Policy Changes In The Central And Local Game

How to recognize the relationship between the Chinese central and local government? Why the local governments have incentives to defy the orders from central-government? Is the relationship the game? The writer will answer these questions in this dissertation.Before reform and opening up of China, the relationship between central and local government is a typical agent—principal because of the true state ownership system, or central government monopoly, and the dynamic adjustment of the power between the two shows as zero-sum game, which means no vigor when it is in tight control or in a mess if empowering to local government. The highly convergence of resources and power restrains independent act space of local government, in that way, the interaction between central and local government is like a seesaw battle, showing more for you and less to me or vice versa. After reform and opening up of China, because of localization and disappearance of property rights, most of the resources are delegated to local level, which makes local government using a new means in this game playing: "escaping". Decentralization of the power and surrender some of the profits make local government an independent benefit subject, which has more power to grab financial income and create severe externalities and corruption issues consequently.The pyramid organization of Chinese bureaucratic administration makes central government bear this negative effect caused by local level. Because central government has the power to constitute national system and regulation, it could define local government's administration procedure and action constantly for stable political situation and historic evaluation; also improvement for current management system is pushed by central government for providing system security of marketing orientation.The strangest thing is that when central government constrains power in one area or use tighter policy to weaken local discretion power, local level has to execute it but it could pioneer a new grabbing area with resources on hand. Changing of the policies has good effect as far as targets concerned. However, if you look at it for a whole picture, this grabbing act is not been limited but transferred. Thus, this forced central government for further policy changing, although it is undoubtedly behind the time and the grabbing act of local level. This is like no one but central government urging local level to find new grabbing areas always. A situation is been formed as: central government is pushing institutionalization constantly, at the same time, beating grabbing act and corruption of local government; but every time, it could not punch in the key point and always been hedged by local level.There is no meaning to say which of the two (central or local government) is more powerful because power is not zero-sum assigned between central and local level anymore. Even central government takes the power back, local government still use objective reasons like, high deputy cost to look for new grabbling area but not becoming powerless as it in planned economy times. Newly chosen act will still secure benefit of local government and also bring enormous externality and corruption.The root cause of this kind of policy escaping is the gradualness of China reform, i.e. the gradualness of system changing. Because system changing has powerful route dependence, which makes central and local government have flexible and non-systematization relationship at early stage of the reform, the possibility of opportunism is given to the local government. This causes inconsistence between two steps of system changing. Therefore, the achievements of system changing can not only been evaluated by single system but from the whole. In this way, an integrated frame and thinking of China gradual reform is needed; so as to solve the conflict between central and local level.As far as land issues, since year 1980, there are two themes of China land management policy changing: limited marketing orientation and land protection. The former one tries to revitalize land resource through paid-use of the land and establishment of land market. This could not only provide financial benefit to the government but also rationalize the land assignment by marketing adjust. This is a decentralization process, during which both benefit and power of the local government are expanding. Land protection policy tries to control total cultivated land reserve, control the speed of non-agriculture use of the agriculture land, prohibit macro-economy overheat caused by rough land supply, and to realize sustainable use of land resource.There is a kind of paradox between these two topics. Limited market-oriented reform adding China special land ownership structure makes land being seen as sources of economy development and financial/personal benefit increase by local government. This also makes government become operation government gradually and a participant of land market. During this process, local government transfers some cost to central government and the public. This is also the direct cause of the rapid decrease of cultivated land reserve, plenty issues on land requisition, high pressure on housing price, land corruption etc. This up-downwards responsibility-shirking act by local government forces central government to bear all severe results. This makes the execution of land protection policy from late 1990, which tries to plan total land supply, control land use, centralize land requisition approval rights, start vertical lead etc. to centralize land management and restrict grabbing hand of local government.This dissertation is on the basis of theories of organizational economy, observing relationship between central and local government from execution of land policy, meanwhile, probing new change of localism. Through all evidence and analysis, the conclusion is been made, which is that local government and officials committed opportunism when developing economy and increasing financial income. This opportunism is caused by short tenure, loose budget control, soft benefit-grabbing restriction and loose control of liabilities etc. Land is the resource hugely wasted by this opportunism and becoming the scarcest resource.Furthermore, local government goes to an industrialized way gradually relying on its resources. The local government could gain economic development and financial increase in short term, but for the long term, this development is unsustainable due to international competition and lack of resources. This crisis will not only refer to energy, but also finance, real estate these vital areas. To solve these issues, central government needs a complete consideration from the system's angle, and then conducts the reform accordingly. Traditional zero-sum playing relationship between central and local government is changing. The possibility of game playing is increasing and centralizing power by central government can not effectively control actions of local government that is why an integrated thinking about central and local government's relationship is needed.In introduction part, illustration about 3 fields is been made: the problems been discussed in this dissertation, relevant research methods been used and literature review. The structure of this dissertation from chapter 2 to chapter 7 is as following:Chapter 2: analysis frame and theory model. It is mainly about theory hypothesis and illustration about analysis model. Further discussion about local government's target preference, system incentive and action chose has been given on the basis of domestic and foreign literature review about China local governments' action. Because of the motivation of showing achievements in short term, plus externality effect of central government' s policy due to geographic characteristics, local government shows obvious opportunism when governing local region and developing economy. This opportunism shows as enclose land blindly and land rough supply for short-term financial increase and economic development.Chapter 3: market-oriented reform and system change of land management. This chapter shows a picture about China land management system change track from 1949 to 2005; including land free-use system formed before year 1978, paid-use system after China reform and opening-up, and market-oriented reform and the 3rd wave of land use. Meanwhile, current policy system about land protection has been observed, including different policies, regulations and laws. Lastly, the effectiveness of land protection policy has been examined from total cultivated land reserve, peasants with no land, urban real estate and corruption cases etc.Chapter 4: land ownership-dispersed and loose control of local government's grabbing action. The system of China land ownership has been examined. State council is the owner of all land but it only has macro planning right without actual supply right and right of remuneration. Local government can decide transfer of the land and the way of using, been paid by rent, but it is not the real owner, which means it has no intergenerational and social responsibility as the owner. The multi-layer of Chinese government makes land ownership being fragmented among state council level, provincial level, deputy city level, county level and town level. Enormous government parties have part of land ownership, which causes land ownership-dispersed. Direct cause is the dilemma of collective action for land protection.Chapter 5: The operational government and policy inherently balance. Chinese local government is more acting as a participant of land market but not a outside controller. As the monopolist of the 1st land market, local government gains economical benefit directly from land transfer (lease and allocation included) and real estate taxes. This causes alienation of local government's role, which is from controller of public resources to participant of land market; and develop and mange land according to the logic of benefit maximizing, which is the character of operational government. This grabbing action by operational government leads to distorted land market and wasted resources. Therefore, so-called government failure does not exist in land market but an absolute market failure. So-called government management can only realize in higher level—central or provincial government level. This chapter mainly analyzes the process of land market system change and benefits consideration of central and local government during this process.Chapter 6: organizational plight: the regulation and anti-regulation in the land market-building. The focus of this chapter in on the ways and tools used by central-government to control local government for market-oriented reform and land protection policy, and means used by local government responding the central government has been illustrated in this chapter. Ways to avoid information issue and control land rough supply of local government by central government. Ways to avoid central government's macro-control and land regulation by local government.Chapter 7: conclusion. Based on literature review and analysis done in previous chapters, conclusion about game playing relationship of central and local government has been made. Some discussions have been made: Certain constrained conditions are formed during changing of system environment and he incentives constrained local government's action. Furthermore, some thoughts about relationship between central and local government since China reform and opening up, and tough issues of governing powerful nations are presented at the end.