Government and Market in China: A Local Perspective

By Yep, Ray | The China Journal, January 2005 | Go to article overview
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Government and Market in China: A Local Perspective


Yep, Ray, The China Journal


Government and Market in China: A Local Perspective, by Jian Zhang. New York: Nova Science Publishers, 2003. viii + 204 pp. US$59.00 (hardcover).

Jean Oi's notion of local state corporatism is arguably the most debated concept about the role of local governments in post-Mao development. It has provoked numerous studies on the political economy of market transition over the last decade and has helped enhance our understanding of the intricacies of economic reform and the impact on local governance. Zhang Jian's book on the development of Xihu district in Hangzhou, Zhejiang Province, joins in the debate.

The book opens with a critical review of the major theories on the impact of cadre involvement in economic development. Zhang shares two of Oi's key assumptions: market development does not necessarily imply a decline in the government's power, and government intervention is not incompatible with market-oriented reform. However, Zhang believes that Oi's obsession with local governments as economic actors is problematic. He argues that "the intimate involvement of local governments in the economy is motivated not just by their economic incentives to generate and extract organizational and personal incomes, but also by their political interest in maintaining their control over the local political economy" (p. 165). In fact, these political considerations may even override economic rationality. Here, Zhang's criticism echoes a general reservation among students of China's political economy regarding Oi's argument about the growth-enhancing capacity of the local government. Notwithstanding the validity of her argument about the coordinating role of local governments in reducing transaction costs, Zhang's empirical account of the local government's discrimination against the private sector and its measures supporting inefficient collective enterprises provides further ammunition for the critics.

However, Zhang exaggerates the differences between his argument and Oi's. While it is true that Oi's main argument focuses on the entrepreneurial role of local officials and on how their involvement could drive a local economy forward, it is evident that her concern is with how local state agents respond to the changes in the larger institutional context (namely, fiscal reforms, decollectivization and marketization). Under these circumstances, local cadres are confronted with a question: how to meet their responsibilities in order to stay in power. In Oi's analysis, promotion of local growth is a rational career strategy; and local economic prosperity is the key to fulfilling their role as state agents. In the era of decollectivization and market reforms, delivery of public goods and economic progress appears the only way to maintain effective governance and to preserve power. The hunger for resources thus explains why local cadres are inclined to promote and protect collective enterprises, which are more vulnerable to local government extraction. Local cadres are thus not concerned with economic growth per se, but see it as a means to the end of career survival and advancement.

By the same token, Zhang's emphasis on the local cadres' preoccupation with control over the local economy is misguided. Local officials simply regard their dominance over the political economy as the way to guarantee their unrestricted access to resources.

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