Government-Enterprise Coupling In Economic Transformation

Wenzhou model is a kind of regional development pattern which might possess the most profound influence during the process of China’s reform and opening-up. It not only helps Wenzhou to achieve rapid economic and social development, but also provides a valuable demonstration for China’s economic transfromation. Similarly, the predicament that Wenzhou is encountering nowadays also indicates the difficulties of China’s economic transition and development. From a national perspective, lots of problems are commonly present, such as how to overcome the restriction of resources, making the society ruled by law instead of favor, and ensuring the governments do appropriate things for our economy and society. Being the earliest region which transferred to market economy in China, Wenzhou is also the very first to encounter these challenges. Therefore, the distresses Wenzhou is facing nowadays are typical, and the solutions to them will also be demonstrative in a national scale.Using the conception of Coupling of Physics, this dissertation tries to build an analytical framework of Government-Enterprise Coupling (GEC) to explain the dynamic relations between local governments and private enterprises, including mutual dependence, mutual adaptation and mutual promotion. Through the GEC framework, this dissertation makes a reinterpretation for the rise of Wenzhou model. Firstly, Wenzhou model’s connotation and characteristics, contexts and conditions, as well as achievements and influences, are briefly examined. Then the important role of local government during the rise of Wenzhou model is well analyzed, such as policy modifications, institutional innovations, regulations for market failure, and diversified supply of public goods. This dissertation proves that a well GEC form in fields of politic, market and society is an essential condition for Wenzhou’s rapid development.The key to Wenzhou Model’s success lies in the favorable GEC and the deformity of GEC leads Wenzhou model to distress. Generally speaking, there are three factors making this deformity worse. Firstly, the external environment of GEC has changed. Competitions among local governments becoming more and more intensely, while Wenzhou starts to lose the first-mover advantage of market economy system, and lots of talented people and capitals outflow of Wenzhou. Secondly, the internal foundation of GEC has released its negative effects. Wenzhou is a typical favor-based society. In the planned economy era. this character played an important role in breaking unreasonable laws and economic institutions. Nonetheless, when market economy system has been basically built up, this character changed into an obstacle of further economic transformation. Thirdly, after all these changes. Wenzhou government failed in repositioning itself and transforming its functions to construct a new condition of GEC. This can be mainly reflected in the following aspects:lack of legal construction, insufficient supply in public goods and services, ineffective policy support and guide for enterprises, and distorted in the incentive and restraint mechanisms of public officers.The case study of Wenzhou lighting industry shows that deformity of GEC is the main reason for industry’s collective relocation. In contrast, the case study of Guzhen lighting industry indicates that, local government should rebuild the form of GEC constantly to meet the needs of industrial development. The effective efforts that Guzhen government made to construct the form of GEC, has successfully helped local industry to break through the high-level equilibrium trap. The comparative analysis and extended discussion of the two cases shows that, the construction of GEC needs multiple forces to promote. It requires consciousness and foresight of the government itself, and also pressure and promotion from the market and society. For the ideal form of GEC, local governments need to be both bounded by the rule of law and do the right things positively.