The Political Economy of China's Provinces

Competitive and Comparative Advantage

Hans Hendrischke

• Publisher: Routledge
• Year: 2013
• Print ISBN:
  9780415207751
• eBook ISBN:
  9781134621002
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Traditionally, political scientists and economists have seen China as a single entity and business people have seen China as a single market. This book challenges the notion of a centralised and unified China, and outlines how provinces are taking on new economic and political roles, forced upon them by decentralisation.It is the most thorough data on contemporary Chinese provinces available and will be of great interest to researchers and graduate students of politics, economics and business as well as Asian studies.

1Provinces in competition
Region, identity and cultural construction

Hans Hendrischke

China’s quiet transition into the post-Deng era has disproved the speculations of impending dramatic leadership struggles and regional instability. Some dramatic scenarios were based on the link between a divided and immobilised central leadership and regional groupings breaking away from central control. The kernel of truth in these speculations is that the central government is indeed becoming less interventionist and that provincial power and influence are increasing. One of the reasons for China’s apparent stability is that the two are closely linked. Essentially, a new relationship between the central and regional power structures is emerging. As the localities increase their regulatory power and independence, the centre has reacted not in an antagonistic fashion, but rather by coopting provincial leaders and negotiating issues with provinces in a more predictable manner. This has been evident since 1992 and has been confirmed by the fifteenth National Party Congress in September 1997. The much quoted team approach of the Chinese leadership not only covers central stake holders such as party, military and government, but also includes a coordination between central and local interests.

While Chinese power structures have never been transparent, much more is known about the central perspective of leadership conflicts and central —provincial relations than the provincial perspective of internal provincial politics, inter-provincial conflicts and relations with the centre. The degree of autonomy exercised by different provinces in their negotiations with the centre is difficult to assess, because it emerges as the result of an ongoing bargaining process.¹ Even what constitutes local interests and who articulates them is difficult to discern.² As the decision-making powers by provinces over their investments are expanding, the centre is reducing its coordination of provincial economic policies. There is now considerable overlap of investment from provincial governments struggling to gain a foothold in promising business sectors. One emerging field of study is therefore the analysis of business strategies employed by provincial governments in pursuit of competitive advantages over other provinces.

Before turning to this topic, the role of provinces and competing levels of regional government coordination in China’s changing economic and social geography requires attention. In the process of reform, provincial-level units have been the dominant political actors at regional level and have had to take on more tasks as the centre reduced its direct control. However, there are indications that, with increasing inter-provincial and international integration, provinces might no longer have the size and scope to provide effective economic and regulatory coordination, thus creating a role for greater regions. On the other hand, the exercise of economic control by a provincial leadership might be undermined by the factual power of sub-provincial economic regions where economic activities are concentrated. These issues gain crucial importance when industrial planning and structural policies are at stake, and policy-making moves away from vertical coordination inherited from the planned economy to the horizontal integration that comes with decentralisation.

For the foreseeable future, however, provinces are still the most likely regional subdivisions to hold local power, as former functions of the central state, ranging from industrial and foreign trade policies to the responsibility for social security, are transferred to provinces and municipalities. Once provinces formulate their own economic and social policies and are able to articulate their specific interests in the light of their differing circumstances, the expectation is that in the process they will also gain stronger political identities .³ Historically, many provinces have distinct cultural identities based on local history and traditions, art forms, popular beliefs and customs, local cuisine and even personal traits, among many other characteristics. The new role of provinces brings existing notions of provincial identity out of their cultural isolation by integrating them in provincial-level political and economic agendas. Provincial leaders have discovered that they can appeal to provincial loyalty as a way to gain public support for their policies. These broad institutional developments are as yet ill-defined for the simple reason that more definite forms will only emerge as different provinces find different ways to adapt to the new and changing circumstances. To address these economic, political and cultural changes is the task of the project to examine China’sProvinces in Reform which has produced this and a previous volume of provincial studies.⁴

This volume comes amidst a range of new publications on regional and provincial China, by both Chinese and Western authors.⁵ Many of these publications still focus on central— local relations and larger regional groupings such as coastal and inland provinces rather than on the role of individual provinces and inter-provincial relations. To some degree, the old paradigm of a highly centralised state dealing with individual provinces and groups of provinces by bestowing and withholding favours still holds currency, not least because the centre can wield considerable influence over provincial matters and, more generally, because a new relationship has not yet been formalised in a new institutional framework. This and the previous volume in the project to examine China’s Provinces in Reform follow a different approach by taking the provincial perspective and concentrating on how individual provinces have actively or reluctantly embarked on a reform course in the 1980s and adapted their provincial economies, politics and culture to the market environment that emerged after 1992. This research heralds a general change in the understanding of contemporary China which for decades was based on the perception of a rather conformist China, where it was safe to regard what happened in one province as representative of the whole country.

It is worth asking why the role of individual provinces has as yet not received more attention. One factor is certainly the propensity of the centrally controlled Chinese media to play down the autonomy of provinces, and the parallel tendency of provincial media not to boast of their degree of factual autonomy and instead emphasise their congruence with central policies. The provincial studies in China’s Provinces in Reform have demonstrated a surprising provincial variety and degree of autonomy in implementing central policies. They show that throughout the 1980s central reform policies met a very mixed response from the provinces. Mostly for fear of losing central subsidies and investment, some provinces were unwilling to accept the gradual withdrawal of the centre and resisted reform, while others were quick in making use of the opportunities they saw in reform policies and benefited greatly. The provincial studies in this and the previous volume on China’s Provincesin Reform confirm that the final breakthrough came only in 1992. From then on all provinces had to take on additional economic responsibilities as the centre delegated more economic and social functions.

On the basis of these results, it is tempting to project what China will look like if it is composed of provincial economies under loose central control and all with similar decision-making powers over their own economic and related political and social affairs. Such projection assumes that the centre will continue to relinquish its support for individual provinces in the form of preferential policies or subsidies and instead provide a macro-economic framework designed to allow each province to maximise its own benefit under generally applicable rules. One could argue that this is far from present realities where a myriad of central and provincial institutions regulate free economic exchange between provinces, but it is certainly not far-fetched in the light of China’s application to join the World Trade Organisation. As a WTO member, China’s markets would not only be opened to external but also to internal competition and provinces would have to compete on an equal footing and without protective barriers .⁶ But even without such external pressure they will take on additional tasks and functions.

The studies collected in this volume bring into focus some of the general implications that will arise from this change. Although each of the provincial chapters has to be broad enough to cover the specific circumstances of each province, there are nevertheless a few major issues around which the studies can be grouped. These are the relationship between provinces and other regional divisions, the way in which increasing economic interaction and competition between provinces contributes to distinct provincial identities and, finally, the process by which provinces as essentially administrative bodies are striving to become local centres of identification linking political with economic and cultural loyalties.

GREATERREGIONS, SUB-PROVINCIALREGIONSANDPROVINCES

China’s sub-division into provinces took shape during the Yuan Dynasty and its essential principle of basing provinces on administrative rather than economic considerations has remained in force ever since. For centuries, therefore, there existed a separation between economic and administrative boundaries. During this time, the central provinces remained relatively stable and well defined, albeit with frequent minor rearrangements and border corrections. In contrast, economic regions were defined in different ways for different purposes. In terms of natural geography, China falls into several large regions. For late Imperial China, William Skinner in his seminal work combined these natural features and market structures to define nine macro-economic regions which generally cut across provincesɹ borders .⁷ Skinner has since used more recent and further disaggregated data to argue that these macro-regions are still relevant to the modern Chinese economy.⁸ However, since China’s early industrialisation, attention has shifted to the division between coastal and inland regions that occurred as a result of industrial concentration along the coast during a century of political turmoil. An attempt to create unified administrative and economic sub-provincial regions was made in Manchuria under Japanese occupation in the 1930s, when the original four provinces were split up into 19 smaller provinces in order to align administrative borders more closely with the local economic geography.⁹

Under the People’s Republic of China, the separation between administrative and economic regions remained in force. When the People’s Republic of China was founded, the new government returned to the old provincial borders and set up a parallel structure of Greater Administrative Regions. Although these six Greater Administrative Regions (Huabei, Dongbei, Huadong, Zhongnan, Xinan and Xibei) geographically largely coincide with today’s larger economic regions, they fulfilled a political role at the time in giving the Communist Party more regional flexibility in consolidating its power. After the new Constitution came into force in 1954, these regions were abolished and the provinces reverted to being the major sub-central political and administrative units. By that time, the first Five Year Plan was taking shape. It confirmed the coastal—inland division of the country as the major principle of regional economic policies. Under the first Five Year Plan (1953–57), regional policies were designed to shift the focus of industrial development from the relatively developed coastal region to the underdeveloped inland areas, especially the western provinces. These policies underpinned regional planning for the following decades. Under central planning, the leadership in Beijing channelled investment into the inland and the western regions. The coastal provinces had to support this redistribution of income with reduced economic growth. The Third Front policy during the late 1960s and the first half of the 1970s further intensified this effect when investment was directed to inaccessible inland areas thought safe from a p...

Table of contents

• Cover
• Half Title
• Full Title
• Copyright
• Contents
• List of figures
• List of maps
• List of tables
• Preface
• List of abbreviations
• 1 Provinces in competition: region, identity and cultural construction
• 2 Selling Guizhou: cultural development in an era of marketisation
• 3 Shaanxi: the search for comparative advantage
• 4 Uneven development: prosperity and poverty in Jiangsu
• 5 Hubei: rising abruptly over central China?
• 6 Tianjin - quiet achiever?
• 7 King Coal and Secretary Hu: Shanxi's third modernisation
• 8 Jiangxi in reform: the fear of exclusion and the search for a new identity
• Index