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This chapter is a case study of the impact of central-local relations on economic growth in the People’s Republic of China during the market transition period and an application of the dual intergovernmental transformation for market development (DITMD) model in the Chinese case. The main purpose of this chapter is to illustrate how the fundamental state-market dilemma has been partially resolved through separating the three hands of the state and dual intergovernmental transformation in the reforming China. Meanwhile, it also points out that the Chinese market transition is second best, at most. Not only has the transformation of state-market and central-local relations been incomplete, but also will further reforms be significantly constrained by the political nature of the regime, that is, a centralized one-party dictatorship.
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For instance, in 1965 when China’s centrally planned economy was in its heyday, the central government of the PRC directly controlled 10,533 enterprises, the total production value of which was about 42.3% of the nation’s whole industrial production value (Zhou 1983: 88). Nevertheless, during the first three decades of the PRC, while China’s economic regime was generally centralized, there were two significant decentralization movements. One happened in 1958 and the other in 1970 (Zheng 2007: 80–85).
Since the early 1980s, this principle of separating enterprises from the government has been one fundamental principle for the party-state to deal with state-market relations. This principle reappears from time to time in party documents, governmental policies, and even state laws. For instance, on September 22, 1999, the Central Committee of the CCP issued Decision on Several Major Issues Concerning Reform and Development of State-Owned Enterprises ( Guanyu Guoyou Qiye Gaige He Fazhan Ruogan Wenti De Jueding). The 1999 party decision reemphasizes that one critical step to establish and enhance a modern corporate regime in China is to further separating enterprises from the government. Also, the State Council promulgated Interim Regulations on Supervision and Management of State-Owned Assets of Enterprises on May 13, 2003. Article 7 of the 2003 state legislation stipulates: “People’s governments at all levels shall strictly abide by the laws and regulations on state-owned assets management, persist in the separation of government functions of social and public administration from the functions of investor of State-owned assets, persist in the separation of government functions from enterprise management and separation of ownership from management. The state-owned assets supervision and administration authority shall not perform the functions of social and public administration assumed by the government. Other institutions and departments under the government shall not perform the responsibilities of investor of State-owned assets of enterprises.” This provision later became Article 6 of Enterprise State-Owned Assets Law of the PRC, which was enacted by the Standing Committee of the National People’s Congress in 2008.
I will discuss this later.
Of course, it took a long time for the ruling party to acknowledge a socialist market economy in China. In 1978, while the CCP decided to focus on economic affairs rather than “class struggles,” the party did not propose a blueprint for economic reform until its Decision on Reform of the Economic System in 1984. During 1978–1984, there was a significant economic transformation in China. But most reforms happened in rural China, mainly relating to the practice of the Household Responsibility System in the agricultural sector. The 1984 decision is a watershed of China’s market transition by many standards. In this decision, the CCP proposed “a socialist commodity economy” and urged to establish a reasonable pricing system in China. But, by the end of 1980s, the party-state still insisted on the domination of a planned economy, albeit with some disagreements among top party leaders. The next significant step happened in 1992, when Deng Xiaoping gave his famous talk on his “southern trip.” During his trip to the relatively developed area of China’s eastern coastal provinces, Deng urged to establish a market economy in China (Deng 1993: 370–383). Later in the same year, the 14th National Congress of the CCP was convened. In the meeting, General Party Secretary Jiang Zemin ( 2006: 210–254) gave a report to the party’s national congress and officially mentioned the term of “a socialist market economic system.” In 1993, the Central Committee of the CCP issued another crucial circular, Decision on Several Issues Regarding Establishing a Socialist Market Economy System ( Guanyu Jianli Shehui Zhuyi Shichang Jingji Tizhi Ruogan Wenti de Jueding). The 1993 decision formally proposed a framework to establish a socialist market economy in China. One decade later, in 2003, the Third Plenary Session of the 16th Central Committee of the CCP further issued another important document regarding the party’s recognition of a market economy in China, Decision on Several Issues Regarding Enhancing the Socialist Market Economy System ( Guanyu Wanshan Shehui Zhuyi Shichang Jingji Tizhi Ruogan Wenti de Jueding). By that time, the recognition of a market economy in China had been institutionalized, at least ideologically. A recently significant recent development is the 2013 Party Decision on Comprehensive Reform recognizes the decisive role of the market in allocating resources.
Data source: National Bureau of Statistics of China, China Statistical Yearbook 2015, Beijing: China Statistic Press, 2015.
Article 30 of the Constitution of the PRC (first adopted in 1982 and most recently amended in 2004). In addition, not all localities are governed by the five levels of governments at the same time. For the four municipalities directly administered by the central government and most places of Hainan province, there are only four levels of governments.
Article 7 of the Organization Law for Local People’s Congresses and Local Governments at All Levels of the PRC (first adopted in 1979 and most recently revised in 2015); Articles 7, 72 and 82 of the Legislation Law of the PRC (first adopted in 2000 and most recently revised in 2015).
Articles 72 and 82 of the Legislation Law of the PRC.
Articles 72 and 82 of the Legislation Law of the PRC.
Article 67 of the Constitution of the PRC.
Article 107 of the Constitution of the PRC.
Articles 89 and 107 of the Constitution of the PRC.
Of course, there are several special courts in contemporary China, including military courts, marine courts, forest courts, and railway courts. But, these special courts all together play a minor role within the Chinese judiciary system. This book does no discuss them in particular.
Article 11 of the Organic Law of the People’s Courts of the PRC (first adopted in 1979 and most recently revised in 2006).
Currently, about 80% of China’s judges are working for Basic-Level Courts, which decide about 90% of all cases in the PRC (The Supreme People’s Court 2010).
In 2009, 11,392,193 cases were decided by all courts in the PRC. Among them, the SPC itself decided 13,318 cases, about 0.117% of all cases decided by the judiciary (The Supreme People’s Court 2010).
It’s reported that, in recent years, liaison offices spent more than 20 billion RMB annually to build and nurture connections with central ministries (Liu et al. 2009).
Although, before the founding of the PRC, there was a minor movement to establish a regime of modern corporations in China since the late Qing Dynasty (Kirby 1995).
Articles 3 and 26 of the Company Law of the PRC (first adopted in 1993 and most recently revised in 2013).
Articles 18 and 22 of Regulations on Village Collectively Owned Enterprises of the PRC (first adopted in 1990 and most recently revised in 2011); Articles 4 and 9 of Regulations on Township Collectively Owned Enterprises of the PRC (first adopted in 1991 and most recently revised in 2011).
See the official website of Ministry of Commerce of China at www.mofcom.gov.cn/xglj/kaifaqu.shtml (lastly visited on December 16, 2016).
Since its enactment in 1993, the Company Law of the PRC was amended in 1999, 2004, 2005, and 2013 respectively.
Articles 77 and 93 of the Company Law of the PRC (the 2013 version).
Article 7 of the Securities Law of the PRC (the 2014 version).
Article 18 of the Administrative Litigation Law of the PRC (the 2014 version).
Article 8 of the Legislation Law of the PRC.
Articles 73 and 82 of the Legislation Law of the PRC.
The other 15 central agencies of the party-state include the Organization Department of the CCP Central Committee, Propaganda Department of the CCP Central Committee, the General Office of the National Committee on the Comprehensive Management of Public Order, the Supreme People’s Procuratorate, National Development and Reform Commission, Ministry of Public Security, Ministry of Supervision, Ministry of Civil Affairs, Ministry of Justice, Ministry of Land and Resources, Ministry of Housing and Urban-Rural Development, The People’s of China, State Administration of Taxation, State Administration for Industry & Commerce, Legislative Affairs Office of the State Council, China Banking Regulatory Commission, and China Securities Regulatory Commission.
All guiding cases are online available at the SPC’s official website: www.court.gov.cn/shenpan-gengduo-77.html
Article 7 of the Constitution of the PRC.
Article 1 of the Law on the State-Owned Assets of Enterprises of the PRC (first adopted by the Standing Committee of the NPC in 2008).
According to the current judicial system in China, while the parties cannot appeal to a higher people’s court after a second-run (final) decision, any of them might make a petition against the final decision to a higher authority. Three major differences between an appeal and a petition are: (1) while an appeal can only be taken to a higher people’s court, a petition against a judicial decision can be taken to any higher authority (including a higher court); (2) while an appeal can be taken without any specific reason, a petition against a judicial decision has to rely on specific legal reasons; and (3) while a court has to make a formal adjudication on a lawful appeal, it does not have to respond to a petition.
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- Central-Local Relations and the Rise of the Corporate Economy in Contemporary China
- Palgrave Macmillan US
- Chapter 5
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