The second is the transformation of industrial structure. At the beginning of the reforms, about 30 percent of China’s GDP was from agriculture. Today, this has fallen to about 10 percent. The service sector has doubled to over 40 percent from around 20 percent at the beginning of the reforms. The most impressive change, however, is in the manufacturing sector. It accounts for half of China’s GDP, which is a striking proportion when compared with other developing countries of similar per capita GDP. China’s manufacturing share in GDP is at least 10 percent higher. This partly explains why China has become a global manufacturing hub.

The third transformation is that of Chinese society. China is becoming increasingly urbanized, as the population has been gradually moving from the countryside to cities. In 2011, 51.3 percent of the country’s population lived in cities. In 1982, the figure was 20.6 percent. In addition, Chinese society has become much more open. China has become the largest international trading country and Chinese people traveling overseas have increased multifold over the last decades to surpass 70 million in 2011.

Fourth is the governance system, which has been changing from one based on personal charisma and authority to one that is increasingly based on rule of law and broad participation. In the early 1990s, direct elections kicked off at the village level. The government has pursued reforms in many other areas, such as the six rounds of administrative reforms since 1982 to make the government more efficient and transparent. Nowadays, the Chinese people participate in policy making in a much broader way. Channels for this participation include public hearings and reporting on corruption through the Internet. The development of NGOs and civil society has also changed the structure of China’s governance enormously. On an individual basis, each of these changes could have happened in any country at different times. But they all happened in China over a mere 30 years. When taking into account the short period and the size of the country’s population, the scope of challenges to the government becomes clear. Any small problem is a big problem when it’s multiplied by 1.3 billion.

Types of Public Policies and Players in the Policy System

Public policies in China can be divided into the following strata:

At the national level, there are strategic directives that have a major impact on the country, like the one in the late 1970s calling for opening-up and reform, and that prioritizing a scientific approach to development initiated by President Hu Jintao.

The second tier of policies consists of national legislation and administrative ordinances, such as the Law on Emergency Management. China’s medium- and long-term plans such as the Five-year Plans are of this level. They are a unique aspect of China’s policy formulation, and provide guidance on what will happen in China in the near future.

The next level is ministerial administrative decisions. This is very much in line with policies in other countries, for example, policy to encourage indigenous innovation and policy to promote financial reforms. Further down, we have provincial and prefectural administrative ordinances and decisions, which also include local government budgets.

The formal policy-making system includes the Communist Party of China (see graph 1), the National People’s Congress (see graph 2), the Chinese People’s Political Consultative Conference (CPPCC) and the State Council (see graph 3). China has a highly integrated system in which the ruling party, the Communist Party of China, makes recommendations on important positions to the National People’s Congress (NPC). It is no coincidence that the CPC National Congress is held every five years, just a few months ahead of the National People’s Congress.

We also have state-sponsored policy research organizations within the government, such as the State Council Research Office.