The Ministry of Finance and Chinese Politics

Abstract

M MINISTRIES OF FINANCE in poor countries are powerful, if unpopular, institutions. As guardians of the national treasury, they must often tell political leaders and other ministries that the state lacks the resources to carry out projects they desire. While reliable information is scarce in poor developing countries, the information network of the Ministry of Finance and the central bank is likely to be better than those of other sources. Control over this information is a major source of power for the ministry and the bank. Relationships with international financial institutions, particularly the World Bank and the International Monetary Fund, are additional sources of power. This does not mean that the Ministry of Finance has the final word on economic matters. Leaders and other ministers have ways of evading, ignoring, or otherwise dealing with opposition from the ministry of finance. But given overall poverty and a desire by states to develop, the ministry is put in the institutional position of having to say no repeatedly.' In China, the central political dynamics associated with the Ministry of Finance [MoF] are different (though if the MoF had its way, the pattern mentioned above probably would be replicated). In contrast to most developing nations, the Chinese state has been able to extract resources from the economy and society at very high levels. More importantly, the budgeting process has been largely subordinate to the planning system. In the institutional complex of the Chinese state, the MoF occupies a much weaker position than it does in many, if not most, other states because of the factors mentioned above.2