Research and ideas play an increasingly important role in China’s policymaking

By Tang Yuankai

Beijing Review

On April 19, the National School of Development at Peking University celebrated its 20th anniversary. Six foreign-educated economists, including Justin Yifu Lin, who went on to become the first chief economist and senior vice president of the World Bank from a developing country in 2008, founded the school as the China Center for Economic Research in 1994. Another founder Yi Gang is now vice governor of the People’s Bank of China, the country’s central bank, and administrator of the State Administration of Foreign Exchange.

“Their important positions highlight our school’s strength as a think tank,” said Professor Yao Yang, who is the current dean. At an anniversary ceremony in Beijing, Yao commented that over the past two decades, faculty members of the school had been invited to participate in discussions before almost every major reform in the country’s state-owned enterprises, the stock market, the land system and the medical care system, as well as having been consulted on issues concerning rural development. Many of their suggestions have been adopted by the government, according to Yao.

Liu Chuanzhi, founder of Lenovo and Chairman of the Board of Legend Holdings, attended the celebration. “China needs think tanks,” Liu said. “As the generation of leadership initiating China’s reform and opening up admitted the tentative nature of any reform, they placed immense value on the experience and lessons from former reforms. When introducing policies, government leaders need consultation and support from think tanks.”

China’s think tanks have experienced vigorous growth in both number and influence over the past 30 years. “Right after the inception of the reform and opening up in 1978, the Central Government was faced with a shortage of experts when drafting reform plans and began to search for capable people from various government departments and subsidiary institutions,” said Lu Zhiqiang, former Deputy Director of the Development Research Center of the State Council, China’s cabinet. Lu recalled that initially these consultants were summoned to discussions with top leaders on an irregular basis and they later became the staff of newly founded think tanks.

As China’s reform and opening up enter a deeper and more comprehensive period, which requires more sweeping change, decision-makers have become increasingly open to suggestions from outside sources. The ongoing transformation of the government’s role from administration to service has provided more development space for think tanks.

On January 23, the Think Tanks and Civil Societies Program at the University of Pennsylvania in the United States released its annual Global Go to Think Tanks Report, the most comprehensive ranking of the world’s top think tanks. According to the report, China ranked second globally in terms of the total number of think tanks with 426, second only to the United States’ 1,828.

Chinese leaders have given more importance to the role of think tanks in recent years. In October 2007, delivering a report to the 17th National Congress of the Communist Party of China (CPC), Hu Jintao, General Secretary of the CPC Central Committee, said that “to ensure scientific and democratic decision-making, we will improve the information and intellectual support for it, increase its transparency and expand public participation in it.” This is the first time that the work of think tanks was implicitly highlighted in such a high-profile document.

The report to the 18th CPC National Congress in November 2012 made a call to “conduct scientific, democratic and law-based policymaking, improve decision-making mechanisms and procedures, seek advice of think tanks, and establish sound mechanisms for decision-making accountability and remedy.”

At the annual Central Economic Conference in 2012, Xi Jinping, General Secretary of the CPC Central Committee, demanded establishing decision-making consulting mechanisms and developing think tanks that are capable of assisting decision-makers and researching topics before practical needs emerge.

Just one month after he was elected president of China in March 2013, Xi expressed his approval and comments in a proposal on building think tanks with Chinese characteristics. Experts believe the message behind Xi’s approval includes making think tanks a part of national strategy and a component of China’s soft power.

The Third Plenary Session of the 18th CPC Central Committee in November 2013 adopted the Decision on Some Major Issues Concerning Comprehensively Deepening the Reform, which mandates enhancing the construction of think tanks with Chinese characteristics and establishing a complete consulting system for decision-makers.

Professor Hu Angang, Director of the Center for China Studies of Tsinghua University, was invited to participate in the drafting of China’s five-year plans for socioeconomic development several times. He said that think tanks with Chinese characteristics should be based on reform efforts in China, study problems native to this country, as well as form their own work styles and research principles.

The plenum also decided to establish a national security commission to improve systems and strategies for national security. Anthony Yuen, a commentator from Hong Kong-based Phoenix TV, said that this new organization “is a think tank to some extent.” Zhang Guoqing, a senior research fellow with the Institute of American Studies under the Chinese Academy of Social Sciences, also commented that the founding of the new commission would lead to an upgrade of China’s think-tank system.

Comprehensive development

Right before the opening of the Third Plenary Session of the 18th CPC Central Committee, President Xi met with foreign consultants of the School of Economics and Management of Tsinghua University. “As globally renowned businessmen, you have brilliant insight to the global economy and the Chinese economy. I would love to listen to your opinions. Your suggestions can inspire the Chinese Government,” Xi said. Some foreign media outlets interpreted the meeting as Xi seeking advice for China’s new reform efforts.

Since the beginning of 2002, consultants of the School of Economics and Management of Tsinghua University have been received by several state leaders.

Founded in 1984, the school’s first dean was China’s former premier Zhu Rongji. In October 2000, Zhu, who had assumed the premiership, advocated the establishment of a consultant committee in the school. “Through this consultant committee, we could learn management experience from successful companies as well as the curriculum and teaching methods of the best management schools in the world,” Zhu said.

The current foreign consultants of the committee include David M. Rubenstein, a co-founder and co-CEO of The Carlyle Group, a U.S. venture capital firm; Dominic Barton, managing Director of McKinsey & Company; Daniel Akerson, former Chairman and CEO of General Motors; and Tim Cook, CEO of Apple Inc. Among its Chinese consultants are top government officials on economic affairs, such as Vice Premier Ma Kai, Governor Zhou Xiaochuan of the People’s Bank of China, Minister of Finance Lou Jiwei and Liu He, Director of the Office of the Central Leading Group on Financial and Economic Affairs.

Some successful Chinese entrepreneurs also made it into the consultant committee, such as Jack Ma, Executive Chairman of the Alibaba Group, China’s largest e-commerce business, and Robin Li, Chairman and CEO of the Baidu Inc. that operates the world’s largest Chinese Internet search engine.

The Chinese Government has attached increasing importance to the role of higher learning institutions as think tanks. During a seminar in Beijing in May 2013, Vice Premier Liu Yandong said that colleges and universities should rely on their advantages in their complete disciplinary system and human resources to become “consultants to decision-makers and evaluators of policies.”

“As think tanks, higher learning institutions could exert significant impacts on decision-makers and society in general through unique ideas and opinions. They are in greater demand than ever before and embracing this historic opportunity to make a bigger contribution to society,” said Professor Hu at Tsinghua University. Hu revealed that during the drafting of the 12th Five-year Plan (2011-15), higher learning institutions undertook more than half of the 80 strategic research programs.

On top of this, government-affiliated think tanks are also getting more credit for their work.

For example, since its founding in 1981, the Development Research Center (DRC) of the State Council has participated in the drafting of medium- and long-term socioeconomic development plans, as well as the research and decision-making process of every major policy of reform and opening up. It also organizes or takes part in important national research projects, and researches on regional development strategies and planning. The center has become the most influential government think tank on economic policies, while the Chinese Academy of Governance, which was founded in the 1990s, is now the best known government-affiliated think tank on political affairs in China.

The largest part of services provided by the DRC of the State Council is its research projects, which involve the largest amount of polling and basic research. The conclusion is written into a report or a summary, which is submitted to central authorities.

The CPC Central Committee also has two affiliated think tanks—the Policy Research Office and the Party School.

Besides conducting research projects and writing papers delivered to top leaders, research fellows of these think tanks have been invited to give lectures at learning sessions of the members of Political Bureau of the CPC Central Committee.

China’s top decision-makers have also showed an unprecedented gesture in valuing the opinions from privately funded think tanks. In October 2003, the National Development and Reform Commission, China’s top economic planner, invited bids from around the world for preparatory research programs for the drafting of the country’s 11th Five-Year Plan (2006-10), the first time bids had been solicited in this way. Several non-governmental think tanks were later selected through the bidding process and participated in drafting the plan.

Some non-governmental think tanks have become so influential that government departments seek their opinions during the policymaking process.

One example is the China Center for International Economic Exchanges, which was founded in 2009 by 122 members from economic, academic, diplomatic fields as well as former government officials. As a high-profile think tank from its inception, it drafted a proposal on establishing a mechanism for promoting transformation of China’s development mode before the Third Plenary Session of the 18th CPC Central Committee, with the center’s Chairman and former Vice Premier Zeng Peiyan as the project leader, and sent the proposal directly to top state leaders.

However, a large number of non-governmental think tanks faced the difficulty in development caused by the lack of government’s trust in their work, insufficient financial resources and weak self-development capacity. Many experts believe, as these think tanks operate outside of the interests of specific sectors, the government should provide more support for their establishment and development, which could include methods such as granting tax breaks, nurturing demands for their research products and boosting the growth of the consultancy market. The government should also help non-governmental think tanks to grow and promote healthy competition in the market so that those doing solid research can be the winners.

“It is common for different think tanks to draw different conclusions on the same issue and these results can all be meaningful to decision-makers as long as they are based on accurate data and rigorous methodology,” said an anonymous expert.

Seeking input from abroad

As Shanghai’s earliest shopping street, the Nanjing Road was once known as “the busiest shopping street in China.” However, its status declined in the 1990s when a large number of modern shopping facilities were built in other parts of the city. When compiling a development plan to renovate the historic road, the local government turned to McKinsey & Company, an American global management consulting firm, for the design.

This project marked the beginning of the cooperation between the Shanghai Municipal Government and McKinsey, which has lasted for more than a decade. When meeting with Dominic Barton, Managing Director of McKinsey, during his visit to Shanghai earlier this year, Shanghai Party chief Han Zheng said that the primary task for CPC Shanghai Municipal Committee and Shanghai Municipal Government is to comprehensively promote reforms and that these reforms require wisdom from across the globe.

Back in 2004, McKinsey designed a plan to reform China’s medical care system for the Ministry of Health, currently known as the National Health and Family Planning Commission, which stood out from the other seven reform plans that year as the only one with foreign input. McKinsey has also helped the Chinese Ministry of Commerce draft a white paper on the development of China’s outsourcing industry and advised the ministry on predicting development trends of e-commerce and logistics.

At the local level, McKinsey undertook a research program on “promoting a new type of industrialization” for southwest China’s Sichuan Province during its drafting of a local five-year plan for 2011-15.

“The transitions Chinese companies are going through provide us with a lot of opportunities,” said Gong Li, the Greater China Chairman of Accenture, another global consulting firm. Li said that the past decade has been a key stage for the deepening of China’s economic restructuring and the climb up the global value chain by Chinese companies.

Chinese clients’ consulting demands from Accenture range from solving short-term growth bottlenecks to developing long-term development plans and understanding the global value chain of an industry, according to Li. The demands are particularly strong in improving management capacities for global companies, long-term human resources strategies and organizational structure and developing digital business in a big data era.

“A major transformation in our clientele over the past decade is that it used to be dominated by foreign companies right after we entered the Chinese market while more than 80 percent of our clients are Chinese local companies,” Li said.

In 2013 Accenture and the Chinese Academy of Sciences joined hands in releasing a report entitled Creating Prosperous and Livable Chinese Cities, based on a study conducted to help city authorities benchmark their progress in sustainable development in the context of China’s urbanization policy agenda.

Abandoning their earlier concerns over whether experience gained in the West could be used to solve problems in China, many governmental departments and Chinese companies are becoming more willing to hire foreign consulting firms.

“The cooperation with local government departments has become deeper, from drafting long-term development plans to annual cooperation programs,” said Yu Jin, a partner with McKinsey and the head of its Beijing office. Having worked in McKinsey for 14 years, she admitted that her career benefits from her Chinese origin.

“To better meet China’s market demands, the company has recruited partners from locals. As project leaders, locals can more effectively serve the government and company clients in China,” Yu said.

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Chinese Think Tanks

– Top 10 in Overall Strength

1. Development Research Center of the State Council

2. Chinese Academy of Social Sciences

3. Peking University

4. Tsinghua University

5. China Center for International Economic Exchanges

6. Party School of the Communist Party of China Central Committee

7. Academy of Macroeconomic Research under the National Development and Reform Commission

8. Fudan University

9. Shanghai Academy of Social Sciences

10. China Institute for Reform and Development

– Top 5 Party- and Government-affiliated Think Tanks

1. Development Research Center of the State Council

2. Party School of the Communist Party of China Central Committee

3. Academy of Macroeconomic Research under the National Development and Reform Commission

4. Development Research Center of the Shanghai Municipal Government

5. China Institutes of Contemporary International Relations

– Top 5 Non-Governmental Think Tanks

1. China Society of Economic Reform

2. China Institute for Reform and Development

3. Horizon Research Consultancy Group

4. Hurun Research Institute

5. 21st Century Education Research Institute

(Source: China Think Tank Report)

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