1 Introduction
As China celebrates its 40th anniversary, in 2018, of the reform and opening-up, it is an opportune moment to examine China’s development characteristics from the perspective of local governance. From 1978 to 2018, the main focal point of China’s reform and opening-up has been the decentralization from the government to the market and the society, as well as the decentralization from the central government to local governments. China’s local governments, which directly undertake local economic development, the provision of public services, and social functions, carry out the policies of the central government and perform de facto governmental functions, as well as offer key insights into to Chinese governmental operation. In China, a local governance system—which gives priority to local governments and includes both market participation and social coordination—is taking shape and playing an increasingly important role in national governance. It’s worth pointing out that China’s reform and opening-up develops along with the global local governance reform, responding to negative effects of globalization in local economic and social development. It plays a key role in a global multilevel governance since it directly deals with a multitude of public issues and services. This shows that local governance in contemporary China, which develops along with globalization, constitutes a key component of the global local governance reform and reflects the application results of governance theories in China.
In the following sections, this introduction first reviews the overall development of local governance in China, including the rise, structural components, and operational mechanism of local governance since the reform and opening-up. It then summarizes the key characteristics of Chinese local governance as government-dominated, institutionally innovative, and adaptive. Finally, the new trends of local governance in contemporary China are discussed.
2 Rise of Local Governance in Contemporary China
Chinese local governance in the modern sense started between the late Qing Dynasty and early Republic of China, when local governments had great power over local affairs. Under the influence of nationalism and the tradition of autonomy, many local celebrities flocked to public affairs, such as the promotion of modern education, and even had a hand in the local fiscal system. In the days of wars, local governments even relied on local celebrities to gather public resources for governing public affairs on public resources gathered through local celebrities (Agrawal et al. 1983). At the same time, some public welfare foundations established by home-grown entrepreneurs also got actively involved in social and welfare services (Zi 2015). Studies have shown that business periodicals, as well as self-governing organizations as represented by trade associations and charitable organizations in the late Qing Dynasty, played an important role in expressing and spreading public opinions, giving rise to public domains independent of the state (Rowe 1993). Continuous cooperation between the state and the public was seen and institutionalized in the third realm (Huang 1993). In the 1930s, the KMT Nationalist government weakened the local self-government and participation, and thus government bureaucrats penetrated into “autonomous” governing bodies and turned them into state-led local organizations (Agrawal et al. 1983). This, together with the Japanese War of Aggression against China, seriously held back local governance. While in the revolutionary base of Yan’an, the Communist Party of China (CPC) didn’t follow the Soviet Union model, such as centralization, strict hierarchy, and command economy. Instead, they developed a sound system of local governance, and accumulated rich experience, including promoting decentralization, allowing great flexibility in works of local cadres, and enhancing close contact with the masses. “The strict compliance to central orders remains a main feature of CPC operation, but the delegation of power and regional autonomy began to serve as main principles” (Lieberthal 2003).
Since the founding of the People’s Republic of China in 1949, Mao Zedong proposed that “it is better to put both central and local initiatives into active use,”1 and designed a formal governance system based on China’s imperial system, practical experience of the Republic of China, and revolutionary base construction. Given a great deal of domestic and global factors, however, China’s government administration system in practice learned a lot from the Soviet pattern and emphasized centralization to boost rapid industrial development and social changes. At the same time, China adopted a planned economy and the system of units (单位Danwei) for overall control over the market and society. The power of political organizations, thus, penetrated into and controlled without limits every dimension of the society, and China entered the era of totalism (Tsou 1986).
With regard to the relationship between the central and local governments, as China advanced its socialist construction, the central government adopted a highly centralized system, while local governments became subordinate bodies being ordered to implement the policies and plans formulated by the central government. A one-way order-obedience relationship was established between the central government and local governments. With a highly politicized administration system, political means became the major means for China to realize its administration goals. The government took charge of everything to realize large-scale unity. From the founding of the People’s Republic of China in 1949 to the reform and opening-up in 1978, China had gone through several rounds of shifts between centralization and decentralization in its fiscal system. In general, these moves to delegate powers to lower levels were made to stimulate local governments in reaching targets set by the central government, while the overall control over economic resources was still in the hand of the latter. In the planned economy system, the relationship between the central and local governments is explained as follows: “If the power is decentralized to the local government, it would get out of control, and then the power would be recentralized, which would stifle the local initiatives” (一放就乱,一收就死 Yi fang jiu luan, yi shou jiu si) (Zhou and Tan 2014).
The relationship between the government and the society also changed after 1949. With changes in the social system and ideologies, and the adoption of totalitarianism in the political system, a high degree of politicization was seen in the Chinese society where the system of units dominated by political systems were defined as basic systems to handle public affairs. Private charity organizations and foundations died out and so did business associations that regulate industry operation and economic development. During this period, as a bridge between the governments and the people, All-China Federation of Trade Union (ACFTU), All-China Youth Federation (ACYF), All-China Women’s Federation (ACWF), Chinese Academic Association, and All-China Federation of Industry and Commerce (ACFIC) served as political organizations.
As for the relationship between the government and the market, China adopted a highly centralized socialist planned economy that features public ownership and distribution on the basis of labor to ensure total control over economic resources. As market-oriented economy and private ownership were regarded as basic features of capitalism, commodity economy disappeared from the scene, and enterprises were owned by and brought under direct management of the government sector. To sum up, social and economic independence is not allowed under the system of totalism and planned economy. It is worth noting that, despite a highly centralized political and economic system similar to that in the Soviet Union, there was still power decentralization among governments at all levels in China. In 1978, the hierarchical structure which encompasses different levels and regions had developed into an “M-form” multidivisional structure which is totally different from that adopted in Eastern Europe and the Soviet Union (Qian and Xu 1993). In other words, China, before the reform and opening-up, implemented not a Soviet-style central planning system, but an economic system that covers many levels and is more regional and local. The decentralized system developed in the days of Mao Zedong has laid the groundwork for the reform and opening-up sweeping across China since 1978 (Shirk 1993).
2.1 The Rise of Local Governments to a Dominant Role
Beginning in 1978, China started a round of reforms advanced by local governments and approved by senior central leaders, and local governance also started to take center stage. China’s process of reform is described as being like a person crossing a river by feeling his way over the stones. It started with trial or pilot operation locally, and the successful experience was next incorporated in “top-level design” and promoted across the country. The reform and opening-up, in terms of its drivers, paths, and forms, grows out of local innovation. It, in fact, includes a cascade of processes of granting decision-making powers to various entities and allowing them to keep more profits. The relationship between the central government and local governments also took on a new look. Amid reforms in the administration, fiscal, and cadre management systems, along with market economy development, local governments obtained autonomy, namely unleashing their vitality from constraints of the unitary system.
China has established, through reforming the administration system, a local government organizational system that delegates powers to local governments in economic and social management. In addition, it has identified, through three amendments to the Constitution and organizational laws of local governments from the late 1970s to early 1980s, the responsibilities and functions of the central government and local governments, and their relationships, and recognized the dominant position of local governments. Several reforms in the fiscal system of the central and local governments have ensured economic autonomy of local governments. In 1980, China adopted a fiscal decentralization system (分灶吃饭Fen zao chi fan), which was then changed to a fiscal contracting system (财政包干制Cai zheng bao gan zhi) in 1988 (Zhou and Tan 2014; Yang and Lai 2009). The fiscal decentralization reform from the 1980s to early 1990s allowed local governments to control their source of revenues, spurred them to act as economic entities, and drove them to boost local economic development. It is widely believed that China’s tax-sharing reform in 1994 marks the watershed where the central government recentralized fiscal power (Zheng 2013; Zhou 2006). With the system, the central government enhanced its control over local governments but also prescribed their power in collecting certain taxes. Thanks to extra-budgetary accounts, local governments had independent sources of revenue (Zhou 2006) and also greater administration power within their jurisdictions. The fiscal decentralization reform contributed to a Chinese federalism (Montinola et al. 1995), and further consolidated the decentralization framework, providing economic support to the local governments’ rise to governance body. In 1984, China started to explore an alternative framework for its cadre and personnel management system to reduce the number of leading cadres under direct central control and let local government have more power over appointing local leading cadres. This move granted more decision-making powers to local governments over personnel management and resources mobilization, which benefits regional governance and management. The central government adopted the principal-agent approach to delegate certain functions to local governments instead of directly intervening in their performance functions. With independence in their administrative power, fiscal relations, and personnel system, local governments are really likely to take charge of local governance.
The reform and opening-up in China is not only a process of unleashing the vitality of local governments but also aims to promote market economy and social autonomy. With the economic reform, China has ushered in a new stage where local governments, markets, and the society seek common development.
2.2 Market Entities in the Local Governance System
The economic system reform dedicated to invigorating market players follows throughout the reform and opening-up, and incorporates itself into ideologies to make possible a socialist market economy with Chinese characteristics. China’s reform in the economic structure focuses on the modern property right system, modern market economy, modern income distribution system, and modern macroeconomics (Wei 2008). With the reform in the modern property right system, China recognized the presence of nonpublic economy and promoted its development, making it possible for the nonpublic sector to participate in local governance. The reform toward a modern market economy has identified the role and status of the market mechanism in economic development. In 1982, the 12th National Congress of the CPC advanced the policy of “maintaining the primary role of the planned economy while giving play to the supplementary role of market forces in economic regulation.” At the 13th National Congress of the CPC in 1987, a mechanism whereby “the government regulates the market and the market guides enterprises” was established. In 1992, Deng Xiaoping officially recognized the role of the market economy in his South Tour Speech. At the 14th National Congress of the CPC, the reform target of building a socialist market economy was clearly set. In 1997, the 15th National Congress of the CPC put forward to “continue the reform toward a socialist market economy in order to further give play to the fundamental role of market in the resource allocation under state macro-control.” In 2013, at the Third Plenary Session of the 18th Central Committee of the CPC, China stated to “deepen the economic system reform by cantering on the decisive role of the market in allocating resources.” As market mechanism underpins economic development with greater vitality, the market entity of the local governance system has been established.
2.3 Rise of Social Organizations in the Local Governance System
The reform in the government administration system and the development of the market economy have a profound impact on such aspects as China’s state-society relationship, social hierarchical structure, social welfare system, and employment structure. China’s reform and opening-up also witnessed its society’s rejuvenation and transformation. With the development of a m...