Wednesday, February 02, 2005

A reporter friend of mine asked me why we see blatant local non-compliance with central policies. Well, the answer is complicated, but I gave her a very boiled-down version. All crticism is welcomed. There are several perspectives on this, and to be brief:

1. local governments tend to listen to the center, since the communist party demands obediance. Disobediance is due to the center's incomplete ability to monitor localities. Huang Yasheng's _Inflation and Investment Control in China_ argues this.

2. local governments would not listen to the center if they perceived divided opinions on an issue in the center. This is because their expectation of being punished for not complying is much lower. Lieberthal, Susan Shirk, and I subscribe to this view.

3. a third view argues that local governments actively lobby and even pressure the central government to change its policies. Of course, this happens, but much less so from the late 90s onward. This is because the central government now holds the most lucrative revenue sources, which it uses to pressure local governments into compliance.

So, the bottom line is that if there is a blatant case of non-compliance, the first thing you should suspect is that someone in the central government in fact agrees with the violator in the local government or is the factional patron of the violator. I suspect that the recent case of the Three Gorges company building the dam in Guizhou despite central order against has something to do with the fact that 3Gorges Co. is still under the control of former Premier Li Peng. Another issue of grave concern is land confiscation in many localities. Cash strapped local governments in many places are confiscating peasants' land and compensating them with very little money in order to sell the land to developers. In this case, the center's interest in preserving social stability is just dead against local interest to raise cash, so central inability to police all of the thousands of local governments might be the main explanation. But we saw signs earlier in 2004 that Jiang Zemin in fact supported rampant real estate development in the Jiangnan region, despite Wen's call for caution.

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