urban government and market reforms in china

PUBLIC ADMINISTRATION AND DEVELOPMENT, Vol. 11,149-170 (1991)

Urban government and market reforms in China

GORDON WHITE Vniversiry of Sussex

SUMMARY Chinese reformers wish through their economic programme to create a new form of developmental state in China and a new relationship between state and economy. This paper examines these issues through a study of the impact of Chinese economic re foEs on the structure and behaviour of local government, focusing on urban government at the district level. It looks at three aspects of the issue-the trend towards financial decentralization, institutional changes in district administration and changes in the relationship between local government and the urban economy. It concludes (contrary to arguments which regard bureaucratic response to the reforms as one of pure inertia and obstruction) that urban local government has changed in several major ways, the most obvious being a trend towards institutional expansion and proliferation. From the point of view of the reform process, some institutional changes have been positive, others negative, resulting in a ‘dualistic’ state which contains elements of both old and new forms of developmental state. There is a need for systematic analysis of the specific future needs and evolution of China’s urban government which would guide a process of politico-administrative reform comparable to the current economic reform.

CHINA’S ECONOMIC REFORM PROGRAMME AND THE ISSUE OF GOVERNMENT DECENTRALIZATION

The central focus of this paper is on the impact of China’s post-Mao market-oriented economic reforms on state institutions, specifically on urban local government. One would expect that the radical changes envisaged in the operation of the economy through the move towards ‘market socialism’ would have major implications for government in general and for local government in particular, especially in a country the size of China where ‘local’ governments often oversee communities larger than most national governments elsewhere. I shall pursue two main questions. First, how have China’s economic reformers perceived the links between changes in the economic system and changes in local government in general; what is to be the role of the local state in the new economic environment? Second, what changes have, in fact, taken place in the role and structure of urban government during the post-Mao era since 1978 and to what extent are these complementary to economic reform.’ I shall conclude by asking what are the problems which face China’s institutions of urban government in the era of economic reform and how can these be tackled?

The author is a Professorial Fellow at the Institute of Development Studies at the University of Sussex, Brighton BNI 9RE, UK. ’ Reform of rural local government has already received some Western scholarly attention, notably Shue, 1984b, on the transition from commune to township administration and Shue, 1984a, and Kueh, 1983, on changes at the county level.

0271-2075/91/020149-22$1 I .OO 0 1991 by John Wiley & Sons, Ltd.

150 G. White

Chinese approaches to these questions have been based on the notion of ‘decentralization’. This has been a central feature of the programme of economic reform launched by the Chinese Communist Party (CCP) leadership at the watershed Third Plenum of its Central Committee in December 1978. However, the exact meaning of ‘decentralization’ has remained somewhat elusive and the attitude of economic reformers has been markedly ambivalent. We can distinguish two basic types of decentralization: administrative decentralization whereby powers of economic planning, coordination and management are devolved from central agencies to lower levels of state administration (local governments and/or local branches of central agencies) and economic decentralization whereby these powers are devolved from administrative agencies at any level of government to enterprises themselves.’ Dur- ing the Maoist period (1958-76), administrative decentralization was the preferred method adopted to tackle problems in the system of central planning, the period being characterized by an undulation between phases of administrative decentralization (1958 and 1970) and recentralization (the early 1960s). Economic decentralization gained a tenuous foothold in the early 1960s but was then washed away by the Cultural Revolution (196676). (For critical reviews of this experience, see Ji and Rong, 1979; He, 1979.)

As a rule, when considering how to tackle the inherent problems of old style central planning, post-Mao economic reformers tend to view administrative decentralization, the transfer of power to local governments and branch agencies, with suspi- cion. This had been the previous ‘Maoist’ approach to economic reform which, in their opinion, lost some of the advantages of administrative centralization while creating new problems (dislocation and duplication in the planning system) and maintaining an economically irrational system of bureaucratic domination over enter- p r i s e ~ . ~ In their thinking, the direct subordination of enterprises to government is unwise, regardless of the level of government involved. The key link in meaningful reform, therefore, was economic decentralization, increasing the decision-ma king power of enterprises (both state and n~n-state) .~ This process embodied a ‘destatiza- tion’ of the economy and laid the necessary basis for the emergence of market relations which involved autonomous economic units free of direct governmental controls.

On the other hand, reformers have recognized that a certain degree of administrative decentralization to local governments can play some role in remedying the defects of the previous system of central planning. While key areas of macro-economic

This distinction accords with that made by Franz Schurman (1968 pp. 175, 196) between decentralization I (economic) and I1 (administrative). It is somewhat different from the distinctions devised by the World Bank (1983 p. 120). viz. ‘deconcentration’-transferring powers from headquarters to other branches of central government; ‘devolution’-to autonomous units of government such as municipalities and local governments; and ‘delegation’-to organizations outside the bureaucratic systems. The notion of ‘administrative decentralization’ includes both ‘deconcentration’ and ‘devolution’ (reflecting the ambigui- ties of ‘dual rule’) while ‘economic decentralization’ can be equated with ‘delegation’. For a valuable discussion of the oscillation between the vertical ( r im) and horizontal (kuni) principles in Chinese adrninis- tration, see Unger, 1987. ’ Reformers were very critical of the ill effects of previous attempts to solve problems in the planning system. For example, see Ji and Rong, 1979, p.11:

‘[When] enterprises were too often placed under the administration of lower levels, there occurred a chaotic fragmentation of production and a state of anarchy and the standard of enterprise administration declined.’

‘ For a review of different opinions on the issue and a resounding defence of economic decentralization, see Liu, 1980.

Urban government in China 15 1

policy and regulation should still be reserved for the Centre (notably in fiscal and financial matters), reformers admit that there are economic benefits to be reaped from devolution of certain powers which Beijing is unable to wield effectively (e.g., price regulation, labour policy and materials allocation) and from a clearer and more rational division of labour between levels of government. On the other hand, they emphasize that administrative decentralization should not be accorded the prime priority in the economic reform programme and, to the extent that it did take place, it should be accompanied by economic decentralization at the local level, i.e. local governments should exercise their economic powers in a new way, indirectly rather than directly, using economic policy mechanisms not administrative fiat. Implicit in the thinking of the economic reformers, therefore, was a notion of reforming local government itself, particularly in the way it engaged in economic planning and management. Without such changes, the cession of greater power to local governments would in fact increase the obstacles faced by a reformist leadership at the Centre in Beijing.

However, I must broaden my discussion here since the issue of a more rational division of labour between central and local governments (and between layers of local government) goes beyond mere questions of economic planning and management in the state sector. Implicit in the arguments of reform spokespeople was the idea that local governments should be neither an instrument nor a replica of central government. If they opposed local subordination to the dictates of centralized economic planning, they also opposed the tendency for local governments to set up ‘independent kingdoms’ which led to regional autarky and an irrational fragmentation of the national economy. Liu (1980), for example, argues that local governments have functions different from central government. First, in the economic sphere, they had prime responsibility for regulating the non-state economy, i.e. collective, co-operative or private businesses. Since one of the basic goals of the reformers has been to create a more diversified economic structure by encouraging non-state enterprises of many different kinds, this regulatory burden of local governments would be expected to increase in tandem. Second, local governments would bear a major responsibility in creating and maintaining the infrastructure needed to under- pin the emergence of a more commercialized economy, such as transportation, housing and public utilities such as water and energy. Third, they should take responsibility for physical planning with particular attention to environmental issues. Fourth, reformers argued that welfare services previously provided by enterprises-such as housing, labour insurance, pensions and health insurance-should gradually be ‘externalized’, becoming the responsibility of local governments, whose welfare functions would extend well beyond their traditional responsibility for education and health.

A successful economic reform, therefore, would embody sweeping changes in the institutional character and practical role of local governments, especially in the urban areas. As changes took place in their methods of economic regulation and as their non-economic functions increased, corresponding changes would come about in their structure and operational principles. The end-point would be a new form of developmental state at the local level which drastically reduced its direct economic involve- ment (regulating the future economy only through ‘economic mechanisms’ and legal measures) and taking on social and infrastructural responsibilities comparable to those undertaken by local governments elsewhere.

152 G. White

The institutional implications of economic reform are highly complex, therefore, and for reasons of economy and precision this study has limited its attention in three ways. First, I shall not go beyond issues arising from the relationship between local government and economic reform. The question of reforming local government has many other facets, such as proposals and/or attempts to change local political institutions, notably the role of the Communist Party and the legislative system of ‘people’s representative congresses’-these aspects have been dealt with by other authors (Saich, 1991; Benewick, 1991). Second, I am focusing on the urban sector because the urban and rural situations differ substantially. Third, because the issue of urban local government is itself highly complex with several layers, I shall deal only with basic level urban government, a category which is itself difficult enough to pinpoint, as we shall see. The role of urban governments is of particular political significance since they are on the front line in the implementation of the reform programme and thus responsible for handling the social tensions which have arisen from some of its ill effects-inflation, unemployment, bankruptcy, ‘speculation’, cor- ruption and so on. These tensions mounted as the reforms ran into increasing difficul- ties in the mid-1980s, culminating in the traumatic events in Beijing during April-June 1989, which found expression in most large cities across the nation.

Systematic thinking in China about local government in general and its changing role in the context of economic reform was scarce during the 1980s. In general, however, the CCP leadership has been slow to confront these issues; in consequence an intellectual constituency has not emerged to work in the field. To the extent that it did take place, thinking about government-economy relations was largely dominated by two groups: the proliferating economists who have concentrated on economic analysis and had little to say systematically about government and still less about local government; and party spokespeople who have reserved the right to monopolize discussion of ‘political’ issues and, with a few exceptions, have been reluctant to investigate avenues for the throughgoing reform of state institutions. In the mid-l980s, however, a small group of political scientists emerged across the nation, one of whose research foci was the issue of local government reform. Writing on administrative and political reform expanded gradually, e.g. in new journals such as Political Studies Research (Zhengzhixue Yanjiu), edited by the Institute of Political Studies of the Chinese Academy of Social Sciences in Beijing. A Commission for Political System Reform was also established in Beijing in parallel with the Commis- sion on Economic Reform. The issue of local government reform was the subject of two large symposia, one in Wuhan in December 1984 on the subject of ‘Local Government and People’s Representatives’ and the other in Chongqing in December 1985 on the general issue of local government reform.’ In 1986, the issue of the relationship between ‘economic system reform’ and ‘political system reform’ was for the first time given a major role on the official agenda, an event which encouraged an outpouring of opinions and proposals. In spite of this short-lived upsurge, analysis of local government reform remained in its infancy and few systematic proposals for reform received a public airing.6 With the onset of the anti-‘bourgeois liberaliza-

’The results of these symposia have been published in book form, viz. Lu and He, 1985, and Local Government Research Editorial Group, 1986.

However, experiments in urban organizational reform did begin in 16 medium sized cities in May 1987 and, based on this experience, a report was issued by the CCP Central Committee and the State Council in August 1987. For a text, see BBC, Summary of World Broadcasts: Far East, 8663.

Urban government in China 153

tion’ campaigns of 1987 and 1989, moreover, progress on this issue has come to a standstill. However, many of the important issues have at least been put on the table and some changes have already taken place in practice. This paper will deal with the latter trend and will base itself on field research in China,7 the writings of Chinese scholars and other published materials during the period.

THE FOCUS OF ANALYSIS: ‘BASIC LEVEL’ URBAN GOVERNMENT

China’s state system is complex and the term ‘local government’ covers a number of levels, as can be seen in Figure 1, from province down to ‘street office’ or ‘neighbourhood office’ in the cities to the ‘township’ or ‘town’ in the countryside. To simplify matters, I have only included in Figure 1 those levels which are units of both politics and administration-by politics, I mean that they have an elected legislative organ, a people’s representative congress (PRC). There are or have been certain administrative levels-between centre and province (‘districts’), province and county (‘special districts’ or ‘prefectures’), county and township (also ‘districts’) and under the urban district (the street or neighbourhood officebwhich are bureaucratic exten- sions of the level immediately above and have no corresponding organs of political representation.

This distinction is important in defining the main focus of this paper, ‘basic level urban government’. Formally speaking (i.e. according to Article 95 of the State Constitution of 1982),’ ‘basic level government’ is at the urban district level in large cities (and counties responsible for suburban areas) and the city itself in the case of smaller cities. Since this research has mainly been conducted in larger cities, we are thus mainly interested in the urban district. This is a unit of local government in both political (it has a people’s congress) and administrative senses. Below it, however, is the urban street or neighbourhood office which formally speaking is a bureaucratic ‘agency’ subordinate to the district, not an organ of political and governmental power in its own right.

The situation is further complicated by the presence of another level of urban organization beneath the neighbourhood, the ‘residents’ committees’ which formally (according to Article 1 1 1 of the State Constitution) are ‘mass self-managing organizations at the basic level’, i.e. not organs of governmental but rather of popular power (the equivalent of ‘villagers’ committees’, in the countryside). Figure 2 depicts these levels in a typical large city.

These formal distinctions, however, are a rather feeble guide to reality. From the political point of view, the key institution at the local level is the Communist Party, not the people’s congress, and this permeates the hierarchy; from an administrative point of view, each level is enmeshed in a hierarchical bureaucratic system regardless of its formal status as governmental, ‘agency’ or non-governmental. Thus each qualifies, in different ways, for the title of ‘basic level local government’.

This ambiguity has not escaped the attention of China’s new generation of political

’ The research was conducted jointly with Robert Benewick of the University of Sussex who has written a paper (1991) on the political reform of local government institutions. The field research involved three large cities-Beijing, Tianjin and Shanghai-and two smaller ones-Jinan in Shandong province and Zhenjiang in Jiangsu province.

For the Chinese text of the State Constitution, see Renmin Ribao (People’s Daily) (1982), Beijing, 5 December; for an English text, Eeoing Review (1982) 25 ( 5 2 ) (27 December).

Central cities' (zhixia shi)

1

- Centre .

fik District County

2 Autonomous regions

(zizhiqu)

City (shi)

(xian)

Province (sheng)

County (xian) c Urban areas

Figure 1. The structure of China's governmental system Notes 'There are 3 large cities which are directly administered by the centre-Beijing, Shanghai and Tianjin-and thus equivalent to the province. 2These are the equivalent of the province in national minority areas. There are similar differences in labelling at lower levels in these areas but these have been omitted for the sake

Suburban areas

Township xiang

District, qu Q Town zhen

Neighbourhood off ice, jiedao banshichu

Residents' committee, jumin weiyuanhui

Figure 2. The structure of urban local government


scientists. Since the formal definition and the realities of urban government diverge, they have inquired how can they be brought into closer harmony. A debate about the nature of ‘basic level’ urban government has sparked several important issues. The debate over the role of the neighbourhood ofice is of particular importance here since its role has expanded enormously since its formal tasks were set out in 1954 and, in the words of one commentator, ‘it no longer has the character of an agency; in reality it plays the role of basic level urban government’ (Bai, 1986 pp. 389-90). This author continues by citing the case of a neighbourhood office in Xian:

‘[It has] 65 work tasks in all: from productive construction to the people’s livelihood, from public order and security to environmental health, from culture and education to employment, including everything from politics to economics, culture, health, etc. Whatever organs the city or district has, the neighbourhood office has as many tasks; whatever departments the district has, the office has as many organizations. . . Some office cadres say: “Apart from not having a people’s representative congress, we handle as much work [as levels which do]”.’

The most commonly proposed method to remedy this anomaly is the establishment of a fully constituted ‘people’s government’, including a representative congress, at the neighbourhood level. Thus the neighbourhood would become a distinct political, administrative and financial level of government. This proposal is not only designed to recognize the wide-ranging governmental functions of the neighbourhood offices, but also argues that the neighbourhood is a more appropriate scale for basic level urban government in larger cities, the district itself being far too large (in 1988, China had 55 cities with non-agricultural populations exceeding half a million). In Beijing, for example, with a total population of 6.8 million in 1988 the city’s nine districts (each supervising nine neighbourhoods on average) had an average population of 547,600, the largest (Chaoyang) having over one million. In the smaller city of Shijiazhuang in Hebei province (with a population in 1988 of 1-26 million), each of the six districts (with an average of 5.3 neighbourhoods each) had an average of 175,000 population (the smallest being 130,000) (Bai, 1986, p.388). The results of this local gigantism were that district-level governments found it difficult to deal with the complexity of tasks they faced. The functions of urban governments had proliferated since their establishment in the 1950s, a process which has been acceler- ated by the post-Mao economic reforms. In consequence, the inadequacies of urban governments have become more glaring and the frustration of local officials has grown. Moreover, since local governments cannot keep pace with rapidly rising expectations, the level of discontent among the urban population has increased, a not inconsiderable impetus behind the popular protests of April-June 1989.

While the issue of scale is important to economic reformers who are concerned about the regulative, infrastructural and welfare capacities of urban government, it is also important to political reformers bent on increasing democratization and governmental accountability; they feel that district governments are ‘too far from the masses’. The establishment of a people’s congress at the streetheighbourhood level and the latter’s formal constitution as ‘basic level urban government’ is seen as an important step towards bridging the gap between government and people.

There are different views on this issue and the matter has not yet been resolved.

156 G. White

There are differences among people in different institutional contexts: academic experts, experts in government bureaux charged with handling the issue (notably civil affairs departments), cadres in various levels of urban government and urban residents themselves. In the 1985 Chongqing symposium on local government, for example, while some spokespeople stressed the need to reconstitute the neighbourhood, others (e.g. Li and Niu, 1986) argued that it was the urban district which needed to be strengthened, particularly in relation to its superior, the city government. The latter position admitted that it was necessary to clarify and reform the division of labour between the district and its neighbourhood offices to give the latter more power and responsibility; however, the neighbourhood office would remain a mere ‘agency’ of the district. From their perspective, greater autonomy for the neighbourhood office combined with a more rational overall organizational set-up and a better administrative personnel system could improve the managerial capacity of existing basic level institutions without a major structural change. Problems of responsiveness and accountability could be tackled through a more effective people’s representative congress at the district level.

There is also concern, shared by people in different circles, that the establishment of the neighbourhood as a level of government in its own right would ‘damage the unity of city government’. Experts at the Institute of Jurisprudence of the Shanghai branch of the Chinese Academy of Social Sciences, for example, think that it would make urban planning, economic management and financial coordination more difficult (White and Benewick, 1986, p.65).

‘In our opinion, if [the neighbourhood office] becomes a level of government, there will be contradictions between neighbourhoods, for example about widening roads, sewerage, housing, and so on. Each neighbourhood can decide and this may be against the interests of other neighbourhoods, therefore more trouble.’

Neighbourhood office cadres themselves seem divided on the issue. For example, the middle-aged director of the Yuyuan Neighbourhood Office in Shanghai’s Jingan District opposed the reform, but admitted that some of his younger colleagues were in favour.

‘Most comrades don’t approve of this because of the convenience of transportation which depends on unified planning. If we become a unit of government, the masses will raise many opinions which we could not deal with within this small area . . . For a simple example, take the problem of a new toilet. It needs land which involves the District Real Estate Bureau and Environment Bureau, and so on. At present, it is the district head who convenes a conference of relevant agencies and he can take the decision.’

Proponents of the reform have argued on the contrary that the closer proximity of the neighbourhood to the people will enable local government officials to meet the needs and solve the problems of their constituents more effectively. It is also argued that it will facilitate management of local business and enable the constituent


residents committees to play a greater role in ‘supervising government organs’ (Chen, 1986, p.383).

By mid-1986 the argument had not been resolved and experiments were under way to provide evidence on potential costs or benefits. An experiment in Nanjing has devolved certain financial powers and governmental functions (such as looking after small roads, house and school repairs, and administration of some primary schools) to the neighbourhood office. However, it appears that the constituency against reform is still very strong. Some of the reformers, moreover, have recognized that institutional change at the neighbourhood level cannot be undertaken before reforms at higher levels, notably in relations between the city and district-I shall deal with this question below.

Another important issue involved in the debate about what constitutes the ‘basic level’ in the cities is the role of the residents’ committees and their relationship with local government institutions at the neighbourhood and district levels.’ As stated earlier, urban residents’ committees are formally classified as ‘non-governmental’ institutions, organs of direct as opposed to representative democracy, theoretically operating according to the three principles of ‘self-service, self-management and self-education’ (White and Benewick, 1986, p.33). From a long-term point of view, they are supposed to be nascent tutelary institutions which will create a ‘democratic spirit’, among the population to prepare for the ultimate abolition of the state. Like neighbourhood organizations, their formal functions are defined by regulations issued in 1954 and were originally confined to maintaining public order and basic welfare; like neighbourhood offices, their functions have proliferated since the 1950s. They have also in effect become agents of local government; in other words, their relationship to the neighbourhood office has become rather like the latter’s relationship with the district, as yet another level in an integrated bureaucratic hierarchy. In financial terms, most of their revenue comes from the neighbourhood office. In consequence, their independence has been compromised and they have fallen under the direct administrative ‘leadership’ of neighbourhood offices rather than indirect ‘guidance’ as originally intended.” In the words of one Chinese analyst, (Liu, 1985, p. 302) they have become the ‘hands and feet of local government, an agency for everything and everyone’. As their functions have proliferated, moreover, they have become bureaucratized, their internal structure taking on the formal charac- teristics of a government organization. In effect, in administrative terms, it is the residents’ committees which have become ‘basic level government’ in the cities.

They play an important role in the overall system of urban government. Their functions are very wide-ranging, since they not only have their own responsibilities, but have to carry out tasks assigned not merely by superior neighbourhood offices but other vertical bureaucratic branch systems, such as family planning and public security. Hence the phrase used to describe their role; ‘On top a thousand threads,

Until 1989 at least, research on the issue of basic level mass organizations was being conducted by Shandong branch of the Chinese Academy of Social Sciences (CASS) in Jinan in cooperation with Shanghai CASS: Shandong concentrates on villagers’ committees and Shanghai on residents’ committees (see White and Benewick, 1986 pp.38,64). For a report on some of the results of research, see Liu, 1986. “For a discussion of the differences between ‘leadership’ and ‘guidance’, see Liu, 1985, p.305.

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at the bottom a single needle’ (Chen, 1986, p.383). Residents’committees have responsibilities which are economic (running small-scale services and providing employment for local youth, housewives and retirees), political (disseminating current propa- ganda, ‘reflecting the opinions of the masses’ to higher levels of government and assisting the local public security bureau to keep order), legal (notably the organization of mediation committees to adjudicate local disputes and avoid recourse to the legal system proper) and social (providing basic health care, carrying out campaigns for public health, keeping their area clean, regulating traffic, implementing the official ‘one-child family’ policy in family planning and making special provisions for the needs of particular groups, notably children, the disabled and old age pensioners).

Academic analysts see the problem of reforming residents’ committees as quite the opposite of the neighbourhood office: in the latter case, reforms are designed to constitute it as a distinct unit of local government by adding a political organ; in the former case, they should aim to release it from the administrative grasp of urban government, by simplifying and codifying its functions and re-establishing its original character as a ‘self-governing’ organization (Liu, 1985, pp. 303-4; White and Benewick, 1986, p. 38). It appears that, while these ideas may find some favour with overburdened residents’ committee cadres, officials in local government are unsympathetic. Since the residents’ committees are a convenient, indeed irreplaceable, instrument of policy implementation, these officials favour the directness and certain- ties of ‘leadership’ over the subtleties and hypotheticals of ‘guidance’, though they are of course willing to preach the latter while practising the former. Given this major constraint, the political impetus for any significant ‘emancipation’ of the residents’ committees seems unlikely. Thus, when the draft organic law for residents’ committees was made public in August 1989, in the wake of the urban disturbances of April-June that year, their role as an instrument of urban government received particular stress (BBC, 1989).

It must be concluded, therefore, that the search for ‘urban basic level government’ is not an easy one: formally it is the district level but in real terms it must include the neighbourhood offices and residents’ committees. This confusion reflects the ano- malous evolution of urban governments over the past three decades, a process intensi- fied by the post-Mao economic reforms, i.e. as their environments have grown more complex and the demands upon them more pressing, their responsibilities have expanded far beyond their original remits established in the 1950s. There is a pressing need to reassess the situation and initiate reforms which clarify and codify the respect- ive roles of different administrative levels and institutions in the context of an evolving urban ‘socialist planned commodity economy’.

In the sections that follow, I shall examine this changing context and the challenges it poses for basic level urban government; describe the structural reforms proposed and initiated to meet these changes and assess their institutional impact; and assess the extent of actual changes which have occurred during the reform era, both as ad hoc incremental adjustments and as the results of conscious policy. Although the analysis will of necessity range across the various levels described above-from residents’ committees up to municipality-I shall focus on the specific role of the urban district, given its formal importance as the basic level of urban government, its real importance as the crucial link between the city level administration and its subordinate parts, and the lack of scholarly work on this level of government.


ECONOMIC REFORM AND REFORM OF URBAN GOVERNMENT

The market-oriented economic reforms of the eighties have undoubtedly increased the administrative and political burdens of local governments in general and urban governments in particular. Economic ‘readjustment’ policies have made urban econo- mies more dynamic and diverse (by encouraging a shift from industry to commerce and services and from state to collective or private firms). Urban districts and their subordinate neighbourhood offices and residents’ committees have prime responsibility for encouraging and regulating these new priority sectors. ‘Readjustment’ has also redirected public investment priorities away from production towards social consumption, particularly housing but also basic urban services and environmental improvement. Again, these are a prime responsibility of urban governments.

In the face of these burgeoning tasks, reformers have recommended changes in the role and nature of local governments along several dimensions: (a) strengthening the general principle of the horizontal (kuai) as opposed to vertical (tiao) principle of administrative co-ordination by decentralizing power to lower levels of government; (b) restructuring the institutions of local government to produce a more stream- lined, professional and efficient administrative apparatus; (c) changing the role of the government in economic management from direct control of the micro-economy to indirect meso-economic regulation by ‘separating government and enterprise’. I shall discuss these areas of reform in turn.

Decentralization and local financial autonomy

It is generally accepted that the economic reforms have led to greater power for local authorities in a number of respects, though the situation has varied over phases (Wong, 1987). This trend reflects not only the desire for selective decentralization on the part of central decision-makers but also the ambitions of local governments themselves, who see the reforms as both the reason and the opportunity to increase their sphere of operational autonomy.

The issue of decentralization to local government is complex. First, it is important to clarify which particular activities and powers are being devolved: managerial responsibilities for enterprises formerly under central control; control over the allocation of material supplies or the regulation of consumer prices; or greater fiscal and other financial resources. Chinese analysts emphasize the importance of fiscal/financial autonomy and we shall focus on this aspect here. Second, given the basic structural principle of ‘dual rule’ (whereby an institution is subject to both central government agency and the local government at its own level), administrative decentralization does not necessarily mean devolution to a local entity in the sense of the government of a geographical locality (kuai); it may be to a subordinate branch of a central agency within a vertical bureaucratic hierarchy (tiao). The relationship between local governments and local functional branch agencies is ambiguous and may be contra- dictory (Shue, 1984a). Third, there is a significant gap between formal and informal decentralization-notably, for example, in the fiscal sphere between the official state budgetary system and various kinds of local ‘extra-budgetary funds’ which may evade central controls.

Previous scholarly work focusing on the provincial, county and municipal levels has suggested that the economic reforms have brought about a significant increase

160 G. White

in both the official and unofficial financial powers of local governments, (Shue, 1984a; Naughton, 1985; Ferdinand and Wang, 1987; Wong, 1985). A new system of revenue sharing between central authorities and local authorities (province, municipality and county) was introduced in 1980 which was based on different sources of revenue; in 1983 the principle of division changed to fixed ratios of revenue.’’ This led to the retention of greater resources at local levels (particularly city and county) to the detriment of central finances. Central concern over this situation led to efforts at financial recentralization and a new attempt to define central-local relations based on different kinds of taxes, which came into operation in 1985.12 By the end of the decade, however, the system for dividing centralAoca1 revenues was far from established and there was a good deal of ad hoc pulling and tugging on an annual basis. The fiscal situation is complicated, moreover, by the fact that the scope of local ‘extra-budgetary funds’ has also expanded as the economic basis of local governments, light industry, has expanded rapidly, and local authorities have sought, through various kinds of discretionary levies, to drain off part of the ‘retained funds’ of enterprises which have increased greatly over the past eight years (for statistics on the increase in ‘extra-budgetary funds’, see State Statistical Bureau, 1987, p.526). The central authorities have sought to levy or restrict these funds and to control their uses, without great success. Our knowledge of these trends is so far confined to higher levels of local government (the province and municipality) or to the rural sector (the county). I wish to examine here the question of whether they are also visible at a lower level, the urban district and below.

Research suggests that the trend towards decentralization, of both functions and finances, has operated between the city government and its constituent parts, but that this process seems to have been more restricted at this lower level than at higher levels, notably city and province. Urban districts have been acquiring more responsibilities but not significantly more power, particularly financial power (Li and Niu 1986, pp. 393-4) which is jealously garnered at the city level. There have been only tentative moves, in some larger cities at least, to expand both the responsibility and power of district government. An official in Shanghai’s Jingan District described this process of decentralization as follows:

‘[In future] we will have functions which originally were exercised by the city: education, culture, sports, real estate, environmental hygiene, gardens and parks, urban construction. These eight bureaux have already had power decentralized to them. Before, the city organized - through

“For more detail on the 1980 reform see the report by Heilongjiang Radio, 17 January 1980; Jilin Radio, 14 March (in BBC (1980). Summary of World Broadcasts: Far East, 6380); Guangdong Radio, 22 May 1980, in Foreign Broadcast Information Service 110; New China News Agency (Chinese), 20 September, about Anhui province (in BBC (1980) Summary of World Broadcasts: Far Easr, W1112). For the 1983 fiscal reform, see Wong, 1987, p. 15. ”For an analysis of the need for a new system of revenue sharing, see Wang Bingqian (1982), ‘Certain questions in financial work’ Renmin Ribao (People’s Daily), 26 November (in Foreign Broadcast Infor- mation Service, 229). For a more academic review of the issue, see Cai Xun (1983), ‘Reforming and improving the socialist financial system. . .’ Guangming Ribao (Glorious Daily) 29 May (in Foreign Broadcast Information Service, 116). Also see New China News Agency (1983) (Chinese), ‘It is imperative to centralize financial and material resources’. 4 July (in Foreign Broadcast Information Services 131) and Beijing Wen Zhai Bao (Beijing Digest News) (1983). 98, ‘Ten manifestations of excessive decentralization of capital’, 19 August (in Foreign Broadcast Information Service, 171). For the new system in operation, see Jilin Radio, 10 January (in BBC (1985) Summary of World Broadcasts: Far East, 7859) and Heilongjiang Radio, 19 June (in BBC (1985), Summary of World Broadcasts, Far Easr, 7984).


tiao - urban construction, living quarters construction, health and hygiene, gardens and parks - we had no say. For example, if people wanted a toilet in the past, the district-head had to apply to the city bureau for it. We didn’t have the money or the personnel or materials, but we had the duty to maintain environmental sanitation, order, etc. From 1985, this decentralization began with the environment, so our initiative was enlarged.’ (White and Benewick, 1986, pp. 68-9)

1985 also brought some limited increase in this district’s financial powers. First, although their budget was still allocated by the city, they were given discretionary power over a certain proportion. Second, a new revenue-sharing arrangement meant that, if the district’s revenue increased in a given year (from greater tax revenue or from increased profits of local enterprises) they were allowed to retain 23.2 per cent for their own use. Similarly, officials of Heping District in Tianjin referred to ‘a policy of encouraging the role of the district government’ which was able to retain about one-sixth to one-seventh of its income for its own projects (White and Benewick, 1986, p.33). Similarly, officials of Lixia District in Jinan, Shandong, province reported a small increase in their financial powers while recognizing that these were still negligible (White and Benewick, 1986, p.44). In each of these cases, district officials indicated that the trend was towards greater autonomy, but some expressed frustration that the pace was not faster. However, in at least one city, Beijing, this process seems further advanced. Officials of Xi Cheng district claimed (White and Benewick, 1986, p.18) that their finances were ‘relatively independent’ with ‘a basic right to decide on our expenditures’, although this basic right still operated within a context whereby all district income went to the city government and the district received a certain percentage from the latter, this depending on the overall balance of city finances.

Although the situation varies widely from city to city, there is clearly pressure for greater financial autonomy at the district level (and below it at the neighbourhood office and residents’ committee levels) each exerting fiscal claims on the level above it. In part this reflects the perennial budgetary appetites of governmental units any- where, the desire to retain as great a part of local revenue as possible and to extract as much as possible from high levels with as few strings as possible. Tensions between levels are likely to mount as the potential economic base of urban basic level administrative agencies (residents’ committee, neighbourhood office and district) expands along with the economic reforms: their specific economic bailiwicks have shown particularly vigorous growth as against those of city governments, viz. services and commerce as opposed to industry, small-scale co-operative and private enterprises as opposed to state. These enterprises are golden-egg geese and are the object of an intergovernmental tussle for revenue: for district enterprises, between district and city; for neighbourhood enterprises, between neighbourhood and district; for enterprises under residents’ committees, between them and the neighbourhood office. In the past, there was a tendency that, when geese at each level grew bigger and fatter, they were taken over by higher levels of government. For example, officials of Lixia District in Jinan city reported losing enterprises to the city government in 1979 which were transformed thereby from ‘small’ to ‘big collectives’ (i.e. statized in effect) (White and Benewick, 1986, p.44). Although the official reason for transfer was the inability of the district to manage them properly, officials maintained that

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this was only the case under the traditional division of managerial labour between city and district, which was breaking down as the district took on more responsibilities for developing industry and commerce. Here we can see a district government trying to corral its own geese for its own benefit.

Looking at this phenomenon from a broader perspective, one can see each level of government acting in an entrepreneurial way, a combination of developmental and predatory behaviour. On the one hand, they attempt to develop the local economy and fence it off from external interference; on the other hand they take their cut from the enterprises under their jurisdiction and attempt to take cuts from enterprises in other bailiwicks. From the point of view of a successful economic reform, such inter-levelhnter-local competition is highly problematic since it fosters excessive and unwise investment, imposes local fetters on the natural flows of a commodity economy and increases depredation on the real producers, the enterprises. Small wonder that local governments often figure as the villains in the dramatic scenarios of disgruntled reformers. As can be seen later, however, a political analyst might be inclined to a less demonic view. As I shall show in the Conclusion, reforming this arena of inter-bureaucratic struggle requires major change in both fiscal arrangements and in the structure and operational behaviour of local institutions.

Institutional changes at the district level

There is clear evidence that the increased demands on urban governments (from both above and below) and their desire to acquire more operational autonomy are producing institutional changes in basic level governments at the district level and below. While the economic reforms have increased the size and complexity of urban economic systems, they have also brought new functions for local governments which require institutional changes. Evidence at the district government level (including its component parts, the street offices and residents’ committees) demonstrates this trend in detail.

Within the system of district level organization, one can detect three trends. First, there are certain areas of activity which are increasing in tandem with economic reform, leading to the expansion of existing organizations. Reformers have called on government to give up methods of direct control over enterprises in favour of indirect regulation through ‘economic levers’, one of which is taxation. Urban governments have in fact expanded their tax offices in line with this new policy, particularly in the context of the new practice of substituting taxation for negotiated profit remit- tances as the main means of generating state revenue from enterprises. Increased commercial activity and the proliferation of collective and private business has led to an expansion of the agencies responsible for their regulation at both city and district levels, namely bureaux of Finance and Trade and Industrial and Commercial Management.

Second, the diversification of governmental functions has led to the formation of new organs, either splitting off from existing organizations or being established de novo. In response to urban economic growth and diversification, for example, some urban districts are taking on a planning role by establishing institutions to co-ordinate economic activity within their borders. At the district level this takes the form of a planning committee; at the street office level, an ‘economic work group’. Separate auditing bureaux, part of the new system of financial regulation of both


government and economy, have also been established, usually starting out as a section of the existing finance bureau. In Tianjin’s Heping district, for example, the origin and functions of the auditing bureau were described as follows (White and Benewick, 1986, p. 132):

‘These new organizations reflect the expansion of the functions of local government after the Third Plenum (1978) . . . In the past, the functions of these new organizations were handled in other bureaux, but their functions have expanded, thus a need for new organizations. They reflect the reforms: for example, the district Auditing Bureau supervises the expenditures of enterprises (both city and district enterprises; the city level looks after the larger ones). The Auditing Bureau has two functions: to supervise the budget of the district government and enterprises.’

Similarly, the reformers’ desire to make price regulation more sensitive and flexible, as well as the recurrent need to clamp down on ‘unwarranted’ price rises which generate local discontent, have created the need for new (or expanded) price bureaux. Reform attempts to strengthen the regulatory role of economic law have also led to the establishment of new legal institutions or the expansion of existing ones. For example, the legal bureau of Tianjin’s Heping District was established only in the mid-1980s. One can also expect the activity of the economic sections of district level courts to expand substantially, although some disputes will still be handled administratively by industrial and commercial bureaux.

As a reflection of reformers’ efforts to promote natural economic ties between localities (against the previous Maoist policy of ‘self-reliance’), urban governments are establishing agencies to handle inter-regional ‘economic co-operation’. This is particularly visible at the city level, but is also apparent in the districts in larger cities. For example, Lixia District in Jinan had established co-operative relations with ten other districts and counties outside the city, including other provinces; these links had not been possible-at least formally-before the reforms. In the smaller city of Zhenjiang in Jiangsu province, an economic co-operative committee was established in 1985 ‘to link economic departments with other areas’. These link- ages within China should be distinguished from foreign economic ties which are handled by foreign trade committees or bureaux, the activities of which are also expanding along with the (uneven) spread of the ‘Open Policy’ to the outside world.

Turning from the economic sphere, another broad area of rapidly expanding local government activity is that of spatial planning and environmental regulation. This reflects several policy innovations of the reform era: the shift in priorities away from ‘productive’ to ‘non-productive’ investment to favour social consumption and raise overall urban living standards, notably by improving public utilities and expanding the housing stock; the desire to rationalize urban assets and improve the efficiency with which they are managed-particularly important is the effort to reform the system by which urban real estate is categorized, valued and regulated. Efforts have been made to improve urban public utilities such as tap water, public transport, paved roads, sewers, household energy, urban vegetation and environmental sanitation. District governments have set up new departments to deal with these functions: city beautification and city construction committees in Tianjin’s Heping district; an urban construction management committee in Lixia District in Jinan which exer-

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cises new powers over construction (previously it had only been allowed to handle maintenance); in 1986 Shanghai’s Jingan District set up a Living Quarters Bureau and Environmental Protection Office and planned to establish a Design and Project Office to engage in urban planning.

These examples suggest a proliferation of organizations in urban district governments, at least in the larger cities, specifically in response to the strategic and institutional changes introduced by the economic reform programme. These new organizations at the district level are the lowest rung in new ‘branches’ (tiuo), which extend up to the city level and above. At each level, the organ is subject to ‘dual leadership’ from its city branch superior and the district government. However, it is significant to note how some of these new organizations reinforce the power of urban governments since they are organized on the ‘area’ principle of administration, i.e. their specific responsibility is to co-ordinate across branch organs and assert local as opposed to sectoral priorities. It is the specific function of new agencies called ‘committees’ or ‘commissions’ to co-ordinate across sectors: for example, the foreign trade committee in Zhenjiang City in Jiangsu province replaced a foreign trade bureau which was formerly a branch department ‘under unified leadership of the centre and province’. The change, said city officials, ‘reflects the expansion of our independent power at the city level’.

This process of institutional proliferation is problematic from the perspective of reform. While some of the new institutions reflect reform priorities, others (such as the new ‘planning committees’ at district level) reflect old methods of direct control over the economy. Moreover, while new institutions are arising to take on new tasks, old institutions which are theoretically superseded and should either contract or disappear, have apparently not done so. This should hardly be a surprise to students of public administration who are familiar with the tendency of public organs towards immortality.

This organizational proliferation is a national phenomenon and has been a target of periodic attempts at administrative reform.13 For example, the party committee of Canxi county in Sichuan province reported that, before attempts at administrative reform in the early 1980s, the county had 64 organs; by the end of 1984 after the reforms there were 84, an increase of 31 per cent, with a 15 per cent increase in staff.14 A similar process may well be under way in the newly reconstituting township and town governments in the countryside, partly through the establishment of ‘provisional’ organs (for example, the Ministry of Civil Affairs reported in 1985 that each of Shanghai’s 17 townships and 2 towns had an average of 35 ‘provisional’ organs, mostly established during the previous three years).’’ As we shall see in the next section, moreover, organizational expansion is not confined to bureaucratic organs; there has also been an explosion of ‘companies’ or ‘corporations’ (gongsi), which are intermediate organizations between the state bureaucracy on the one side and basic level units and enterprises on the other.

As the new emerges and the old remains, the Chinese state takes on a dualistic character, a mixture of old and new forms of developmental state. One interesting case of the persistence of the old institutions is that of urban industrial departments

”For an overview of attempts at administrative reform during the reform era, see White, 1988. “New China News Agency, domestic service, 7 July, in BBC (1985), Summary of World Broadcasfs: Far East, 8001. ”New China News Agency, 22 July, in BBC (1989, Swnmary of World Broadcasts: Far Easr, 8017.


whose powers have been directly threatened by the reformist innovations in industrial administration, notably the efforts to increase the financial and managerial autonomy of enterprises. Local industrial bureaux have sought to protect themselves by a variety of means: by simply dragging their heels and either implementing reform policies slackly or not at all; through a kind of institutional camouflage by which they simulate the appearance of change (e.g. by changing from a bureau to a company, or devolving authority to subordinate companies under their control) but retain the previous substance (by not changing their operational methods, or using their subordinate companies as instruments of continuing control over ‘their’ enterprises). An interesting example of this institutional ‘creativity’ is the Shanghai City Textile Bureau (White and Bowles 1987, p.74). Let an official of the Bureau tell the story:

‘Enterprises have their self-owned funds. This process went through three stages: (1) [the system of] retained funds from profits (9.5 per cent in 1979). This 9.5 per cent was redistributed by our Bureau to meet the bonus and welfare needs of enterprises and keep them at the same level as other trades in Shanghai. We had a lot of power then. (2) Then in 1982 “profit-to-tax” came in, but we did not implement this because the 1979 profit contract was for five years. (3) In 1984 came the second stage of “profit-to-tax” which took away ourpower to distribute, so our financial role decreased greatly.’ [emphasis added]

The Bureau responded to the third stage by establishing a new agency, a Financial Allocation Centre (FAC), in an attempt to recapture some of their previous financial power by drawing off part of the retained funds of textile enterprises which were theoretically for the latter’s own use.

‘Enterprises have increased their own funds; we want to pool some of these funds so we set up our FAC. Remember that before the reform, the [local] financial bureau went through us and our companies to the enterprises. Both our bureau and the company retained a portion of the funds. Now the enterprises have direct relations with the finance bureau.’

The Bureau justifies its FAC on the grounds that its subordinate enterprises have differential profitability and needs for technical upgrading, so some form of redistri- butive financial agency is still required. An economic reformer would not agree but, regardless of the FAC’s economic logic, it is a revealing example of protective institutional adaptation, perhaps reflecting a rich variety of such defensive bureaucratic entrepreneurship which requires further research.

Management of the economy

The economic environment at the urban district level and below is substantially different from that of city administration. While the latter is responsible mainly for state-owned enterprises or their equivalents, the former mainly deals with collective and private enterprises, among which commercial and service units tend to predo- minate over industrial. Although state-run industries may be situated geographically within a district, the district government has little power over them and they are

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managed by their specific administrative branch systems under the city government or above. Given that controls exerted by state agencies over collective enterprises (as opposed to state enterprises) have historically been less stringent, one would expect relations between the district government and the enterprises under its jurisdiction in the pre-reform era to have already been less directive than would have been the case at the city level. During the reform period, however, there has been an attempt to change the process of economic regulation more fundamentally; ‘from controlling the enterprises by management-type to service-type regulation’ (White and Benewick, 1986, p. 45).

Partly from ideological opposition, partly from entrenched bureaucratic interest and partly because of urgent financial pressures, local governments have been reluctant to release enterprises from their grip. They therefore embraced a compromise solution-an institutional change which appeared to sever their links with enterprises but maintained them in essence. This was the company or corporation which was established as an intermediary. As one district official put it:

‘In the past, we managed the plan, material, sales and appointments; now we are giving these powers to the neighbourhood companies. The economic sections of the government guide companies, companies guide enterprises-this is an experimental process and we don’t have much experience.’

The introduction of companies is one of the major institutional innovations of the reform era, but it must be analysed as a conservative device designed to maintain the reality of direct state control over the economy. They are a kind of ‘half-way house’ between a state organ proper (in this case of districts, an agency such as the Industrial and Commercial Management Bureau) and an enterprise. They are ‘quasi-state’ organizations in terms of ownership and responsibility, but are usually responsible to a district administrative organ. At the same time, however, companies are supposed to be economic agencies, to have an ‘enterprise character’, exercising a degree of commercial autonomy and interacting with their bureaucratic superiors and enterprises subordinates in terms of economic rather than administrative relation- ships. In practice, the latter seems to have predominated.

The concrete institutional picture varies from area to area, but the following pattern seems common. Within the district, there are two levels of companies, at the district and neighbourhood levels. At the district level are the more specialized companies (for instance, transportation, labour service or housing development) while neighbourhood companies tend to group together disparate types of small enterprise under umbrella Industrial and Commercial Companies (either separate or fused). The companies have an important role in planning the production of their constituent enterprises, in providing finance and in helping to find materials and sales outlets. Companies levy management fees or a percentage of profits from their constituent enterprises but they themselves have financial as well as administrative obligations to their superior government agencies.

In places where private business is developing rapidly, a different method of institutional control may be used, viz. a separate system of private industrial and commercial offices, responsible to the district Industrial and Commercial Management Bureau.


These in turn either deal directly with private concerns or with their representatives: in many cities, for example, ‘private labourers’ associations’ and ‘entrepreneur associations’ have been established under government sponsorship. While these organizations are nominally independent, they tend to function as a regulatory intermediary useful to local governments.

To summarize, again the picture is one of institutional proliferation, in this case through the emergence of intermediate, ‘quasi-state’ agencies with hybrid characteris- tics. I am analysing these as essentially defensive entities spawned by government agencies anxious to maintain their power over the urban economy while being seen to engage in ‘institutional reform’. However, it is perhaps too easy to see companies and associations as purely bureaucratic creatures. Clearly they are subject to control and monitoring from superior state agencies and successive layers of local government view them as important instruments to extract resources from enterprises to expand their own financial base. At the same time, however, an element of flexibility seems to have entered the system of economic management: some companies do appear to have some autonomy from their bureaucratic superiors and to exercise some freedom of manoeuvre to the economic benefit of themselves and their constituent enterprises. Moreover, though associations of private workers and entrepreneurs are still heavily under the influence of their bureaucratic ‘minded, they do carry a strong potential, in the longer term, to develop a more independent role in defence of their members’ interests.

CONCLUSIONS

Conventional analysis of the role of local governments in the post-Mao era has tended to paint them as major obstacles to reform due to bureaucratic inertia and political vested interest. The analysis here suggests, to the contrary, that at least in the urban areas, their response to economic reform has been ambiguous and multi-faceted. They have adapted, often in highly ‘entrepreneurial’ ways, to new circumstances, partly in ways designed to further reform and partly to block, divert or water it down. The result is an institutional set-up far more complex and fluid than before, presided over by a Janus-faced administration which preserved the essen- tials of the old system while grafting on elements of the new. In no way can this phenomenon be dismissed as pure bureaucratic inertia or conservatism.

The question of ‘political vested interests’ also needs examination. Many indivi- duals and institutions do have an important stake in the previous system which they endeavour to protect. However, the above analysis suggests that the behaviour of local government-‘conservative’ or ‘progressive’, predatory or developmental- cannot be understood unless they are seen in the context of the political pressures and demands which had both accumulated during the Maoist era and been generated by the reform process itself. Urban governments in particular face environments of increasing complexity and mounting demands on their services which they are hard pressed to meet.

In short, local governments are at the ‘sharp end’-they are under pressure to perform more (and ideally better), yet face resource constraints in their attempts to do so. Some of their organizational responses have been creative and positive

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when viewed within this context: the attempt to ‘search’ for a better level of urban basic level government (the neighbourhood office) which balances conflicting needs for co-ordination, manageability and ‘closeness’; the reorientation of existing institutions and the establishment of new institutions to perform the new governmental functions required by the economic reform programme; and the attempt to reinforce the area (kuui) principle by strengthening the role of co-ordinating institutions to limit the segmenting effects of branch (tiuo) administration.

Another response, which reform economists are quick to regard as mere ‘rent- seeking’, is the attempt to expand their revenue base by developing the economy under their jurisdiction and levying revenue from it, while a t the same time trying to extract more resources and power from the next higher level of government. However, such revenue-seeking behaviour may be expected in a political context where their actual responsibilities are greater than their formal responsibilities, where popular aspirations and dissatisfaction are mounting, where higher levels of government are reluctant to devolve financial power and where there is little clarity about the specific rights and responsibilities of successive levels of government.

Unless the issue of local government reform is given higher priority, and unless a more systematic and determined effort is made to sort out the tangle of urban government, the currently prevalent form of revenue seeking, which is defensive, competitive and economically problematic, threatens to turn local government into successive layers of leeches battening on the blood of caged enterprises, thereby generating greater popular resentment.

There would seem to be a strong case for the Chinese authorities to develop the expertise necessary to focus more squarely on the structure and content of state itself, rather than merely on the nature of its relations with the economy. In short, there is need for a programme of politico-administrative reform parallel to, and complementary with, the economic reform. At the local level, such reforms might include the following: a clear definition of the division of labour between central and local government and between layers of local government; a redefinition of the financial status and powers of each level of government in relation to the state as a whole and to its own socio-economic constituency (this needs reform in the tax system); greater clarity about the precise and particular functions of local government and the extent to which these can be devolved to ‘quasi-state’ or independent agencies (for instance, housing associations, pension funds, insurance companies and the like); new administrative practices such as meritocratic recruitment, professional training and an enforceable code of administrative practice. Accompanying reforms in specifically political institutions are also a priority, but discussion of this is outside the scope of this paper and will be addressed elsewhere.

The emergence of systematic thought on these problems in China has been slow in coming-still slower the move from thought to action. There are various reasons for this: the very complexity of the changing urban society and of the institutional network of local government; the fact that the structure of local government is a pagoda of many levels and reforms at each level are interdependent; the fact that analysis and action go beyond the relatively ‘safe’ sphere of economics to tackle the more sensitive areas of administration and politics; the fact that the objects of inquiry and action are themselves political actors with well established institutional interests which may run counter to the dictates of reformist rationality, whether economic or administrative. Sadly, in the climate of the political reaction which


has followed the Beijing massacre of June 4 1989, even the limited progress made in addressing these issues of local government reform now seems to be in jeopardy.

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