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The Essential Institutional Features Of China That Without Those China’s Reform Practices And Performance Would Be Substantially Different From What Has Happened In The Past 30 Years

597 words - 3 pages

The essential institution of China is called Regionally Decentralized Authoritarian (RDA) system. “The RDA system is characterized by a highly centralized political and personnel controls at the national level and a regionally decentralized administrative and economic system.” There are many key features of this RDA system which impacts a lot on China’s reform practices in the past 30 years. First of all, one of the features is that the sub-national governments are more powerful than other sub-national government in the world because they are responsible for deeper and wider regional matters than simply fiscal issues. Another feature is that regional government is encouraged to be economically self-contained in order to develop faster than other region after the reform started. Moreover, another feature is that each regional government, especially those special economic zones are competing with other region by attracting more Foreign ...view middle of the document...

However, both the pre-reform version and the latest version of the Constitution stipulate that regions have no inherent power and regional power is granted by central authorities. The central government is empowered to delegate power to regional and also to rescind this power.”

Now I would like to use regional competition as an example to explain about above features that transit China from a central planned economy to market economy. The Chinese economy was organized into a multi-layer-multi-regional form which is called M-form. The Ministries of the central Government controlled only a small proportion of State Owned Enterprises (SOEs), most of which are under control of regional government. When reform started in 1978, the basic feature of the Chinese regional decentralization is already in the place. The central government controlled less than half the output of state industry. Regional governments control major resources with their jurisdictions. They owned most SOEs and COEs in that region and influenced the allocation of different resources. Moreover Chinese local governments were given a greater autonomy which allows them to take initiatives than their counterparts. For example, when a region had better growth rate than other regions, the leader of that region would have greater power and get promotion faster. These powered incentives different regions to try to get higher economic growth thought trying out regional completion during reform era. Regional experimentation is one of the important features for Chinese reform. This regional experimentation is initiated by regional government which requires regional decentralization. Different corporate type such as TVEs and joint stock companies were experimented selectively depending on different local conditions. One of most significant regional experiment examples is the special economic zones (SEZs) which started from Shenzhen and promoted to nationwide later. This regional experiment is used to attract more FDI as I mentioned before in order to increase the sufficiency of raising the growth rate of that region which will get stronger incentives than those of the Tiebout competitions.

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