The Political Economy of Service Organization Reform in China: An Institutional Choice Analysis
Tang, Shui-Yan, Lo, Carlos Wing-Hung, Journal of Public Administration Research and Theory
China is widely known for its economic growth in the past two and a half decades. Less well known, however, have been the numerous efforts undertaken, especially in the past decade, to reform its governance system. Many of these governance reform efforts have sprung from the realization that in order to sustain economic growth in the long run and to maintain political order, it is necessary to develop a strong governance system that can provide the institutional support for an effective market economy. Recent reform efforts have been targeted at various widely known problems in the existing governance system. For instance, despite the increasing size of the market-based economy, many government entities have engaged in collecting various types of fees and fines and set them aside as extra-budgetary items for exclusive, and sometimes dubious, use by agency personnel with little transparency or accountability (Tsui and Wang 2004). Another common practice has been for government entities, and most noticeably the military during the 1990s, to engage in various business and profit-making activities, creating breeding grounds for corruption as well as conflicts of interest, especially for agencies that have regulatory responsibilities (Yang 2004).
To address these issues, some government leaders began to endorse the concept of "limited government" or "small government, big society" (Brodsgaard 2002). They began to recognize that the key role of government should be limited to providing those public goods and services that otherwise would not be adequately and efficiently provided by the for-profit sector. Government agencies, especially those with regulatory responsibilities, should be restrained from engaging in direct business activities, which have been breeding grounds for corruption. Central leaders have gradually begun to realize that in order to build a well-functioning market economy, it is necessary to build an impartial and transparent regulatory apparatus. Many local government leaders, however, are known to be resistant to reform efforts initiated by the central government, and many local officials are still committed to profit-making ventures, regardless of their legality and impact on the macroeconomy. But there are signs that, especially among the more economically advanced regions, local government leaders are increasingly seeing good governance as a source of economic competitiveness for their localities, which is key to their career advancement in the government hierarchy (Li and Zhou 2005). This is especially true in recent years as central government policies have increasingly prohibited the use of tax incentives and other preferential financial treatments as instruments for local governments to attract business investment (Yang 2004). Good governance and other nonfinancial incentives such as better environmental quality have become elements of strategic plans for local governments to enhance their economic competitiveness versus other localities. With the drive for limited government and good governance, a key arena for reform has been the ubiquitous service organizations (shiye danwei). As an organizational category that is probably unique to China, service organizations refer to many semi-governmental organizations that perform social or public functions, partly or fully on a self-financing basis. Yet they are not part of the core government bureaucracy as most of their personnel do not belong to the staff establishment (bianzhi) and many of them are not formally accountable to the legislative branch-like core government agencies are. Service organizations also provide services such as education, health, and other social services that are usually provided by either nonprofit or business organizations in western, market economies.
Although largely unknown to people outside China, the reform of service organizations is of critical importance to China's governance reform. Service …
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Publication information: Article title: The Political Economy of Service Organization Reform in China: An Institutional Choice Analysis. Contributors: Tang, Shui-Yan - Author, Lo, Carlos Wing-Hung - Author. Journal title: Journal of Public Administration Research and Theory. Volume: 19. Issue: 4 Publication date: October 2009. Page number: 731+. © 1999 University of Kansas. COPYRIGHT 2009 Gale Group.