A popular cliché among opinion writers writing about China is that everything works through guanxi – personal ties. Though valid, the bargaining between provincial officials and central bureaucrats is far more complex.
Xiao Ma, assistant professor of political science at Peking University, argues that the Chinese Communist Party doesn’t simply distribute funds to provinces. Instead, there’s a localised bargaining process under which cities and provinces compete for Beijing’s largesse.
Chinese provinces, even municipalities, have such high-end offices in Beijing that they could be confused for consulates of foreign countries. They are called ‘Beijing offices’ and act as nodal offices for lobbying and bargaining for new projects with the central government.
Until recently, the provincial officials knew that bringing a project, such as a high-speed railway, could mean windfall profit in the form of kickbacks from project developers. Local officials were incentivised to lobby the central government for projects given how their political fortunes were tied to the projects they could bring to their region.
Ma estimates that the annual operations cost of all the ‘Beijing offices’ amounted to 10 billion RMB ($1.427 billion). These offices run their restaurants and hotels in the capital to generate revenue. The ownership of restaurants allows provincial officials to conduct business with the central ministries away from public eye, thereby institutionalising corruption.
By 2010, there were at least 10,000 Beijing offices of local governments, local state-owned enterprises and even social organisations and universities.
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An elaborate operation
The concept of regional offices can be traced back to the Han dynasty (206 BCE – 220 CE), when regional authorities established liudi — staying mansions — to accommodate local officials visiting the Han capital. But the modern-day regional offices have a very different purpose.
Crafty networking provincial officials figured that the Beijing offices’ success could be achieved by targeting central-level bureaucrats.
“Some Beijing offices even operate their own bars and karaoke boxes, as the demand is strong. They also give out gifts on holidays or invite central officials to visit their localities,” writes Ma in Localised Bargaining: The Political Economy of China’s High-Speed Railway Program.
The restaurants, situated close to Beijing offices, can be hard to get a reservation as they can be booked months in advance for meetings between provincial officials and a ministry person.
The central ministries that ‘Beijing offices’ may target under the lobbying include the transport, the China Railway Corporation, the housing and urban-rural development, and the natural resources, which are likely to award an infrastructure project to a province.
A case illustrates how a Beijing office can gain advantage by lobbying central bureaucrats.
A staff member of a city’s Beijing office learned from a central ministry bureaucrat – due to good personal relations – that the State Council was going to bring an order requiring the local government to obtain central-level approval for land purchases. Using this information, the city purchased large chunks of land for its 20-year construction plan before the State Council issued the order. The city gained a major advantage over other regional towns when the order was finally announced.
But then, these cases of local government using the Beijing offices to gain advantages by hosting large dinners, free travel for central officials and other schemes became public knowledge. In January 2010, the State Council acted by announcing a measure to close offices of entities below the municipality level. But the closing down of the Beijing offices belonging to small entities means that the powers of the local government have been consolidated as they can now carry out a variety of lobbying-like activities with the approval of the State Council.
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‘Cardinal’ cities and high-speed rail
The nexus between provincial politics and property developers who work in tandem to bring projects to a region, and enrich each other in the process, has led to a large real estate bubble focused on a small group of top-tier cities. Evergrande Group’s troubles are one such example of a property bubble running its course. Despite all the scandals, Evergrande has now resumed construction projects.
In some instances, the provincial localities, which Ma describes as ‘cardinals’, have greater bargaining capacity to influence the central government’s policymaking – a grassroots authority of a kind. The ‘cardinal’ cities, or localities, are the ones with leaders who hold concurrent leadership positions, which is one rank above themselves – giving them access to other organs of CCP’s decision-making. Ma concludes that cities or localities with such leaders have greater bargaining power and even influence Beijing’s policymaking.
The success of ‘cardinal’ localities in China is illustrated by the process of bringing high-speed railway projects to a particular region.
“Cardinal cities are not only among the first to construct the high-speed railways; they are also permitted to build more stations within their jurisdictions,” writes Ma.
Other factors also compound with the ‘cardinal’ phenomenon. The cities with deep history or ties to the Communist revolutionary era are likely to bring high-speed railway first to their region, especially if their leader holds a concurrent position at the provincial level.
The Northeast regions of China, with few overlapping ‘cardinal’ factors, were late to get a high-speed railway, despite its proximity to Beijing, which reflects the complexity of bureaucratic politics to bring infrastructure projects to a region. Huang and Zong conclude that Central and East China have received the most high-speed railway services, along with heavy concentration of these services in southern coastal provinces and middle regions of the Yangtze River.
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Cities must hustle hard
The bargaining for high-speed railway projects has grown even more complex as the Beijing government began to allow private enterprises to finance these projects in 2014. The provinces now have other sources of funding rather than just the benevolence of the Beijing government. But the entry of private funding hasn’t eliminated the role played by Beijing offices and the ‘cardinal’ phenomenon in ensuring certain cities and provinces get the lion’s share of infrastructure projects.
Even when cities don’t have the social and cultural capital or the political bargaining power, localities have taken to mass mobilisation to convince the Beijing government to reward a high-speed railway project.
In 2009, a “high-speed railway battle” was reported between Xinhua and Shaoyang county in Hunan province to bring a project to their region.
“To win the ‘high-speed rail battle’ at the local level, local officials must not only lobby their superiors through conventional channels within the system, but also increase their bargaining power with the help of turbulent public opinion. As a result, the local government and the people form a tacit and interactive relationship,” wrote Yan Jiuyuan, founder of Zhigu Trend Research Center.
The lobbying by Beijing offices and the endemic corruption have fueled growth in parts of China. But the new politics under Xi Jinping has sought to put the genie back in the bottle by disciplining over a million party officials under corruption charges. Despite these efforts by Xi, the localised bargaining power of regional entities decides which cities in China prosper and which ones must hustle hard.
The author is a columnist and a freelance journalist, currently pursuing an MSc in international politics with a focus on China from School of Oriental and African Studies (SOAS), University of London. He was previously a China media journalist at the BBC World Service. He tweets @aadilbrar. Views are personal.
(Edited by Prashant)