China's Economic Culture by Herrmann-Pillath Carsten;

Author:Herrmann-Pillath, Carsten;
Language: eng
Format: epub
Publisher: Routledge

Chinese experimentalism and economic policy-making

In Chapter 3 I outlined the basic structures of localism and regional property rights that define the interface between government and the economy in China. Many observers have noted that one of the most important features of the Chinese economic system has emerged from this peculiar structure, which is the intense locational competition among territorial units on different levels. This phenomenon raises the important question of how this competition is regulated. As a matter of fact, there is no formal constitutional framework that establishes this regulation in a stable way. One case in point is the fiscal system considered in the previous section. On the one hand, the ‘tax-sharing system’ establishes a clear division of taxes along the levels of government, but at the same time entitlements to certain amounts of taxes are still governed by the regional property rights structure that has historically evolved. This reflects the universal validity of the tiao kuai dualism: the tiao line may imply regulatory centralization, but this does not necessarily restrict territorial autonomy in important respects. This is one reason why non-funded mandates play such an important role in establishing central policy authority. The tiao kuai dynamics results in what I call a territorial status order. Hence, I surmise that territorial competition in China is mainly regulated in ritual form.

One of the distinctive features of the administrative hierarchy of China is the status distinction of jurisdictions that only partly reproduces the formal administrative hierarchy. This status distinction may be determined by economic criteria, in particular the distinction between central and peripheral territories. Economic criteria also underlie possible changes in the formal status of jurisdictions, such as when upgrading a county to a higher level urban entity. This matters in terms of economic policy, as jurisdictions with different status typically have different degrees of freedom in economic planning and project implementation; and it defines the scope of inter-jurisdictional competition for status: leaders may aspire to ultimately achieving a change of status of their jurisdiction, thus enjoying an extension of rights of local policy-making.

In other words, we can say that there is also a status order of local states in China. This status order of local states is projected into a system of giving certain rights of economic policy-making to certain jurisdictions. These rights may be generic with reference to the level of administration, which means that higher level jurisdictions also have more rights in terms of making decisions, for example, about infrastructure projects. They may also be specific to certain strategic programmes defined by the central state, both the central government and the provincial governments, such as when particular jurisdictions obtain special rights in implementing experimental economic policies. Finally, there is an informal dimension of rights which emerges out of historical trajectories and bargaining processes and which may be reflected in certain reputations of particular places, such as when Zhejiang province and Wenzhou in particular have gained the reputation as being the avant-garde of private business, which implies that they

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