Cities in China: Recipes for Economic Development in the Reform Era

By Jae Ho Chung | Go to book overview

7

Institutional constraints, path dependence and entrepreneurship

Comparing Nantong and Zhangjiagang, 1984-96

David Zweig


Introduction 1

Why do some Chinese cities develop quickly while others demonstrate a slower pace of growth? Location may play the pivotal role, as coastal cities in China have developed much quicker than inland ones. 2 But even among coastal cities, the pace of development has varied considerably. Why? Four factors seem most salient: (1) the institutional constraints a city faced as the reforms emerged and changes to these constraints proffered by 'preferential policies' (youhui zhengce) granted to it by central or provincial leaders; (2) its level of 'path dependence'; (3) its opportunities-i.e. endowments or comparative advantage; and (4) the entrepreneurship and strategies of its leadership. Still, as much as one may try to portray these factors as distinct influences on economic outcomes, they are highly interrelated.


Institutional constraints and path dependence

As the reform era began, communities faced different institutional constraints. In particular, their tax commitments, 3 their administrative boundaries, 4 and the level of regulation by what Leeds calls 'supra-local power authorities', 5 allsetlimits on their ability to respond to new opportunities. Thus, a community's location within the 'hierarchy of urban places' set limits on its ability to respond to evolving opportunities under the reforms. 6 Cities remained highly constrained by provincial governments and their industrial bureaucrats who, under a system of 'partial reform', have the authority to interfere in their decisions. 7 Similarly many 'county-level' cities were seconded to larger municipalities whose political influence could affect their economic activities. Moreover, many aspects of development, particularly those related to internationalization, such as building harbours, opening airports, expanding international shipping lines, establishing national-level 'county-level' cities, and the power to authorize joint ventures, remained under the purview of higher level officials to whom urban leaders could often only raise hopeful pleas.

A city's administrative boundaries constrained development. Land was not marketable for much of the reform era, and without the intervention or approval of higher level officials, it could be obtained only through negotiations with

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