RIETI——Thinking about “Optimizing Business Environment” and Reconstructing “Central-Regional Relations” in China


This non-technical summary is boldly described based on the results of the analysis, with an emphasis on policy implications and is not part of the DP/PDP. For more details on the analysis, please read the DP/PDP text. Furthermore, the views expressed here are the responsibility of the authors and do not represent the views of their organization or the Institute of Economics, Trade and Industry (Germany).

Other special research results (no project)

In recent years, with the advancement of domestic reforms, the Chinese government’s awareness and actions on “marketing” have shifted from the traditional strong government-led thinking to the rational thinking of the market. In addition, since President Xi Jinping proposed the “Belt and Road” initiative in 2013, the internationalization goal of China’s economy has been clear. They agreed on a series of economic developments in the country. The Chinese government is increasingly aware of the challenges that institutional reforms must be combined with the systematization of the market environment. On the other hand, the reform of the government itself requires institutions that create a market environment. In 2015, the government positioned itself as a “modern service government” in response to market-oriented reforms. Since 2018, “optimizing the business environment” for the purpose of government reform has become a core issue for governments at all levels in China. Therefore, the traditional “central-regional relationship” as the most fundamental institutional environment integrates the characteristics of each region and institutional innovation, forming a diversified institutional relationship of “central⇔province⇔city”. Rebuilding.

In this paper, we use game theory to analyze this decision-making relationship between the central and provincial governments, while taking into account the institutional reforms promoted by the municipal government by contrasting the case study of Shenzhen. There is also the city of Qingdao… As the Chinese government has recently adopted a strategy of “political concentration and economic decentralization” for the reform of government institutions, the direction of market-oriented reform is relatively low compared to the reform of “optimizing the business environment”. Target attributes and high economic attributes affect the reconstruction of “central regional relations”. In addition, in order to avoid the risks and uncertainties of the decision-making environment during the transition period, governance mechanisms such as the central government’s “leading” and the local government’s “boating” have been formed. Trial and error within the framework of regulation, local governments adapt to the central strategy, while self-reliance in the reform, learning and dissemination is also faster. In this paper, the following three findings are obtained through such consideration.

First, in the policy cooperation to optimize the business environment, the central government clearly accepts or supports local governments to innovate independently under the unified reform framework, and the central government’s previous basic policy of “streamlining administration and delegating powers” ​​to management and authorization.” However, different levels of government in the region There are obvious differences in the relationship between the provincial governments and urban governments in different regions. There are large differences in the power and responsibility relationship and the “business environment optimization” boundary line, which reflects the gender difference.

Second, across the country, provincial governments’ adoption of policy vocabulary is highly consistent with urban governments’ innovative trial-and-error, but willingness to anchor reform outcomes to local rules is local, allowing for more independent sex. However, in coastal areas where marketization, internationalization, and the rule of law are constantly advancing, the requirements of the central government in adopting policy vocabulary and promoting local trial and error can be satisfied, but they must be cautious in local legislation. Variety of choices. In the relatively backward inland areas, the provincial government has strong control over the municipal government, and the central government has limited influence. Therefore, the adoption of policy vocabulary, the trial and error of the municipal government, and the promotion of laws and regulations are more active, and so on.

Third, from the perspective of local governments, governments at all levels have different “presence” in different areas of reform. It can be seen that the urban government is at the core of innovation in the relevant reforms to optimize the business environment, while the provincial government has a low “sense of presence”. In addition, by biasing the “administrative style” of the entire local government towards “political” or “economic”, elements of administrative culture also influence the relationship between provincial and municipal governments. Objectively speaking, strong provincial governments tend to concentrate resources on central cities, and in addition to the policy cooperation determined by the standard power relationship chain of “central ⇔ province ⇔ city”, it is more clear to promote the reform of “leading cities”. “On the other hand, strong municipal governments need more free development space to encourage the development of other parts of the province, and it is becoming more and more obvious to promote the reform of “city-led”.

Game tree of “Central Region Relations” on “Optimizing the Business Environment”
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