping was elected to the post for a record breaking third time.

It is not clear to me when the next person will take this post and who it will be. Most China observers are humble about their understanding of how power works at the highest levels. How and when will the next transfer of power be? We don’t know.

How different is China, really?

If you have reached so far, it is likely that I have convinced you that China is unique in the way power is exercised in the country. Let me try to convince you now that it is not that unique. I will do it by talking about the United States (US).

The US was one of the earliest to become a democracy in modern times. The country has vigorous elections between two parties. It also has some of the strongest laws and cultural norms in support of freedom of speech. The economy of the country is dominated by independent and innovative firms that compete fiercely. This is a fair summary, isn’t it? And yet, even in the country with a genuinely high level of freedom of speech, we see narratives take hold that very few people resist. Let’s take examples.

In 2003, the US attacked Iraq. This was supposedly in retaliation for the 9/11 attacks on the United States and because Iraq had Weapons of Mass Destruction (WMD). I remember visiting the US before the attacks and not meeting anyone who was opposed to this war. Nearly all the media supported the war. The proposal for the war passed both the House and the Senate comfortably. In the Senate, a majority of senators from the Democratic party, the then opposition party, voted for the proposal. Two decades, hundreds of thousands of deaths and no WMDs later, no government or media personality has suffered any career repercussions as far as I can make out. It is not just that one war though. If anything, the war in Ukraine has seen an even broader support amongst the legislators if not in the wider public. Strong narratives dominate the US but not just about war.

When Covid-19 broke out across the world, it was deemed racist to suggest that the virus escaped from a lab in China. Major publications called a possible lab origin a racist conspiracy theory. Social media organizations suspended accounts that suggested that Covid-19 could have originated in a lab. Three years later, without much change in underlying evidence, US media is now increasingly saying that at minimum, the lab leak hypothesis cannot be ruled out.

The two parties rarely disagree when it comes to most important issues. The defense department budget is passed every year with very little opposition and a lot of inflation. Financial firms are bailed out regularly. Most importantly, the country merrily increases the supply of Dollar with very little opposition. Even in a vigorous democracy with genuine freedom of speech, there is very little challenge to dominant narrative. It is almost as if there is only one dominant party in that country.

I am sure that by now some of my friends, especially those who stay in the US, are bristling. Am I seriously comparing the US and China? The reality of living in the US is very different from my summary description! But that is the point. From what I am told, the day-to-day reality of living in China is also very different from my description, especially in the last few decades. I am fairly confident of the facts that I have presented but not as confident about the picture I have painted. I am an Indian and am unimpressed with most articles on India. The country is just too diverse and too huge for the generalizations writers have to inevitably make. I think China is an order of magnitude more difficult for an outsider to understand than India so there is no way that my article is either complete or definitive.

As I was finishing this blog, I started reading the widely acclaimed book, ‘The Three body Problem.’ The English translation that I am reading begins with a stinging criticism of the Cultural Revolution. The author, in an interview, compared the cultural revolution to the Nazi Holocaust. In the original Chinese version, the chapters on cultural revolution were not in the beginning but in the middle, but it seems that in the later version, they have been put at the beginning as they are in the English version. So for all the sensitivity of the Party to this phase of history, at least one very famous book in China is openly critical of it. Reading the book changed the imageI had in my mind about China a little.

China is huge. China is ancient. China is rising. It is also very difficult to understand. It is very important to understand. I hope this article helps you do that.

* McGregor published his book more than a decade ago. Facts may have changed since then. But the scale of these facts is still illustrative.

I am trying to understand China better and this is my third article on India and China comparisons. I will keep posting what I learn in this list — Viewing China through an Indian lens.

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Yogesh Upadhyaya

Entrepreneur. Economist. Investor. Actor. Technophile. Policy wonk. Comedian. I love to explore places where these worlds intersect.