Conclusion: Bargaining In Perspective

If we view bargaining as a symptom of an institutional setting, it appears less consequential than if we focused exclusively on bargaining strategy and activity. For the rules of the game are given by a new system of revenue sharing that has given localities enhanced fiscal powers and a heightened incentive to regulate carefully the financial flows between the city budget and each enterprise. They are given by a system of unreformed prices and unequal capital endowments for which managers have no responsibility. They are also given, finally, by the city's quite legitimate task of managing local development, protecting fiscal stability, and safeguarding the income and employment of local citizens.

From this perspective, it makes little sense to account for soft budget constraints, or interminable delays in policy implementation, by invoking the phenomenon of bargaining. For bargaining is but a symptom of institutional realities that are themselves responsible for delays and soft budgets. The state's budgetary process and mechanisms for revenue generation are not premised on firm rules about property, responsibility, or entitlement. There are as yet no clear standards about what is legitimately the central government's or the city's or the enterprise's share of industrial profits. There are only customary practices and situational standards, which must be revised case by case. It is only out of the bargaining process that a "fair" determination of these matters can be reached.

The same is true of fiscal responsibility. Just as there are at best situational standards regarding shares of factory revenues, local industrial circles rarely assign final responsibility for investment decisions. Many agencies and officials are involved, and the responsibility is shared collectively. As a group they strive to create conditions that reduce risk, but they do not always succeed. Sometimes this failure can be laid to the manager's actions, but often it cannot. No matter how much managers may want autonomy in other areas of their jobs, in striving for these favorable conditions they willingly surrender their autonomy to city planners in return for insurance against financial risk and responsibility.

It is commonly said that China's industrial system, formerly a centralized bureaucracy, is becoming one in which autonomous firms face market situations. This is at best a half-truth, misleading because enterprises are not yet financially independent entities. They are more accurately seen, not as independent business entities, but as quasi-auton-

omous divisions within a corporate structure.^[54] China's local industrial systems are becoming decentralized bureaucracies with expanded elements of market calculation. But they are still relatively coherent corporate structures. How these socialist corporations and socialist markets differ from their counterparts in market economies is beyond the scope of this chapter. Yet it is surely in the comparative study of corporate settings that we shall find answers to the most perplexing questions about China's industrial economy.