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CHANGING CENTRE-PROVINCE RELATIONS in the PEOPLE's REPUBLIC of CHINA in the 1980S

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CHANGING CENTRE-PROVINCE RELATIONS in the PEOPLE's REPUBLIC of CHINA in the 1980S CHANGING CENTRE-PROVINCE RELATIONS IN THE PEOPLE'S REPUBLIC OF CHINA IN THE 1980s Shaun Gerard Breslin Presented for the degree of Doctor of Philosophy of the University of Newcastle upon Tyne Department of Politics October 1993 1 CONTENTS Detailed Table of Contents ii Abstract vii Note on Transliteration ix List of Tables x Abbreviations xi Introduction 1 Chapter One: The Strengths and Weaknesses of Centre and Provinces 55 Chapter Two: Unpacking the Centre - Intra-Elite Conflict And Economic Development 122 Chapter Three: The Loss of Central Control: Central Policy and Provincial Responses 178 Chapter Four: Centralisation And Decentralisation 259 Chapter Five: Regional Development Policy 306 Chapter Six: The Financial Dimension Of Centre-Province Relations 378 Conclusions 449 Bibliography 488 Detailed Table of Contents INTRODUCTION Introduction 1 Models of Centre-Province Relations 9 (a) The Totalitarian Model 10 (b) The Centralist Model 14 (c) The Cellular Model 16 (d) Decentralist Models 21 (i) Whitson's Field Army Hypothesis 22 (ii) Whitney's "Provincial Power" Hypothesis 26 (e) The Central Cohesion Model 29 (f) The Bureaucratic Model 32 (g) The `No Model' Model 35 The Political Consequences of Economic Change 40 CHAPTER ONE: THE STRENGTHS AND WEAKNESSES OF CENTRE AND PROVINCES 1.1 Introduction 55 1.2 Sources and Strengths of Central Control 57 (a) Appointments and Dismissals 57 (b) Structural Divisions of Provincial Power 69 (c) The Nomenklatura System 71 (d) Central Party and State Discipline Mechanisms 73 (e) Propaganda and Media 77 (f) Central Control Over Key Economic Resources 79 (g) Control of Military Forces 82 1.3 Sources and Strengths of Provincial Autonomy 86 (a) Provincial Leaders as Central Leaders 87 (b) The Key Link in the Administrative Hierarchy 89 (c) Efficacy of leadership 92 (d) Control Over Local Appointments 93 (e) Local Media Sources 94 (f) The Strength or Weakness of the Centre 95 1.4 Variations in Provincial Leaders' Relation With the Centre 97 (a) Variations in Provincial Leaders' Attitudes to the Centre: A Classification of Provincial Leaders 97 (i) Agents of the Centre 99 (ii) Defenders of the Locality 104 (iii) Survivors 107 (b) Variations in Central Attitudes to the Provinces 108 1.5 Summary 116 CHAPTER TWO: UNPACKING THE CENTRE - INTRA-ELITE CONFLICT AND CENTRE-PROVINCE RELATIONS 2.1 Introduction 122 2.2 Factions, Factionalisation, and Intra-Elite Conflict 124 2.3 Factions, Factionalisation and the Politics of 3 Transition 128 (a) Competing Policy Packages 129 (b) Evolution of Conflict 137 (c) Achieving the Four Modernisations: Programme or Aspiration? 146 (d) The Manifestation and Consequences of Opposition to the Reforms 155 2.4 Relevance for Centre-Province Relations and Regional Development 161 (a) The Impact of Partial Reform 161 (b) Centre-Local Alliances 169 (c) Central Cohesion and Provincial Power 171 2.5 Summary 173 CHAPTER THREE: THE LOSS OF CENTRAL CONTROL: CENTRAL POLICY AND PROVINCIAL RESPONSES 3.1 Introduction 178 3.2 An Emerging Conflict of Interests: Local Economic Needs and Central Economic Plans, 1978-84 180 (a) The Growth of Local Spending 180 (b) Developing a Central Response - The Views Of Deng Xiaoping 182 (c) Criticising The Provinces 184 (i) Learning From Shanghai 184 (ii) Direct Central Criticisms of the Localities 185 (d) Addressing The Problems 187 (i) The Sixth Five Year Plan 190 (ii) The Continued Failure of Central Policy 191 3.3 Stoking the Fire: Increasing Local Autonomy, 1984-86 194 (a) Political Constraints On Economic Reform 195 (b) The Third Plenum of the 12th Central Committee 197 (i) The Third Plenum: An Assessment 199 (c) The Third Session of the Sixth NPC 200 (d) The Impact of the New Reforms 204 (i) Inter-Provincial Tensions and the Coastal Development Strategy 204 (ii) A Second Investment Boom 207 (iii) Corruption: The Hainan Incident 208 3.4 Losing Control: A Growing Divergence of Interests, 1986-88 209 (a) The Failure of Central Control 209 (b) Conservatives in the Ascendency? The Rise of Li Peng 212 (c) A Growing Economic Crisis 215 (i) Inflation and Panic Buying 216 (ii) A Continuing Credit Boom 217 (iii) Corruption 218 (iv) Shortages and the "Energy Crisis" 219 (d) The Provinces Accused 224 3.5 The Failure to Rein in The Provinces, 1988-89 227 (a) The Third Plenum of the 13th Central Committee 227 (i) Elite Conflict and the Third Plenum 227 (ii) Towards Recentralisation 228 (b) The Centre on The Offensive 230 (i) The Media Campaign 230 (ii) The Imposition of New Controls 231 (iii) Exhortations and Threats 233 (c) The Response From The Provinces 235 (i) `Be Alert To New Counter Measures' 235 (ii) Retrenchment and Provincial Revenues 236 (d) Conflict at the NPC 239 (e) The Impact of June 4th 241 (i) Provincial Responses to the Demonstrations 242 (ii) Addressing Grievances 243 (f) Continued Provincial Resistance 246 3.6 Summary 249 CHAPTER FOUR: CENTRALISATION AND DECENTRALISATION 4.1 Introduction 259 4.2 Organising Space 260 (a) Distance and Political Authority 260 (i) Physical Distance 260 (ii) Administrative Distance 262 (b) The Immediate Sub-National Level of Administration 265 (c) Lower Level Administration 267 (d) Changes in the 1980s 268 4.3 Between Centralisation and Decentralisation 274 (a) Centralisation 276 (b) Decentralisation 277 (c) Recentralisation 278 (d) Redecentralisation 279 4.4 Types of Decentralisation 281 4.5 Decentralisation in the 1980s: A New Shift in the Balance of Power 283 (a) Market Decentralisation: How Far? How Fast? 284 (b) Market Decentralisation and Provincial Administrative Control 289 (c) Power to the Provinces? 294 (d) Decentralisation - a Means to Which End? 298 4.6 Summary 301 CHAPTER FIVE: REGIONAL DEVELOPMENT POLICY 5.1 Introduction 306 5.2 Historical Decision Making Criteria 307 (a) National Defence Considerations 309 (b) Ideological Considerations 311 (c) Economic Considerations 314 (d) Balancing Competing Considerations 318 5.3 The Historical Legacy 320 (a) Economic Growth Foregone 320 (b) Regional Self-Sufficiency 322 5.4 The 1980s: An East to West Development Strategy 324 (a) Defining a New Regional Development Strategy 324 (b) Decision Making Criteria after 1978 325 (i) Economic Considerations 326 (ii) Ideological Considerations 326 5 (iii) Economics, Ideology and Legitimacy 328 5.5 Comparative Advantage, Specialisation and Regional Development 328 (a) The East to West Development Strategy and The Seventh Five Year Plan 330 (b) The Role of Zhao Ziyang 338 5.6 The Regional Pattern Of Growth 341 (a) Provincial Fears of Polarisation 341 (b) The Official Rationale for the Reforms 343 (c) Regional Differentials in Growth 345 5.7 Explaining the Regional Pattern of Growth 350 (a) The Trickle Down Explanation 351 (b) The Government Intervention Explanation 354 (c) The Provincial Autarky Explanation 357 5.8 Polarisation: Real or Imagined? 362 5.9 Summary 369 CHAPTER SIX: THE FINANCIAL DIMENSION OF CENTRE-PROVINCE RELATIONS 6.1 Introduction 378 6.2 Revenue Sharing 380 (a) A Tool of Central Control? 385 (b) An Indication of Provincial Autonomy? 386 6.3 Post-Mao Fiscal Reforms 392 (a) Building a New Revenue Sharing System 392 (i) The Jiangsu System 393 (ii) Revenue Sharing and Fiscal Reform 394 (iii) The Majority System 396 (iv) The Subsidies System 398 (v) The Municipal System 398 (vi) Guangdong and Fujian System 401 (b) Reforming the Shanghai System 403 6.4 The Expansion of Provincial Revenue 406 (a) Corruption 408 (b) Increasing Extra-Budgetary Revenue 410 (c) Direct Foreign Investment and Loans 414 (d) Consequences and Problems 417 6.5 The Growth of Central Government Spending 420 (a) Military Expenditure 421 (b) Subsidies and Compensatory Payments 422 (c) Reducing the Burden 424 6.6 Problems and Prospects 425 (a) Infrastructural Constraints and Energy Supplies 430 (b) Competing Policy Options 437 6.7 Summary 440 CONCLUSION Economic Transformation and Political Change 449 (a) Obstacles to Growth 451 (b) The Incremental Approach to Change 457 (i) The Limits to Incrementalism 459 Economic Transformation and Centre-Province Relations 461 (a) The Loss of Economic Power 462 (b) The Wider Diffusion of Central Power 466 Variations in Centre-Province Relations 468 Consequences and Prospects 473 (a) From Political Centre to Economic Core? 474 (b) Towards Disintegration? 479 7 BIBLIOGRAPHY 1 - Non-Chinese Sources 488 2 - Chinese Sources 502 (a) - Authored Sources 502 (b) - Non Authored Sources 516 ABSTRACT This thesis analyses the way in which the economic reforms implemented in the 1980s resulted in dramatic changes in the nature of centre-province relations in the People's Republic of China. I will argue that a lack of coordination between reforms in different areas of the Chinese economy distorted many of the initial aims of the reforms. Although this lack of coordination can be partly blamed on the inherent difficulties of reforming a centrally planned and directed economic system, intra-elite conflict over the pace, scope and direction of reform also played a key role. Such a process of reform generated important dysfunctional consequences - notably the extent to which the central authorities lost control over economic affairs in the provinces. However, it is important to note that although the centre lost an element of control, power did not gravitate to the provinces in an equable manner. Although it has never been possible to identify a model of centre-province relations that holds true for every province's relations with the centre, variations in provincial reliance on and responsiveness to the centre increased during the 1980s. The provinces of the south and south east (and in particular Guangdong and Fujian) were the main beneficiaries of the centre's loss of power, and utilised their new found strength to generate rapid economic growth. In the process, the whole concept of centre-province relations in China was altered to such an extent that it may be losing validity as a paradigm for analysing Chinese politics.
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