当时语言水平还很有限，见谅了

要是觉得好，版主能否资助一点物质奖励？

A Discussion of the Role of Government in Regional Economic Development in China

Economics Department of Nankai University

Liu Suyu

(Tianjin 300070)

Abstract

Regional economic development is an important issue for China’s economy and is also a key topic for theoretical economic research. This paper attempts a discussion of the role of government in China’s regional economic development. It analyzes the role from two perspectives: changes in China’s regional economic development strategies and the direction of government influence; and the respective roles of central and local governments.

Keywords: regional economic development strategies the role of central government the role of local government

China is a vast, populous developing nation with tremendous imbalances in regional economic development. How to effectively harmonize regional economies, to effect a reasonable regional division of industry, to reduce excessive imbalances in regional economic development, and to move together into prosperity, has always been crucial questions in the national economic progress. It is also an important topic for economic research. In reaching the targets for achieving moderate prosperity in an all-around manner, a goal set by the 16^th NCCPC (National Congress of Communist Party of China), the importance of harmonizing regional economic development was given increased prominence. Because of the differences in social and economic backgrounds, in comparison with the mature market economies of developed western nations, the Chinese government has rather more responsibilities in the acceleration of regional harmonization, and plays a more important role.

1) The evolution of China’s regional economic development strategies and the direction of government influence

Since the establishment of the new China, the question in economic construction has long been how to build this huge country, rich in people but poor in capital, into a thriving and prosperous nation; one important aspect of this problem is regional economic development. China’s strategies for regional economic development have been adjusted and developed in line with the development and reforms of China’s socialist economy. This is in accordance with the development rules of social economics.

A) Strategy of balanced regional economic development

For an extended period after the liberation China’s regional economic development policy was based on “balanced development”. From the 50s to the later 70s balanced development theory was the main basis for China’s regional economic policy. Specifically, investment and construction were directed toward the inner regions and targeted at autonomous economic development systems. This policy direction was recorded in Comrade Mao Zedong’s On the Ten Major Relationships. In April 1956 Comrade Mao proposed in this works: “In the past Chinese industry was concentrated along the coast. That is Liaoning, Hebei, Beijing, Tianjin, the eastern part of He’nan, Shandong, Anhui, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong and Guangxi. 70% of the nation’s industry, light and heavy, is on the coast, with only 30% in the inland regions. This is an unreasonable situation brought about by historical factors. We must make full use of the industrial foundations along the coast, but to balance the distribution of industry we must vigorously develop industry in the inner regions.” Under the direction of the balanced development policy, the main development targets in both the first Five Year Plan and in the three-front construction of the 60s and 70s were both economic development in the central and western part of the country. On the Ten Major Relationships states: “Most new industry should be established in the inland regions to gradually balance out the distribution of industry and to be more prepared for war. There is no doubt as to that .” In other words, this development strategy met the needs of the economic situation at the time. China’s economic foundations were extremely weak at that time, and western nations were imposing economic blockades and the threat of war. China needed to establish its own national economy based on full use of its own resources and markets. Regional economic development tactics were entirely subordinate to the strategy of driving the instant expansion of the national economy, and ensuring national economic security through self-dependence. At the same time the balanced development strategy and the corresponding economic policy implementation were attempts to establish a modern industry base and to improve the national distribution of production and resources. The policy also intended to establish a strong strategic base area, to change the longstanding backward and impoverished condition of the central and western regions, and to enhance national unity among the different ethnic groups in China. These aims were all of highly importance, and had lasting effects on our country.

B) Prioritized development strategy

At the end of the 1970s, after the opening and reform, a regional economic development strategy of prioritized development replaced the balanced development strategy. This change was the result of a great transformation in China’s social and political economy. The theory of prioritized development was laid out in Comrade Deng Xiaoping’s opening and reform theory. Comrade Deng’s insightful analysis of the international situation and deep understanding of the domestic scene led him to propose that: peace and development are the two major issues for the modern world. China must seize its opportunities and persevere with the opening and reform, perseverance in development is of overriding importance. Based on this thinking, Comrade Deng produced two major theories analyzing the overall situation and shared prosperity. He expounded them in his general strategy for regional development in the new era: development should occur in a fixed order. First the economically superior regions should be developed, and then that development transferred to other areas. The regions developed first would have an obligation to help the more underdeveloped regions. This policy was based on the principle of “giving priority to effectiveness as well as caring about fairness.” Its execution involved a shift in government policy towards the coastal regions, and it allowed the effects of the opening and reform to gradually advance into the inland areas from the coast. It broke through the old balanced development position followed for so long in the planned economy, and created a new direction of progress based on the theory of breakthrough development regions bringing benefits to the whole country. Comrade Deng stated that we must correctly understand and deal with unbalanced regional development: “in a country the size of China, we must take into consideration the different characteristics of the various regions of the country.” “We advocate first working to enrich a part of the country. This is to encourage and drive on the enrichment of the other regions, and to make the early developing regions help the more backwards regions to develop better.” At the end of the 1970s four Special Economic Zones were successively established: Shenzhen, Zhuhai, Shantou and Xiamen. This was the first sign of prioritized development being established as China’s regional development strategy. The effect of these first SEZs led to the establishment of new SEZs in Hainan and Pudong (Shanghai). 14 coastal cities were also declared “coastal open economy zones.” Now the prioritized development policy was being widely implemented in China. This policy met the needs of the national situations at the time of the opening and reforms. In implementing the policy, the nation gave the foremost importance to developing the economy of the coastal regions in the 80s to the 90s. The results were incredible. This policy had the effect of vastly accelerating China’s economic growth for many years. The prioritized development policy is absolutely necessary for a developing nation in the take-off phase of its economic development. This is not only true for China: there are successful examples of this policy in South Korea and Singapore as well. In the early stages of the development of a developing nation, when resources are limited, the financial and material resources must be collected together. If a nation tries to change its regional economic structure too early, it will lead to resources being spread too thin, and the results will certainly be slower overall development.

C) Harmonization strategy for regional economic development

In 1999 the central government announced the policy of developing the western regions. This was a sign of China’s move from a prioritized development strategy to a development harmonization strategy. Comrade Jiang Zemin stated: “harmonization of regional economies and the reduction of differences in regional development is now one of the strategic goals of our reforms and development. The reduction of regional differences should be a long term policy.” The eighth Five Year Plan explicitly states the regional economic development thinking: “we will gradually effect a reasonable redistribution of productive capacity in line with the goals of: a systemic overall plan; a reasonable division of industry; complementary strengths; harmonized development; considerations for benefits of all; and common enrichment.” 20 years after the opening and reforms, China’s society and economy are very different from the time of the beginning of the reforms. The country is much stronger overall, and the economy is growing steadily. The coastal areas have gone through a period of high speed development during the prioritized development phase and are now growing steadily. Suitable quantities of capital have already been accumulated there. The gap between the coastal regions and the western and inner regions of the country has grown, particularly in terms of distribution of income. This has become one of the new problems for the society. The globalization of the economy has increased the demands on our country’s strength. Against this new background, it was necessary to adjust or change the regional development policy from a prioritized development policy slanted towards the coastal regions to harmonized development. This way it is possible to create a more unified development path embracing the eastern, central and western regions.

The harmonized development strategy was developed out of the prioritized development strategy. It does not involve prioritized development for any region. It cannot greatly increase our national strength or accumulation of wealth in the short term, but it aims to protect the national capacity for sustainable development. It will redress the excessive imbalances in income distribution, and on the basis of the current economic situation will adjust the regional development policy to stress harmonization. Harmonized development is not the same as simple equality; it does not mean taking from the rich to give to the poor. Rather it uses the rich to help the poor, and employs the strong to support the weak. Harmonized development stresses two major factors: one is allowing some regions to enrich themselves; the other is harmonizing development and realizing common enrichment. Carrying out the policy of developing the west does not mean relaxing or pausing in the development of the eastern regions. The economy of the eastern regions will still be supporting the overall economic situation for a fairly long period, and its strength is of the greatest importance. However, the central and western regions, occupying 70% of the nation’s land but having only 30% of our population and producing a mere 17% of our GDP, will certainly be the area the government emphasizes for development from now on. These regions have a huge potential for development, and are important factors in promoting the sustainability of China’s development. Harmonized development aims for the objective goals of developing an open economy and creating a single market within China. Its objectives are a reasonable distribution of industry, promoting the harmonized development of all regions (particularly the central regions), and bringing about further enrichment for all.

The process of changing the regional economic development policy also revealed the nature of the role of the government in regional development. In the Chinese administration local government is directly subordinate to central government. In terms of regional development policy, this means that in general it is the central government which plays the leading role. Central government proposes policy, and local government executes that policy, organizing its implementation in the regions. After the opening and reform, the extent of the authority of local government in economic matters expanded noticeably, but control over the overall structure of regional development strategy still lay with the central government. The remit of local government was still to apply the major national policies to the situation on the ground in the regions, and to design and execute strategies for implementing national policy.

The different regional development strategies which have been used in China since the Liberation are closely connected to our regional economic governance system. The balanced development strategy came at a time when central government had centralized economic authority to a high degree, and had imposed a top-down management system. In a traditional planned economy, using this kind of system allows the authorities to allocate space and resources across the whole country in a highly structured way, according to a single governing strategy. This allowed the regional economies to develop in a fairly balanced pattern. However, with local government lacking powers of its own and blindly enforcing central government’s plans and policies, and with the central plans being not able to take the very specific requirements of the different regions fully into account, resource allocation was often ineffective. Interregional economic links were neglected. Regions could not capitalize on their strengths, and in general economic growth in the regions was slow.

From the start of the opening and reform to the 14^th NCCPC, authority over regional development was shared between central government and the regions in a piecemeal system. The central government gave up some of its powers to increase efficiency, and fully involved local government in regional development. This system stimulated the proactive economic management of local government. Local government became the main actor in regional economies, and regional prioritized development plans enormously accelerated the growth of the regional economies. Particularly in the areas which benefited from preferential policies and in the opened zones, growth received a large boost. However, one result of the central government’s relinquishing of its powers was an increased danger of “dukedoms” – local government protecting their own regions. The risk of local authorities blindly pursuing growth targets and wasting resources also raises the possibility of excessive competition between regions, which can have an adverse effect on the overall growth of the national economy.

At the 14^th NCCPC the transformation to a market economy was confirmed. The resolutions also stated that the primary precondition and objective of a market economy is the separation of business and government. Streamlining and reduction of government powers and the reform of economic powers are simply methods of effecting this separation. Government would no longer be directly involved in business at any level. The authority of local and central governments would be suitably along lines of public management and macro-economic management. In the regional harmonization policy, this system helps to strengthen the central government’s regulation of the macro-economy and also makes full use of the functions of local government. After the central government determines its regional development strategy and the relevant policy measures, the local governments exercise their powers to improve the investment environment and to carry out the development strategy.

2) The role of government in regional development

Imbalanced regional development is a phenomenon found all over the world. However, China is a developing nation, and its developmental level does not compare with the rich western nations. The mismatch in our two-speed economy is very obvious. Our levels of urbanization, industrialization and marketization are very low, and the disparities in regional development are large. For these reasons the reduction of regional disparities is a difficult and complex task in China. I believe that in carrying out regional development strategy, in harmonizing regional development, the Chinese government plays an important guiding role. During the balanced development period in the planned economy, the government was the absolute master and the main executor of economic policy. In the operation of a market economy, because the free markets are not yet mature, the government still has an important guiding role to play in the drafting and implementation of regional development strategies. Because the ranges of functions of the central and local governments are not the same, their roles are somehow different in emphasis.

A) The role of central government in regional development

China is a vast, populous developing nation with widely distributed resources and many coexisting ethnic groups. The imbalances in our regional development are far more striking than in many other countries. It is the central government which bears the main responsibility for harmonization of regional development, and where the imbalances between the different regions are considerable, the government’s role is even more important. The author believes that the role of the central government in China has not diminished in the change to a harmonization strategy, but rather should be clearly defined. To play a full role in regional development, the central government needs a clear grasp of the overall national economic situation. Its roles are primarily regulation, balance and promotion of economic growth.

1 – Using economic measures to strengthen regulation of the national macro-economy

In a market economy, the regulation of the economy by the central government involves economic rather than administrative measures, primarily adjustment of financial and monetary policy. The role of central government in the macro-regulation of regional development is expressed in two ways. The first is the setting of regional development strategy. Central government must set this strategy taking into account the status of the entire national economy. Such strategies are different to the local economic development plans drafted by local government. They are an important component of the national economic development strategy; they take an integrated view of the economy of the entire country. Local development plans are the blueprints for local growth, and must be in accordance with the national strategy. The second role of central government is carrying out economic policy and adjusting the imbalances in regional development. They must use suitable financial and monetary policy interventions, in line with the conditions in the regions, to advance the strategy. In the WTO framework, moderate favorable treatment or protection, in terms of funding or policy, of new industries or underdeveloped areas by the central governments of developing countries is acceptable.

2 – Harmonizing regional interests, balancing regional development

There exist great differences in levels of development among the regions in China, and it is difficult to avoid the regions from protecting their own interests. Therefore it is imperative that the central government grasps the full picture of the national economy and carries out appropriate harmonization to reduce the development gaps between the regions. Particularly it is the central and western regions which urgently need the government’s support. The central government has two important roles in harmonization. One is to use effective taxation and transfer payment policy to effect a reasonable redistribution of national income and to reduce the imbalances in development among the regions. The second role is to use administrative measures to regulate the relations between regions, to encourage the regions to exploit their strengths, work in competitive collaboration, complement and support each other and develop together.

3 – Creating a favorable social environment, boosting regional harmonization

The central government’s role in implementing a regional development strategy falls into three areas. The first is establishing a healthy legal system and correcting regional or departmental administrative monopolies or limitations. They must establish and maintain a unified national market and create a fair playing field for competition. The second role is increasing central investment in underdeveloped areas, particularly investing in basic infrastructure, hi-tech development and environmental protection. This strengthens the economic foundations of underdeveloped regions. The third role of central government is establishing an effective and comprehensive social security system, to maintain stable social conditions and a strong foundation for development.

B) The role of local government in regional development

Local governments are the principal executors of regional development policy. They play a pivotal role in regional economic development. In China’s administrative system, local government is subordinate to central government, and carries out the major policy objectives of central government. Their crucial task is to synthesize central policy with the existing situation in their regions to boost economic growth, that is, to lead, to promote and to serve the regional development.

1 – Effecting changes to the government’s economic functions, leading regional economic development

Local government is the backbone and leader of regional economic development. Their prime function is to develop concrete plans for regional development in line with the strategy drafted by central government, and to ascertain the exact steps for implementation of this plan. Secondly, they must establish a regional economic policy based on the economic situation in their region. Thirdly, they must make out the development focus of the region’s economy, attracting skilled labor, technology and capital.

2 – Improving government services, driving regional economic growth

Local government plays an important role in driving regional growth. Firstly they use their administrative system to improve relations with other regions, to promote technical innovation, and to communicate with and support the corporations in the region. Secondly, local government strengthens the operation of the market though its public finance policy. They are also responsible for the public projects, such as regional infrastructure and protection of ecological environment, which are the preconditions for continued growth and development. Thirdly, local government can cultivate the human resources necessary for economic growth by increasing investment in education and the workforce. This drives sustainable development.

Finally, it is important to note that the role and function of government in the market economy is not without its limits. Government cannot take over the role of market adjustments. While the role of government cannot be ignored, equally it should not be overstated.

Bibliography

1) Zeng Zhaoning, The Direction of Role of Local Government after China’s Accession to WTO, Economic Observer, 2001, 3^rd Issue

2) State Department Development Research Center “Economic Globalization and the Role of Government” Research Team, Government Reform: Prospects and Directions, 2001.

3) State Department Development Research Center “Economic Globalization and the Role of Government” Research Team, Changes in the Role of Government in the face of Economic Globalization, Management World, 2001, 4^th Issue

4) An Auxiliary Reader of 16^th NCCPC Reports, People’s Publishing House, 2003

5) Mao Zedong, On the Ten Major Relationships, People’s Publishing House, 1956