Public policy and competition amongst foreign investment projects: A case study of the Daya Bay economic development zone in South China
| Author | Yuelun Liu |
| DOI | http://doi.org/10.1002/pad.4230130106 |
| Date | 01 February 1993 |
| Published date | 01 February 1993 |
PUBLIC ADMINISTRATION AND DEVELOPMENT, VOL. 13,6540 (1993)
Public policy and competition amongst foreign investment
projects:
a
case study
of
the Daya Bay economic development
zone
in
South China
YUELUN LIU
University
of
Liverpool
SUMMARY
By the second half of the
I980s,
economic reform in China had produced differentiated interests
between regions and a decentralized authority in the country. The central government had
increasingly delegated its powers over funding, foreign exchange, resources and investment
to local governments, and local governments in different regions had gained more autonomy
to control the resources. This situation resulted in the proliferation of power centres at local
levels where independent policies were generated to protect and pursue regional interests
and resist the general policies
of
the centre. Conflicts of interest and competition intensified
and became more popular than during previous periods. This tendency particularly manifested
itself in local policy making concerning the introduction of foreign investment and projects.
The case of the founding and evolution of the Daya Bay economic development zone in
South China indicates the extent to which the competition between different coastal regions,
and between the coastal regions and the central government had been generated. In this
case study, the contextual changes that created a competitive environment will be reviewed
briefly; the general conditions and motivation to establish the zone will be introduced; then
the focus will be on analysing a series of policy formulations surrounding the competition
for foreign investment projects. The case study is concluded by an assessment of the ‘incremen-
tal’ nature of Chinese policy making.
CONTEXTUAL TRANSFORMATIONS: ECONOMIC MARKETIZATION
AND ADMINISTRATIVE DECENTRALIZATION
The most striking changes occurring in China during the mid-1980s were a series
of market-orientated reforms. From the experience of previous experiments in reform-
ing the economic structures, further effort was made to create ‘a socialist commodity
economy’. This meant that an open-ended experiment to introduce the factors of
market economy into the economic planning system could be carried out. In the
light
of
the reform document in
1984,’
the reform of the economic system had
been driven towards
a
transition from
a
centrally planned economy to one based
largely on market relations.
The leadership of the reforms realized that it was impossible for the central govern-
ment to incorporate all the local details into
a
giant national plan. Any such effort
The author is a PhD student in the Institute
of
Public Administration and Management, University
of Liverpool, Liverpool L69 3BX, U.K.
The Decision
of
the Chinese Communist Party Central Committee
on
Reform
of
the Economic Structures.
Adopted
by
the Twelfth Central Committee
of
the Communist Party of China at its third plenary session
on
20
October 1984.
0271-2075/93/01oO65-16$13.oO
0
1993
by John Wiley
&
Sons, Ltd.
66
Yuelun
Liu
would create new difficulties through misinformation and top-heavy bureaucratiza-
tion. Implementation of a detailed national plan by administrative orders, rather
than through natural market conditions, can be very inefficient. Considering the
vast size of China, her regional diversity, her huge population, the lack of transpor-
tation, the inadequacy of microinformation for any detailed planning, and the uneven
economic and cultural differences in various parts of the nation, it is more urgent
to replace the rigid ‘command economic system’ with
a
‘commodity economic system’
with great flexibility. Therefore, the reform programme emphasized that central com-
mands should give way to ‘guidance’-type directives and to market forces.
Since 1984. a number of measures aimed at expanding enterprise autonomy and
reforming planning have been introduced into the economic system. Enterprises have
been granted the power to trade materials not procured by the central government.
The number of commodities handled by the state’s distribution system has also
declined sharply, from 256 in 1978 to only
20
in 1986. By the summer of 1987,
a
new mode of management had been introduced in
75
per cent
of
China’s 12,398
larger state-owned industrial enterprises. Known as the ‘contract responsibility sys-
tem, it was to give managers added control over their enterprise operations. A new
profit retention scheme was also pioneered, under which profits retained by enter-
prises rose to 39 per cent of total profits, a three-fold increase over what they were
allowed to keep at the beginning of the reform era in 1979 (Solinger, 1989).
The Annual Plan of Economic and Social Development for 1985 was drawn up
to map out a new planning system. The new central planning system incorporated
guidelines to:
(1)
reduce the scope of the central government’s ‘mandatory planning’;
(2) incorporate all the economic levers and market forces and;
(3) expand the scope of ‘guidance planning’ with more flexibility and choices avail-
able for low-level planning agencies.
The 1985 development plan emphasized the ‘provisional regulations on the improve-
ment of the planning system’. Mandatory planning in China would be applied to
products or areas that have a ‘vital bearing on the national economy and the people’s
welfare’. Local governments would be given the role of balancing the planning func-
tions between ‘guidance planning’ and ‘market forces’, while the central government
would strictly enforce the ‘mandatory planning’. Local governments in the future
will have to decide how to co-ordinate such plans with those of enterprises. The
state will guide and help their implementation primarily by a flexible use of such
economic levers as pricing, taxation and credit, and through the allocation of econ-
omic funds, foreign exchange, and other major resources and equipments at its dispo-
sal.*
The most significant and dangerous step towards a ‘commodity economic system’
was the price reform. At the end of 1984, the State Planning Committee issued
a set of proposals for reducing the number of products subject to mandatory planning
that would allow prices
to
fluctuate in response to market conditions. By 1986,
the proportion of items with fixed prices, set by the state, decreased dramatically
See
The Third Session
of
the Sixth Nationol People
S
Congress: Main Documents.
Foreign Language
Press,
1985,
p.
62.
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