Ahead of this year’s Two Sessions, the weeklong meeting of China’s largely rubber-stamp parliament that started on March 4, President Xi Jinping released another volume of his speeches—this time on what the Chinese Communist Party (CCP) calls the “correct view of political performance,” a concept that has become the centerpiece of an ongoing campaign to redefine how officials are judged.
The timing is highly suggestive. For months, Beijing has been urging cadres across the country to rethink the meaning of bureaucratic success. Yet even a leader as powerful as Xi sometimes struggles to persuade China’s vast administrative machinery to move in the direction he prefers.
Xi and China’s bureaucracy face a classic principal-agent dilemma. The center sets priorities. Local officials implement them. Their incentives do not always align.
Why now? What makes the current moment unusual is the urgency. For most of the reform era, the system relied on a brutally simple organizing principle: GDP growth. Local officials understood the rules: Deliver rapid expansion, and promotion would follow. As long as growth targets were met, other problems could be deferred or absorbed. Debt accumulation, environmental degradation, speculative construction, and even bouts of social unrest could be tolerated so long as the growth machine kept running.
The model produced immense distortions. It also produced results. China’s economy surged forward, lifting hundreds of millions of Chinese out of poverty and transforming the country into a global industrial powerhouse. But that formula has reached its limits. High-speed growth has become harder to sustain and less desirable to pursue.
Beijing now frames its economic strategy around structural transformation and, critically, a pivot toward domestic demand as China confronts a post-property market fiscal and tax restructuring, macroeconomic recovery, and heightened external tensions all at once. Meanwhile, the old industrial machine continues to churn out excessive capacity, eroding profits through deflationary price wars and further intensifying external trade tensions.
The difficulty lies in translating those ambitions into bureaucratic incentives. GDP once offered a clear metric to evaluate performance. The new agenda revolves around longer horizons and softer objectives. “Investment in people” and “high-quality development” resist simple measurement. Officials still need something tangible to chase.
In fact, Xi’s newly compiled speeches reveal that he has long been uneasy about the distortions of GDP worship. As early as 2013, he warned that officials could no longer be judged solely by economic growth rates. China, he argued, had to abandon the mentality of producing quick political achievements that “drain the pond to catch the fish.”
Yet Xi’s writings also help explain why building a new evaluation system has proved so difficult. They show that he expects local officials to satisfy three simultaneous demands that frequently pull in different directions.
The first is strict political compliance. In the reform era, local officials enjoyed room to adapt central directives to local realities. That space has narrowed considerably. Xi has emphasized that strategic decisions made by the CCP Central Committee must be implemented without deviation or modification. Both under-implementation and excessive zeal can be treated as political mistakes.
The second expectation involves tech upgrading. Beijing still wants economic dynamism. The leadership has reframed growth around the concept of “new quality productive forces.” Officials are encouraged to cultivate advanced manufacturing, artificial intelligence, green technologies, and other frontier industries. China’s next stage of development, Xi has argued, depends on innovation and industrial transformation.
The third expectation focuses on systemic security. Beijing increasingly treats financial risk and local government debt as threats to long-term stability. This concern is rooted in the legacy of past decades, when growth incentives pushed local governments to finance aggressive investment sprees through off-balance-sheet borrowing vehicles. Many of these projects—industrial parks, infrastructure, and sprawling real estate developments—boosted headline GDP but left behind heavy liabilities and underused assets. Officials are reminded that borrowing and investment decisions will be audited long after they leave office. Xi has repeatedly warned against reckless projects that leave behind large debts and unfinished infrastructure, explicitly criticizing cadres who “rack up a mountain of debt, pat their butts, and walk away, securing promotions all the way up,” demanding that “officials leaving their office must be audited and accountability must be pursued for life.”
Each of these priorities makes sense on its own. Together, they create a bureaucratic trilemma in which officials can realistically satisfy only two of the three.
Innovation requires risk-taking. Building new industries involves large investments, uncertain returns, and tolerance for failure. Achieving innovation while containing financial risk would require financing mechanisms beyond China’s state-dominated banking system, such as private capital participation, co-investment structures, or venture-style funding. Yet these approaches often fall outside the safest interpretation of existing rules and therefore sit uneasily with strict political compliance.
If local officials prioritize risk control and strict adherence to central directives, development becomes deeply risk-averse, and experimentation suffers. If they push technological upgrading through aggressive investment or creative financing, they risk future audits uncovering hidden liabilities or procedural violations, the worst nightmare for a Chinese bureaucrat. If they pursue innovation while staying within existing government financing rules, the burden often falls back onto local government balance sheets, increasing fiscal pressure and undermining financial stability.
In practice, Xi’s imperatives rarely coexist comfortably, a tension further intensified by the chilling effect of his anti-corruption campaign. The result is predictable. Xi gave this phenomenon a nickname: the bureaucratic version of “lying flat.” The term describes a survival strategy that pairs visible political loyalty with minimal initiative.
Xi has repeatedly complained about this bureaucratic paralysis, mocking such bureaucrats as “fence-sitters” and taunting them as fearing “the more dishes you wash, the more bowls you break.” In January 2021, at a plenum of the CCP’s top disciplinary body, his frustration boiled over: “Some officials won’t lift a finger until the Central Committee issues a written directive; without one, they do absolutely nothing. My written instructions are meant to be the absolute last line of defense. Are you telling me that if I don’t personally issue a directive, the work just grinds to a halt?”
Yet the incentive structure continues to reward caution. Caution, however, does not always mean doing nothing. Sometimes it means doing too much of the wrong thing. When officials feel pressure to show results, the response can swing in the opposite direction. Local leaders rush into politically favored sectors that signal alignment with central priorities. The result is an intensified form of GDP-style competition. Provinces and municipalities pile into the same high-technology industries, producing waves of redundant projects and wasted capital that are extremely difficult to unwind. Xi himself warned about this pattern in 2020, noting that blind investment in sectors such as semiconductors, electric vehicles, and renewable energy had already produced abandoned projects.
Beijing recognizes the tension. Xi has attempted to soften it through institutional adjustments, including a principle known as the “Three Distinctions,” intended to separate honest mistakes in reform from deliberate violations of discipline: errors made while experimenting without precedent, missteps in exploratory initiatives not yet clearly restricted by higher authorities, and unintended mistakes made in pursuit of development—distinct from violations driven by personal gain. Officials, at least in principle, are encouraged to act boldly in pursuit of innovation.
Yet these assurances compete with a powerful disciplinary system and the reality of retrospective accountability. Few cadres are willing to wager their careers on ambiguous promises of leniency.
Occasionally, however, local initiative still breaks through. One recent example offers a glimpse of what that energy can produce. In Jiangsu province, an amateur city soccer league has unexpectedly become one of the country’s most vibrant cultural phenomena. Known online as the “Su Super League,” the competition pits teams from the province’s 13 cities against one another. Players come from all walks of life: teachers, students, delivery drivers, office workers.
The spectacle has exploded in popularity. Stadiums are filling with tens of thousands of spectators. Online audiences stretch into the hundreds of millions. The deeper appeal lies in local identity. Jiangsu, like other provinces, has strong subregional cultures and a long tradition of rivalry among its cities that found a new expression on the soccer pitch.
Local governments quickly recognized the opportunity. Cities began linking matches with tourism promotions, restaurant campaigns, and cultural festivals. Ticket stubs unlocked discounts for hotels, shopping districts, and attractions. During a recent holiday period, several host cities reported notable surges in tourism consumption tied directly to the tournament.
The experiment illustrates the economic potential of bureaucratic creativity. Only local officials deeply familiar with Jiangsu’s subregional culture could tap into it and design the right mix of tourism and commercial incentives. A centrally designed policy would not have achieved the same effect. Local cadres, shrewd and career-minded, also understand Xi’s well-known interest in soccer and know how to frame initiatives in ways that are likely to win central approval.
These examples are instructive. Reviving domestic demand is the top challenge Xi has yet to crack. China’s consumer economy varies sharply across regions and industries, making local experimentation indispensable. That, in turn, requires a bureaucracy that feels empowered rather than paralyzed.
So, is it in Xi’s interest to empower them? Paradoxically, doing so may not conflict with his broader goals for the bureaucracy as much as it appears. Technology industries ultimately depend on consumers. Firms need profitable markets to sustain research and development. A vibrant consumer economy would strengthen the very innovation ecosystem Beijing hopes to build.
However, the question is, what happens if political discipline and loyalty remain central to Xi’s governing vision, as they clearly do? Can he tolerate a more confident bureaucracy? The answer is complex and defies easy resolution. Yet the alternative carries risks of its own. A system that rewards performative loyalty while discouraging initiative breeds quiet resentment. Chinese political discourse even has a term for officials who publicly profess loyalty while privately hedging their behavior: “two-faced people,” something Xi himself
In the end, Xi confronts his own version of the incentive problem he seeks to solve. The leadership wants a bureaucracy that can do everything at once—an impossible tension. Whether that bind loosens will depend on how much experimentation officials are actually allowed to escape the trilemma. Until then, caution will remain the default. Xi should not be surprised if calls to boost domestic demand once again fall on deliberately inattentive bureaucratic ears.
