China’s Policy Failures

John Yasuda

China’s experimental policy regime catalyzed the country’s economic ascent. Today, the system seems incapable of providing effective governance.

Asterisk: Your latest paper 1 is about policy failure in China — and specifically about failures with China’s experimental policy regime. Could you briefly explain to our readers what this regime is and how it works? 

John Yasuda: So there’s a common assumption that in very large bureaucracies, with the classic example being the Soviet Union, that there isn’t much experimentation or innovation in policy. And as a result, such countries experience this sclerotic policy process that doesn’t lend itself to high adaptability. It leads to a number of failed policies. 

But when you look at China’s experience, that isn’t the case. China’s policy regime is nimble, adaptive, it’s dynamic — and what drives this dynamism is a willingness to experiment with what we call policy trials. 

There are a host of different types of trials, but the basic idea is that before the government adopts a policy, it has already tested it in a delimited sector or a geographical area. This provides a great deal of space for policy makers then to tinker with a given policy before rolling it out on a nationwide scale. 

This captures the essence of what happened in China after 1978, famously associated with Deng Xiaoping’s announcement of the “Reform and Opening Up” policy, which marked the beginning of significant economic reforms in China, moving away from a purely state-controlled economy toward a more market-oriented one. But you can even see this experimental thread emerge out of the Maoist period as well. It just had a different flavor to it. The Chinese system really never conformed to standard notions of how bureaucracies operate based on the classic Soviet experience.

A: So to concretize this: Many Americans probably assume that the central government issues a dictate and everyone falls in line. But the way it actually works is that China will issue a goal of some kind and then give either individual provinces, or sometimes different ministries and agencies, quite a bit of flexibility in figuring out how to implement that. The idea is to see what works best. 

J: Yeah. The nuts and bolts of it is that the central government will establish some goal — “increase GDP by X%,” or “develop new high tech zones.” Local governments will receive that directive and then they’ll try out a variety of different strategies. Then typically the provincial-level government has a process to assess whether a particular pilot was successful. They pick and choose from the best of them, and they continue to tinker. This occurs over a 10-year period at time.

A: You mentioned GDP growth, and of course this regime has been extraordinarily successful in driving industrial development and economic growth. But your research shows it has been much less successful in recent years, particularly in establishing successful regulatory agencies. 

Is this system better suited to certain goals, like development, than others, like regulation? 

Doeun Choi

J: It’s a great question. Development goals, such as hitting certain GDP targets, lend themselves nicely to this sort of regime. Local governments have their own interest in hitting these goals, because the more money they bring in, the more money comes into their own coffers. 

But when it comes to areas like environmental protection or aviation safety or food safety — these targets are much more difficult to achieve. They come at a cost to the government. It’s a different dynamic at play. And so using the same experimental playbook for regulation is much more challenging.

A: Aviation is interesting, and I’m dwelling on this partially because I happen to be an aviation safety nerd in the U.S. context, and partially because your work suggests that aviation regulation has been more successful compared to, for example, food safety or finance. China’s crash record has gone way, way down since the ’90s.

J: That’s right. The crash record has decreased dramatically since the ’90s, to the point where by the early 2000s China was a world leader in aviation safety. That’s a dramatic turnaround. 

There was some outside help. Boeing and Airbus were involved. The consortium of airlines was also involved in improving safety records. But the Civil Aviation Administration of China authority, the CAAC, ran a number of pilot projects to drive up safety. And very quickly, you see their safety record dramatically improve. 

You hope that that would sort of set them up for other sorts of improvements as well. But it turns out that hitting a safety record is a lot easier than balancing capacity, load, and efficiency. China has some of the worst airline delays in the world. These things are much more difficult to regulate; when you throw safety into the mix, there are trade offs that are involved.

A: So aviation safety is doable under this regime, although it’s a challenge to balance with other goals. But it seems that food safety is a constant struggle — you have an entire book on it: On Feeding the Masses: An Anatomy of Regulatory Failure in China.

China has been trying to address food safety issues for years, with very little effect. We’ll get more into the details of that later, but just at a high level, do you think that some goals, such as airline safety, are more tractable, or are there significant policy errors happening in the food safety space?

J: The food safety space is really the result of a lack of coordination between central and local governments — and this is unfortunately just endemic to the policymaking space within China. Tension between central and local governments always exists, and there’s really never been a coherent plan to address these issues. In that sense, food safety is a bellwether for policy in China: If they can solve the coordination issues there, they’ll be able to deal with other problems like environmental protection, because they all boil down to this central/local divide and how to bridge it.

And so it’s a more fundamental dynamic than it is a particular policy area. It’s a function of the government system. The same dynamic that has produced various policy innovations does not work as well when you’re trying to standardize regulatory enforcement over a common market. You can’t have your cake and eat it too. Standardization requires consistency and predictability. 

A: I can see how if there are different food safety regulations between provinces, but then there’s also a national market in foodstuffs, just getting food around the country becomes very complicated. But why is this less tractable with food than with other things? Aviation is also a large national market with lots of different players in it. 

J: That comes down to how food is produced in China. You have somewhere between 200 million and 300 million farmers, each operating on small farms, say half a hectare. By the time a food gets to a processing center, or by the time of its manufacture, it’s already gone through multiple levels: from farm to trader, from small trader to a larger firm with complicated logistics, up to major provincial wholesale markets, and from there across the entire country. So traceability becomes very challenging. 

But it also means that at every step, there needs to be clear regulations. If a food safety failure — say, some contaminant — begins at the farm gate, by the time it makes its way up the chain it will have touched multiple other products throughout the system. So it turns into a huge problem.

And it’s extremely difficult to have a functioning supply chain regulatory system that works in tandem with such complicated supply chain management. The scale of the problem is far beyond what we typically deal with stateside. In the U.S., by contrast, you have giant food companies with much greater vertical integration that operate with fewer farms in a supply chain that is much more streamlined. 

A: I also imagine the U.S. is just more technically sophisticated. And this speaks to the difference with aviation safety: You need a certain level of technical sophistication to be able to operate aircrafts, whereas you can be a farmer, with a small family plot, who may not be well educated or familiar with modern food safety practices.

J: That’s a huge problem. A lot of things modernized in China during the reform and opening period, but agriculture was not one of them. Typical agriculture practices really haven’t leveled up over the same period. And so it’s problematic.

A: Obviously, ramping up food production was a huge priority in China during that same period. Is it due to another set of policy failures or policy mistakes that these practices have not caught up, or does it reflect a different set of priorities?

J: The major issue is that small plots of land aren’t particularly productive. How do you make them more productive? Well, you throw all kinds of chemical fertilizers on them, you use lots of different pesticides. These all increase your risk of exceeding a maximum residue limit. 

Theoretically, you could just agglomerate farms. But you can’t do that. China has what’s known as the Hukou system. That system divides citizens into either rural or urban residents. Each category has distinct rights and entitlements, and for those in rural areas, you’re entitled to specific plots of land. In order to agglomerate land, China would need to change the terms of Hukou welfare and entitlements as well. And so the safety issue is tied to a production issue, which is tied to an old policy of who gets land and regiments under what conditions it’s allowed to be transferred. It’s a classic wicked problem. 

A: You spoke earlier about how vertically integrated companies have an easier time with food safety in the US. There are vertically integrated companies in China, known as “dragon-heads.” But they also have issues with food safety — unlike vertically integrated companies in the U.S. Is that because, at their base, they’re still working with small farms? 

J: Yes. Ultimately, the challenge is to ensure quality control over a large number of suppliers. Dragon-heads have tried workarounds, for example by sourcing all of their food from a single village. The village head basically becomes the quality control firm. But it always slips in the end, and that comes down to scale. Dragon-heads have tried to force people off the land to have more control, but this leads to huge social tensions. Most mass protests in rural areas are tied to land. It’s always potentially explosive.

A: You’ve also noted that China’s export economy in food is a lot safer than what it produces domestically. Why? If dragon-heads aren’t able to figure it out, why does the export economy fare so much better if the land issues are, at root, the same? 

J: The export economy is a much smaller sector, and it’s much more difficult to get licenses to export in general. Those firms then work very closely, usually on the land they’re purchasing from. Oftentimes you’ll get Japanese regulators or quality control inspectors on a Chinese farm managing all these things. And because it’s a smaller sector, they can just choose not to work with many farms. 

A: Let’s talk, then, about some of the actual policies the Chinese government has tried to implement to address this problem, and why they failed.

J: In the food safety sector, again, it’s a classic example of a lack of coordination across various agencies. Local governments don’t have enough people to actually conduct inspections. Bureaucracies are siloed off from each other. There was a recent attempt to centralize control under what’s effectively a super regulator, known as the State Administration for Market Regulation, which oversees all consumer products; food was put into this. But despite the intention to streamline and improve coordination, the large size of it has meant that only a few people are in charge of managing food safety. And in the end this has had the paradoxical effect of increasing coordination issues rather than solving them. 

A: There’s an interesting tension between the rhetoric and practice here. The Chinese Communist Party seems to take food safety very, very seriously. What do you think is up with that?

J: It’s interesting because food safety was a primary issue for quite some time. In 2008, the Sanlu Group was caught adding melamine to water-diluted milk and infant formula — which would increase the nitrogen, giving the appearance of higher protein and therefore passing quality control. Over 300,000 children were affected, and over 50,000 hospitalized. When scandals like that do arise, the government will pour a ton of resources into fixing it — they’ll send out teams to search for a particular chemical additive or problematic pesticide usage — and it ramps up enforcement for a very short period of time. But then it dies down again, at least until the next big disaster happens. And there have been other major scandals, but those have largely died down. And so as a result, you’ll see that the overworked regulatory system is going to now shift its priorities to other issues. 

A: Do you think this reflects that the underlying conditions have improved? 

J: My sense is that they have. One of the big issues the government pushed was in supplier responsibility, and so that safety culture has worked its way into the system.

You have much more savvy consumers now also, who are far more aware of food safety as an issue. And so there has been some improvement in that respect. But it always comes down to this issue of coordination within the government, and food safety is one of those issues where you need such high levels of coordination in order to get things to work. Ultimately there is going to be some sort of a breakdown. 

A: The U.S. is an interesting contrast here. We have the FDA, the USDA, and state-level agencies as well. It’s also a fragmentary system, but it works. We don’t have major contaminant crises. My sense is this is because there are just clearer instructions from the top — standards and practices that come down from the FDA or the USDA that lower level regulators can implement and know how to use.

J: That’s right. And it’s because state governments work very closely with the federal government on these sorts of issues. And so there’s such a high level of coordination — the way that the USDA has, for example, field offices. So you have high levels of communication, high levels of coordination, and that’s just not something that exists in the Chinese system. 

A: Why does China struggle with coordination between local and national-level actors so much? Because it is ostensibly just a purely hierarchical, centralized system.

J: That’s right. We often use the term fragmented authoritarianism to describe it, but another way to think of it is as a unitary system. There’s a gaping implementation gap between what the center wants and how the local governments actually do it. And this goes back to the whole design, because you want to build in flexibility, right? There is this whole notion in China where you don’t want to have what’s referred to as a single-cut policy, where basically an edict comes out of the central government, and then all local governments are supposed to carry it out single mindedly. That does happen still from time to time, but these sorts of single cut-policies have generally been somewhat problematic. Sometimes that flexibility is not so much flexibility — it’s really fragmentation. It’s really a lot of different individual units pursuing their own interests and ultimately leading to a big policy failure of some sort.

In contrast, when the Boston Marathon bombing happened in 2013, there was a huge concerted push across agencies to find the suspects. 

A: They basically shut down the entire city.

J: Exactly. And every level of government, down from the Watertown police up through every federal agency, each explained their various roles and how they ultimately found the suspects. And I remember watching that thinking, “I don’t know if that would happen in China, if you could have that level of coordination up and down the chain.” 

A: And in the U.S., these are ostensibly independent organizations. The Watertown police are separate from the Massachusetts state police, are separate from the FBI. And in China, these are all rungs on the same ladder.

J: Yeah. They were able to coordinate and share information across agencies very successfully. In China that’s incredibly difficult. 

A: Why do you think those information asymmetries are so pronounced in Chinese governance?

J: It’s ultimately because no one wants to be the bearer of bad news. It’s the same thing that played out during the COVID-19 pandemic. There were reports of a virus bubbling up in Wuhan. But at the local level there were cover-ups. They delayed reporting it. And it’s because the bureaucratic structure is quite punitive. 

In China, if you discover a problem, the thinking isn’t, “This is what happens in a complicated modern society.” It’s, “Why weren’t you doing your job?” If you’re faced with those sorts of incentives, you’re much more inclined to delay providing information until absolutely necessary. But by then, you’re often well past the point at which that information would be useful. 

A: To jump back to aviation, this rhymes with an anecdote in your China Quarterly paper, where a pilot was afraid to report an issue landing at a runway because he was afraid of being fired.

From the perspective of American and most international aviation, the whole principle is that you don’t care about individual fault at all. The thinking is that if one human error could cause this to happen, then our system is not robust enough and we need to figure out how we can fix the system so that even if the same mistake happens again, it would not lead to the same result.

J: The punitive approach is something you also see in food safety. When there’s an incident, there are intense crackdowns. But if everything goes right, there are no rewards. 

One of the local government officials who was explaining this dynamic to me said, “You know, once something goes wrong, we get all the blame. But if we do everything right? There is no praise for us.” So regulation is a losing game, right? And so they said, “Unfortunately, given this dynamic, once you’re appointed to a position you just hope nothing happens on your watch.”

A: Are there other important arenas where you see that dynamic play out?

J: It’s the same thing in financial regulation. If there’s an issue in the stock market, you know the head of the China Securities Regulatory Commission is going to be sacked. That’s just what’s going to happen. There isn’t a sense of collective responsibility in managing the system.

I tried to run a study on this many years ago, which was designed to assess food safety regulators tolerance of risk. The question I asked safety regulators in several towns went like this: Assume a factory has a 20% chance of a food safety incident. Do you shut it down? Would you shut it down at 40%? Would you shut it down at 60%? Would you shut it down at 80%? And each time, invariably, the response I would get is, “Did the factory produce bad food or not?” And I’d respond, “No, there’s just a chance that it might have; this is the level of risk.” And each time the response I got was, “Did they do something wrong or not?” That’s the only question. And that was where it became very clear to me where risk management is not built into the logic of the regulator. 

A: One thing we haven’t talked about is surveillance. With “zero-COVID,” we saw that China is clearly capable of tight surveillance — down to having ostensibly zero COVID cases in many areas. The U.S. has a strong surveillance system when it comes to food outbreaks. Local epidemiologists are trained in this. Clearly the surveillance infrastructure exists in China. Why is food safety such an outlier? 

J: In many respects the “zero-COVID” approach was still a lot easier than it is to manage food safety across the country. COVID demanded very clear and identifiable restrictions: You can’t travel; you can’t leave your house. You can quickly tell if someone’s out of compliance, if they move. It’s crazy because you’re still talking about monitoring the movement of over 1 billion people. But in many respects it’s a lot easier than dealing with food safety, where each stage of the food supply chain lends itself to breakdowns in traceability and quality control. 

If you think about Costco right here in the States, one of the most amazing things is that they know everybody who has bought a product right from them. If they identify a food safety issue, they can reach out to any person who might be affected. 

It’s very hard for Chinese companies to do this. You have to have supplier responsibility. You also have to have consumers that are actively doing this work too. You also have to have the news media working. And so, are there holes in all of these systems? Yeah, they’re not really working that seamlessly.

A: Shanghai, as a province, seems to do much better on food safety. Why?

J: I haven’t covered Shanghai for a long time, but at the time I did, the Chinese FDA was working much more closely with food producers. They were also very careful in terms of dealing with issues of certification. They’re highly professionalized. It was kind of like if you wanted to have a showcase model of how the FDA could work. But replicating that across provinces is the challenge. 

A: And also it seems like there aren’t enormous incentives to do it.

J: Exactly right. And I say this with a great deal of compassion for these individuals. They’re dealing with significant budget constraints, personnel constraints, and all of these built-in coordination issues. So rather than try to innovate, what you’re just hoping is that by the end of your tenure, at best you get a certificate that says you’re a model food safety province. Which doesn’t really translate into anything great. And at worst, you have a scandal of some sort that happens on your watch. And so you’re just trying to kind of bide your time. You’re putting out fires where you see them. But it’s hard to do. 

And that applies to aviation too, where the stakes are particularly high. Say you want to try to innovate a new sort of scheduling system for airlines. If that lends itself to some sort of safety issue? It’s over for you. The costs are just so high.

A: And then it’s not even worth innovating further because the military controls 70% of the airspace anyway. 

J: And then there’s that real reality too, where it’s like, come on, the real thing we need to be talking about is civil-military aviation coordination. But then you go, “Well, that’s never going to happen.” So if you’re playing within those constraints, well, the main thing is still safety. And the efficiency problems will just have to wait until we get more airports, basically. 

A: Not to wax philosophical here, but this seems to point to the broader challenge of regulatory authority in authoritarian governments, where you have the ability to crack down ex post facto. From the outside it can seem like it is a sign of state capacity. But just the dynamics of authoritarianism and the fact that you are trying to run things via crackdown means that information networks are broken, that you have all these problems negotiating between different actors.

J: That’s right. Regulators in an authoritarian system are always stuck between a rock and a hard place. At the end of the day, politics still rule. There’s no notion of an independent regulator. How do you carry out your mandate where political prerogatives are always going to be at the forefront of whatever you do? Let’s say I’m an environmental protection regulator and I want to crack down hard on several polluting factories in my locality. I have to be cognizant of the fact that, yes, my job is to protect the environment, but also that these particular companies contribute a significant amount to economic growth. So what is the regulator to do? If they were fully independent, they could actually carry out their mandate. But in reality? In China, there are significant repercussions to that behavior.

  1. Yasuda, John Kojiro. “Explaining Policy Failure in China.” The China Quarterly, 2023, 1–17.

John Yasuda is an Assistant Professor of Political Science at Johns Hopkins University, specializing in Chinese politics, bureaucratic politics, and comparative political economy. His most recent book is On Feeding the Masses: An Anatomy of Regulatory Failure in China.

Published February 2024

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