1. The contradiction between the new stage of pluralistic goals and pluralistic policies and the unsound institutional foundation of pluralistic policies

China has entered a new stage of development with diverse goals and policies. In the past, we pursued high-speed growth, but now we pursue high-quality development. From the perspective of development economics, it is the pursuit of development from the pure pursuit of growth. Growth is just the quantitative concept of getting bigger. Moreover, development is not only a matter of scale and quantity but also a matter of quality and structure. It is not only an economic issue but also a social, ecological, and environmental protection issue. The overall characteristics of China in the new stage of development are becoming more and more obvious. At present, only the growth of gross domestic product (GDP) is not enough. All aspects of the economy and society are interrelated and restrict one another so they must all be considered. Therefore, the overall characteristics of development are derived from multiple goals and multiple policies. The pursuit of high-quality development is not a certain aspect, a certain field, or a certain region but rather an overall, all-round, long-term high-quality development. The theme of high-quality development in the new era also provides legitimacy for governments at all levels and departments to issue campaign-style policies. As a result, the protracted war has turned into an assault.

From the previous stage of focusing on growth goals to a multi-target stage such as growth goals, people’s livelihood goals, and security goals and when putting forward these goals, there is no clear order or priority to hierarchical classifications. As practical departments tend to advance hand in hand, policies are becoming more and more diversified. The economic impact of policies grows, not only from the economic policies and market supervision policies formulated and implemented by the economic authorities but also from the non-economic policies and social supervision policies issued by the education authorities, S&T authorities, health and wellness authorities, environmental authorities, publicity authorities, and network and information authorities.

In this process, the contradiction between the new stage of pluralistic goals and pluralistic policies and the imperfect institutional foundation of pluralistic policies has become prominent, which is reflected in the “Three Transformations that Do Not Align.”

First, social transformation does not match economic transformation. The reform and opening up over the past 40 years has mainly changed the planned economy but in the past it was not just the planned economy but a “planned society” based on the planned economy. So far, the planned social system has not undergone real major reforms, and many of the problems currently encountered are a result of the planned social system, not the problems of the planned economy. Factors in the planned economy still exist, such as the market-based allocation of factors, but the bigger constraint is the planned social system, which has seriously hindered the deepening of market reform. This is the result of social transformation failing to keep up with economic transformation. The new development stage pursues many goals, such as higher efficiency and fairer and more beautiful development. Whether it can be successfully realized depends on social transformation, but social transformation has not kept up with the pace of development.

Second, economic transformation does not match green transformation. From the perspective of social transformation and economic transformation, economic transformation is at the forefront, and social transformation lags behind. Moreover, from the perspective of economic transformation and green transformation, green transformation rushes ahead, and economic transformation lags behind. How to avoid the moving approach in green transition is a governance-level issue to be resolved. The moving approach has recurred in different ways and in different sectors, and it remains a question whether it can be truly avoided in the future.

Third, there is a mismatch between government transformation and development transformation. Over the years, the emphasis has been on accelerating the transformation of government functions, but what changes have been made in government functions? How have they transformed? Government functions include economic functions and social functions. From the perspective of national governance, government transformation is the transformation of national governance. This is precisely the goal of comprehensively deepening the reform determined by the Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening the Reform issued by the Third Plenary Session of the 18th Central Committee of the Communist Party of China. Government transformation must further keep up with the overall requirements of development and transformation.

The mismatch of these three transformations has led to the lack of a foundation for the current multi-goal and multi-policy system. The overall framework for deepening the reform has been set up, but from the perspective of the whole of society, there are actually many problems. For example, the planned social system based on the planned economy of the past still requires breakthrough reforms. The basic framework of the institutional system left over from the planned social system has not changed. Many of the micro-foundations of education, science, culture, and health are public institutions, involving tens of millions of people, and it is a knowledge-intensive group. It is still difficult to unleash the creativity of personnel in the institutional system. This is the root cause of many livelihood issues such as education, medical care, and employment that are difficult to solve through policies alone.

2. Avoid the “fallacy of composition,” “fallacy of decomposition,” and engineering thinking tendencies of policies

Under the current multiple goals, the rigid assessment of policies can easily lead to the pursuit of extremes, short-termization, and indexation. Excessive pursuit of indicators is somewhat similar to the planned indicators of the past. There are many goals and many policies, and each indicator must be assessed. If one is not managed well, it will be rejected. Excessive indexing in policy also leads to a lack of necessary policy innovation space to account for local conditions. Under the circumstance of multiple and rigid policies, local governments have limited financial resources and cannot adjust financing uses, such that the space for autonomy is gradually narrowing. It is difficult for local governments to give full play to their initiative, enthusiasm, and creativity. Under a strict accountability mechanism, local governments must have a basis for everything they do, and they must wait for documents, instructions, or notices, otherwise they may be judged as “flexible,” “discounted,” or “disorderly behavior.” This issue continues to grow. The risk of post liability will involuntarily lead to the overall contraction of the creative behavior of local governments. Extreme and mechanical behaviors have instead increased, a departure from the vitality of the past.

In this case, the way the policy is implemented brings forth the “fallacy of composition” and the “fallacy of decomposition.” The “fallacy of composition” is that the policies are correct from the perspective of various authorities, and they all have certain goals, but when viewed together, if they advance in unison, it will be impossible to achieve the “thousands of threads and governments at the community level as a single needle that weaves.” The “fallacy of decomposition” is that systematic tasks that should not be decomposed are decomposed. Some are broken down across various authorities and various places, and some are broken down over various time periods. For example, on the issue of pollution reduction and carbon reduction, if the assessment is conducted every five years, there will be some flexibility for local governments. If there is time to make necessary preparations, enterprises will have clear expectations and know how to change and adjust. If the assessment is conducted every six months, the local government has to take tough administrative measures, which will lead to the stagnation of development, thus the “fallacy of decomposition.” Excessive and overly detailed task decomposition arises from the idea that better clarification of responsibilities and greater pressure can serve as a motivation. In fact, pressure does not serve as motivation but rather results in overall disorder.

At a deeper level, this is directly related to the engineering mindset. Solving social problems with engineering thinking can lead to widespread chaos. The task of building a house can be very finely divided, even by several companies working at the same time because precise calculations can be made, and there are very precise standards for construction locations and required materials such as for rebar and cement. However, if a solution for social goals, social policies, and social problems is implemented as a project and the indicators are decomposed, the finer the points are, the greater the degree of uncertainty. To depart from engineering thinking, do not assume that greater design detail at the high level is better or that more indicators would be better to avoid the alienation of the grassroots. Since there are many uncertainties in economic and social issues and information asymmetry, it is difficult to fully foresee possible changes over time, so in this case, it is necessary to reserve room for ambiguity. Social coupling is not a precise coupling in the sense of physics but rather a kind of ambiguous coupling, so it is necessary to allow for the existence of ambiguity, otherwise it will be counterproductive.

Therefore, under the condition of an uncertain macro environment, it is necessary to leave more room and flexibility for policymaking, and the direction of policy assessment should serve as a guide rather than an excessive pursuit of indicators.

3. Build a mechanism for generating policy coordination

Policy synergy across divisions of power: Documents of the Party Central Committee have always called for giving local governments greater autonomy and governance, but now the tendency towards “meticulous” policies has weakened local autonomy. Every move hinges on a one-vote veto such that any single authority can have the power of life and death over local governments. Some have ridiculed this as “a thousand knives slicing down upon a single head” rather than the “thousands of threads and governments at the community level as a single needle that weaves.” From the perspective of national governance, the local government should be regarded as the main body of first-level governance and given independent decision-making power in governance. In terms of major national strategies and major policies, local governments should creatively transform and implement them according to actual local conditions, rather than mechanically and dogmatically copying central policies.

Policy synergy along lines of authority: Synergy along lines of authority is first and foremost the policy synergy between the economic sector and the non-economic sector. It stands to reason that China has more political advantages and institutional conditions for coordination across departments, but from the results, the level of coordination is poor. If there is a sense of the overall situation, coordination along lines of authority should be a breeze. There is also a particularly important relationship between lines of authority, that is, the relationship between matters and money. Due to the lack of an effective coordination mechanism, in fact, many policies issued by non-financial authorities require local governments to increase spending, which is adding a lot of potential spending to future finances. If a locality is financially constrained and its policy enforcement is compromised, the locality will be held accountable. As a result, the local government can only find ways to raise funds or even utilize illegal financing and borrowing, resulting in hidden debts. In order to achieve the goal of preventing and controlling financial risks and assuming the main responsibility of the local government, the local government will integrate finances, link local state-owned enterprise platform institutions with finances, and make overall use of financial resources. However, in this way, there will be no division between local governments and enterprises, and there will be no division of labor between the government and the market, which will lead to greater risks.

Therefore, policies issued by various authorities should be evaluated in advance, and the accounts of future fiscal expenditures should be calculated, which should be matched with the future fiscal capacity. This game of chess should be formed into the overall consideration of future budgets. If many policies are introduced without considering the conditions of future budget constraints, policies will fail or local finances will be skewed and financial pressure will increase. This is a major risk that must be considered for high-quality development. When policies are introduced, take less for granted, expect more uncertainty, and do more risk assessments on policies to avoid many things that should not happen.