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Territorial Actors as Competitors for Power: The Case of Hubei and Wuhan

Paul E. Schroeder

The competition for power between Hubei province and its capital city, Wuhan, reveals Chinese political and legal systems little changed by urban reforms. These systems are still unable to determine how to handle the sharing of decision-making authority between different levels of government. The formula adopted by central leaders to spur regional economic growth, namely, the central-cities policy, offers only a carbon copy of the earlier Center-province decentralization, this time from provinces to central cities. The strategy offers no new political, constitutional, or legal formula by which new territorial competitors for power might more easily reach accommodation. Through all this, China's administrative system, with its multiple lines of authority that hold units and individuals under tight control, has shown a tenacity for self-preservation. Efforts to cut these lines of authority have resulted only in their multiplication.

In the absence of political, constitutional, or legal formulas that might guide the policy process, Chinese units engage in lengthy bargaining over the specifics of any general policy that is to be implemented. Such bargaining is done within certain limits. Bargaining positions can change over time and from issue to issue. Success often depends on the issue at hand, the context in which it is debated, and the nature of coalitions that form on either side of the bargaining table.

Such was clearly the case with Wuhan and Hubei. The 1984 policy decision to give Wuhan provincial-level status in economic affairs was taken only after the Center, siding with Wuhan, mediated extensive bargaining between the city and the province. From then until late 1988, when the province—with central backing—resumed authority in the face of economic retrenchment, a continuing stalemate between Hubei


and Wuhan as to the definition of this new power revealed that bargaining, even in a system characterized by bargaining,[1] does have limits. The stalemate was caused by political and legal systems that lack proper definitions of authority and offer no formula for allowing those definitions to be developed. Definitions of the limits of authority are given by fiat and are often intentionally left vague.[2] China's legal system is not mature enough to permit development of legal definitions through the gradual building of any substantive body of case law. Nor is the court system mature enough to permit dispassionate settlement of disputes and the enforcement of those settlements. Given that the two actors in question are sitting on top of each other, the result is competition for power characterized by irrational policy proposals and the inertia that arises from an inability to find accommodation.

These factors are evidence that, though featuring many changes, late-twentieth-century China has changed little since the days of the Qin dynasty in terms of finding an appropriate balance of power between Center, region, and locality. Territorial actors in China are the key to the strength or weakness of any regime, and each of China's dynasties, including the Republic and the People's Republic, has struggled to find an adequate formula for determining the proper distribution of decision-making power between Center and region.

Following the economic and administrative reforms that began in China in late 1978, research has focused on the competition between provincial-level actors and the Center. This competition was heightened as the Center gave to these governments greater decision-making power and greater resources with which to implement their decisions. Provincially based commodity blockades, wars over export-commodity prices, resistance to resource sharing, and increased provincial financial resources have been documented since the reform era began.[3] In some respects, provinces, with autarkic tendencies, still seek to become self-


reliant in as many areas as possible to reduce dependence on other Chinese provinces.[4]

Close examination of provincial-government activities, both with the Center and with lower-level governmental units and enterprises under their jurisdictions, provides a clearer picture of the nature of China's political system. The number of units with some authority in any functional setting, their interlocking connections with central leading organs (tiao-tiao lingdao guanxi ) and local leading organs (kuai-kuai lingdao guanxi ), the relative inability to obtain resources easily (what some blame on a scarcity of these resources), the complexity of decisions demanded by modern commercial activity, the lack of formalized decision-making rules, and weak institutions—all constrain policymakers. The Center, lacking the capability to enforce policy choices, is thus forced to issue implementation guidelines that are vague and open to broad, conflicting interpretation by implementing agencies. Things get accomplished more often than not by bargaining among the many actors involved.[5]

The research on interprovincial competition raises a second set of questions about the Chinese political system. Do territorial units within a province compete? If decentralization focuses power at the provincial level, do subprovincial groups attempt to have power decentralized further? Is the Chinese political system institutionalized enough to handle any further decentralization? Does the Chinese bureaucracy at different levels exhibit the same characteristics as bureaus found in other countries?

The case of Hubei and Wuhan shows that intraprovincial competition for power does exist. While provinces may view power as decentralized, subprovincial governments clearly do not. Writing in Liaowang , Wuhan's first Party secretary, Zheng Yunfei, linked the success of economic reform to political reform, which he said was needed to overcome "excessive centralization of power."[6] China's decision to make central cities a focal point for economic development during the Seventh Five-Year Plan (1986–90) provides an opportunity to examine the competition between city and province, the structural characteristics affecting implementation


of this policy, the bureaucratic behavior prompted by this policy decision, and the structural changes required if the policy is to work.

The competition between Hubei and Wuhan reveals much about the nature of bureaucratic behavior in China and the limits of Party cohesion when territorial interests are at stake. Strategies to minimize the conflict, such as problem solving, persuasion, or bargaining,[7] have given way to what Downs called "excessive territorial sensitivity" as both Hubei and Wuhan struggle for policy-making and policy-implementation autonomy.[8]

Though designed to push economic growth by decentralizing power to levels below provincial governments, the central-cities policy shows clearly the structural constraints that inhibit the development of the Chinese economy, no matter where decentralization stops. Without full implementation of the reform of the economic management system, without "smashing" the tiao-kuai lines of authority that bind all units and individuals, the central-cities policy has had and will have limited success. Indeed, Wuhan's Zheng Yunfei, referring to city and provincial governments, complained that these "have ... become major obstacles [to] the perfection and development" of enterprise reform.[9] Before turning to the nature of the competition between Hubei and Wuhan, a brief discussion of structural reform and the central-cities policy is in order.

Structural Reform And The Central-Cities Policy

In China's unitary system, tiao-tiao lines of authority tie each unit vertically to superior organs of power at the Center, whereas kuai-kuai lines of authority tie them horizontally to local organs of power. In the Chinese scheme of things, both tiao-tiao and kuai-kuai authorities are to share power cooperatively according to a system of dual rule, or shuangchong lingdao . Problems that arise in this dual-rule scheme are supposed to be ironed out by the unifying authority of the Communist Party, dang tongyi lingdao , a hierarchical organization that theoretically has only a single leading organ at the Center.

This system, instituted after much debate in the decentralization drive of 1957, does not work as leaders at the time stated it would. There is no dual rule; instead, there is rule by either tiao-tiao or kuai-kuai authorities, depending on the issue at hand and the relative power of each. The relative power of tiao-kuai authorities changes with time and with differ-


ent functional systems.[10] In the decentralization that followed 1978, provincial governments have gained considerable decision-making authority, thereby enhancing the relative power of these kuai-kuai leaders. These locally based authorities have shown themselves (as have tiao-tiao authorities at the Center ) to be quite resilient despite efforts designed to curtail their authority (such as periodic recentralization of foreign trade), in large measure because the Center is relying on these same kuai-kuai (and tiao-tiao ) authorities to implement the reform policies that would replace administrative authorities with economic networks.

The basic goal of China's urban economic reforms is to break the administrative lines of authority that bind China's economy and to replace them with market-logical ties that instill competition, make use of comparative advantages, allow for informational (market and otherwise) efficiency, and spur economic growth.[11] These governmental, bureaucratic lines of authority, the tiao-tiao lingdao guanxi and kuai-kuai lingdao guanxi already mentioned, tie each unit to multiple other units in fishnet fashion.[12] This makes it difficult for any single unit, or danwei , in any functional setting to act quickly enough to take advantage of opportunities as they arise—in short, to act economically. The entrepreneurship so essential to any economic-development plan is hampered by these artificial lines of authority.

For example, initial reforms designed to curtail governmental interference in economic activity and to spur horizontal economic ties across territorial boundaries resulted in the establishment of many new industrial corporations and research institutes. The Wuhan Hydraulic Cylinder Plant is one of twelve such factories that constitute the Wuhan Hydraulic and Pneumatic Industry Corporation. The plant had been the former Machinery Research Institute of the Wuhan Machinery Bureau. The name changed, but the personnel and facilities remained the same.


The new corporation is owned by the Wuhan Municipal Government and answers to the Wuhan Economic Commission.[13]

The aim here was to put the administrative bureaus onto a business footing, letting them make money, and, at the same time, to cut government spending by putting them on a profit-loss basis. Theoretically, this step was to cut tiao-kuai lines of authority and permit the growth of horizontal economic ties. Actually, the tiao-kuai lines of authority were increased rather than reduced. The twelve hydraulic factories under the Wuhan Machinery Bureau continue to answer to their original tiao-kuai authorities, but now they must also answer to the Hydraulic and Pneumatic Industry Corporation, which has what is termed yewu guanxi , or business authority, over them.

Many Chinese, however, see yewu lines of authority in terms of tiao-tiao and kuai-kuai authority. A Chinese economist explained yewu guanxi in theoretical terms as tiao-tiao "all the way to the Center. A pure administrative relationship is kuai-kuai up to the Center."[14] This theoretical approach, obviously, can lead to confusion because the line between administration and business is blurred in a Communist system. Business managers who deal not in theory but in the real world of determining to whom they answer tend to ignore the distinction.

In an interview, the manager of a rubber factory in Bengbu city, Anhui province, said his plant was attached to the Bengbu City Chemical Industry Corporation through yewu guanxi . "In some ways this is tiao-tiao because it connects us to similar corporations in Beijing. But this corporation is owned by Bengbu city's Economic Commission, which is our kuai-kuai authority. Actually, they both [the corporation and the Economic Commission] are kuai-kuai authorities. Nothing has been eliminated."[15]

Whether China's system is decentralized, then, depends on where one is within that system. Post-1978 China is certainly decentralized from the point of view of provincial governments, but to the manager of the Bengbu factory, and to Wuhan's Zheng Yunfei, it remains centralized, albeit at levels lower than Beijing.

In an atmosphere of continuing administrative interference, then, where economic management reform is not fully implemented, the Center, under Zhao Ziyang, listened closely to any proposal aimed at reducing the tiao-kuai network and instilling some economic logic into China's development strategy.

Such was the case in 1979 and 1980 as the era of economic reform got under way. The hierarchical nature of urban economies was dictated by


the Stalinist command-economy model chosen by China's Communist leadership in the 1950s. All trade within and between cities was monopolized by government agencies. The results of this—a collection of urban economies that were closed to each other, related only by administrative bureaus at the top of the governmental hierarchy—was seen as hampering China's development.

In 1980 economist Xue Muqiao promoted the idea of Chinese cities rebuilding the interurban economic networks that existed before the 1950s. The focus on cities as economic centers was given political life in 1982 by the then premier, Zhao Ziyang, at the Fifth Session of the Fifth National People's Congress, where it became one of his ten principles for economic development.

Then, in October 1984, at its Third Plenum, the Twelfth Communist Party Central Committee formally adopted the central-cities policy as part of its urban economic reform program. Large central cities would be given the necessary authority to break tiao-kuai control and act, as Solinger states, "as the nuclei of several large economic regional networks and markets across the nation."[16] Wuhan's participation in the central-cities strategy was first espoused in 1983 by Dr. Li Chonghuai, professor of economic management at Wuhan University.[17] In brief, this was an effort to tap the economic potential of larger cities in China's interior, which are not part of the coastal-cities program nor of the provincial-level cities of Beijing, Shanghai, and Tianjin. The stated goal, as in the creation of industrial corporations, was to cut tiao-kuai lines of authority and allow larger cities to act as economic magnets, building regional economies that would tap their respective comparative advantages, foster foreign trade, and thereby help build the national economy.

In 1983 Li put forward an overall central-cities strategy for Wuhan's economic development.[18] Among the twelve measures was an effort to "establish a rational economic network while implementing economic management reform." In discussing this step, Li went directly to the


heart of China's problem: "In China's current economic management system, the major abuse is too many centralized authorities, the failure to break tiao-kuai [lines of authority] and to separate government and enterprises so that we still cannot handle affairs according to economic laws. This is done not only in business but in all aspects of industry, planning, and finance."[19] Li pointed out that most enterprises in Wuhan were "under the direction" of the Center and the province. City-run firms were very few. The value of fixed assets for enterprises under city management was less than one-third of the total value of fixed assets for all enterprises within the city limits.[20] Using Wuhan's machinery industry as an example, Li said the 1,141 factories (in 1983) were "interlocked vertically and horizontally and subordinated to more than forty xitongs (functional systems) and departments at the five administrative levels of Center, province, city, district, and neighborhood. Vertically and horizontally they have no mutual relationship." The result was operation at only 30 percent of what local economists considered potential industrial capacity.[21]

Li's remedy was the central-cities policy. These cities, not their provincial authorities, should manage all economic activity within their borders. A city should be given "enough authority in economics, enabling it to be engaged in essential construction and technology and equipment renovation and transformation, to break tiao-tiao kuai-kuai fetters, and, according to economic needs, carry out cooperative ventures across regions, departments, and trade and organize regions in rational economic networks."[22] This was to be done through separate listing in the state plan, jihua danlie . Briefly, a city's annual plan would be given its own listing in the national plan separate from the provincial plan. Municipal officials would deal directly with central planners regarding the contents of the city plan. Without jihua danlie , a city's annual plan would be subsumed in the provincial plan. The city would deal directly with provincial planners in this case. With separate listing, municipal construction projects and products would be able to "enter the national plan" directly. Provincial leaders initially welcomed the idea but soon came to see it as a direct assault on their planning prerogatives, especially when Li coupled jihua danlie with greater autonomy and authority in finance and foreign and domestic commerce, giving central cities "ample economic strength to bring into play the effects of an economic center."[23]


Li's formula, as I said at the outset, sought only further decentralization, this time from provinces to central cities, mirroring earlier efforts by provinces to decentralize from the Center. His strategy offered no new political, constitutional, or legal formula by which the new territorial competitors for power might more easily reach accommodation. Li pinned hopes for his strategy on successful implementation of the management system reform and decentralization to the enterprises, what one Wuhan economist called a long-term prospect, given the intransigence of both local and provincial authorities about giving up power.[24] But, as Zheng Yunfei wrote, this policy was blocked by a lack of political structural reform and clear definitions of the functions of Party, government, and enterprises.[25]

By simply decentralizing authority lower to the central cities without any fundamental change in tiao-kuai relationships, the bargaining inherent in the Chinese system was increasingly to be found in the localities as well as Beijing.


Throughout early 1983 Li Chonghuai was busy publicizing his strategy for Wuhan's development. A series of articles in the local media and academic journals pushed the idea of Wuhan's relying on "liang tong," or liutong , meaning circulation (of commodities), and jiaotong , meaning communications.[26] Thus Wuhan should rely on its geographic position in China's center, equidistant along the main rail line from Beijing in the north and Guangzhou in the south and along the Yangtze River from Chongqing to the west and Shanghai to the east. By relying on this position, Wuhan could recapture the leading position it had early in the twentieth century as the core city of a central China economic region. It would once again become the "thoroughfare of nine provinces."

The central-cities program was a national policy, as was stated earlier. Separate listing in the state plan for central cities was not limited to Wuhan. Chongqing was granted jihua danlie in early 1983. Implementing the policy there, however, was much less difficult than in Wuhan because "Chongqing is not the seat of provincial government. Wuhan is, and that makes it much more difficult. The closer authorities are to each other, the more difficulties there are."[27] Wuhan was the first provincial capital to be


given jihua danlie status and, as such, drew special attention from central leaders. By early 1989 twelve other cities, in addition to Wuhan and Chongqing, were granted jihua danlie: Guangzhou, Shenyang, Dalian, Chengdu, Harbin, Xian, Qingdao, Ningbo, Xiamen, Shenzhen, Nanjing, and Changchun.[28]

At the start it appeared that implementation would be easy. The Center and Wuhan both used bargaining strategies designed to convince Hubei officials of the policy's benefits for all concerned. While Center, province, and city watched developments in Chongqing closely, municipal officials and the State Commission on Restructuring the Economy communicated the need to approach Hubei about giving Wuhan separate listing in the state plan.[29] With prodding from the commission's vice-minister, Zhou Taihe, Wuhan sent Hubei a proposal, which provincial officials accepted. "Hubei didn't know what it would mean, so with Zhou's encouragement they accepted the plan gladly. Hubei sent the proposal to the Center, which acted immediately, something Beijing intended to do anyway. The Center had given clear hints to Wuhan of its support [in this issue] and the city seized the opportunity."[30] According to other sources, Hubei's initial acceptance of the policy was urged by the provincial first Party secretary, Guan Guangfu, and the then governor, Huang Zhizhen, close associates of the former PRC president Li Xiannian, a former Wuhan mayor.[31]

The bargaining strategies used here fit Lampton's classifications of "foot-in-the-door" and "a little something for everyone."[32] Theoretically, separate listing would lead to increased economic activity by Wuhan, which in turn would increase the financial returns for city, province, and Center, all of which "had little money."[33]

The decision to grant Wuhan jihua danlie was made in May 1984 and announced to the nation on June 3 in a statement that Wuhan would be a test-point for a variety of urban economic reforms, including provincial-level economic management status, the establishment of trade centers, the invigoration of transportation and the opening up of the Yangtze River, and the creation of horizontal economic ties with other regions in China.[34] Once the decision was made to permit jihua danlie for Wuhan, the city and the province had to work out how to implement the plan before the separation could be formalized by the State Council. During


this period it was clear that separation would lead to a division of powers between city and province, which created a variety of problems to which Hubei objected. The Center, led by Zhou Taihe, had to negotiate a settlement between Hubei and Wuhan so the policy could be implemented beginning with the 1985 plan.[35]

At this juncture, the historically bad relations between Wuhan and Hubei became a critical factor. The major initial problem, determining what Wuhan's proportion of retained capital should be, along with what enterprises under provincial jurisdiction would be sent down (xiafang ) to the city's jurisdiction, had to be negotiated in an atmosphere of mutual mistrust.

Problems In Relations

Standing behind the negotiations over separation was the continuing conflict between Hubei and Wuhan. The rub runs both ways. First, Hubei is fearful of Wuhan independence, given the latter's superior economic base. For many years it had been rumored that Wuhan would become a provincial-level city like Beijing, Shanghai, and Tianjin, and that Hubei would have to move its provincial capital to some other city, such as Huangshi or Shashi. "This rumor started in the Cultural Revolution. There was never anything to it, but it has persisted, so Hubei is afraid of any steps that could lead in this direction. That's why other Hubei cities always got more help from the province than Wuhan did."[36]

The result of this fear was what one city official termed Hubei's "reluctance" to consider Wuhan's development proposals for inclusion in the provincial plan that would itself become part of the national plan. This meant a gradual reduction in the amount of money going to Wuhan through Hubei. In the 1950s Wuhan received sizable investments for construction of such items as Wuhan Iron and Steel and the Yangtze River bridge. By the 1970s it was felt that investment should be made in other areas of the province.[37] Consequently, Wuhan requests for additional large-scale capital-construction projects (which had been made through the provincial planning process), despite benefits to economic development, were not included in Hubei's annual plans. An example of Hubei's reluctance in this regard is the construction of a new airport, which Wuhan proposed in each annual plan for nearly thirty years prior to separation. Citing lack of money, Hubei repeatedly cut the airport out of the city's annual plan.

Second, these bad relations were compounded by Wuhan's attitude as


the central-cities policy was debated and implementation was negotiated. Wuhan adopted an attitude that it was the biggest city in central China and that it could act as a development magnet for the entire region, not just Hubei. "From the beginning Wuhan thought its many functions had been ignored [by Hubei]. It tried to take too many steps too fast, too directly cutting itself off from Hubei. Wuhan thought it was Wuhan of central China and this made Hubei very unhappy. Shenyang took the opposite tactic, calling itself Shenyang of Liaoning. It put Liaoning first, even though it was breaking away from provincial bonds."[38] It was in this contentious atmosphere that the two sides began negotiations over the details of the separation. To help ease Hubei's concerns, Beijing, though pushing the central-cities policy, warned Wuhan that it would remain under Hubei's leadership.

Financial Problems

Before the policy could be implemented, the Center also had to find a way to assuage Hubei's worries about the prospect of losing sizable revenues to Wuhan. Thus the bargaining centered on two basic aspects of the proposed separate listing: assuring Hubei that Wuhan would not become a "province within a province,"[39] and more directly, finding an arrangement that would eliminate Hubei's objections to losing revenue.

Two key sources in the Wuhan city administration described what was at stake. Prior to separation, Wuhan was allowed to keep on average 20 percent of its revenue. Actually, this rate was "returned, not retained," as all revenue was sent to Hubei as the basic governmental accounting unit. Hubei kept 55 percent, (with 5 percent going to other Hubei local governments), sent the Center about 25 percent, and returned 20 percent to Wuhan with clear stipulations in each annual plan as to how the money was to be used.

This was the major sore point in the relations between Wuhan and Hubei. Revenue from the city accounted for about half of Hubei's total income, yet the rate of money returned to Wuhan was far less than the city contributed.

The effects of this treatment by Hubei continue to plague Wuhan, even after separation. During the negotiations leading to separation, the Center calculated the expenses and revenues of Wuhan for the previous five years, 1980 through 1984. It then said Wuhan could keep 19 percent while sending the rest to the Center. Expecting to be given between 30


and 40 percent of its earned revenue, Wuhan objected. The Center finally agreed on a 20 percent retention rate. This was certainly to Hubei's advantage. If Wuhan were able to retain large portions of revenue and thus gain greater independence in key financial resources, the city might prove to be too strong a competitor. However, given the basically incremental nature of decision making at the Center in such instances, Hubei did not need to worry. "The Center has an unwritten rule to decide everything. It bases every decision on the previous few years' experience. The Center doesn't have enough money, so a comparison is a good way. Despite Wuhan's objections, the city was given only what it had been getting from Hubei. That's why Hubei could sit quietly and let the Center handle the problem."[40]

What Hubei did seek was some mechanism that would allow the province not to lose any revenue that had previously come from Wuhan and that would now go directly to the state. The Center agreed to permit the province to count Wuhan's retained portion as part of Hubei's annually planned payments to the Center, meaning that the financial arrangement between all three parties would not really change, except in accounting terms.[41] Separation, then, was something less than complete if one considers the many ways governmental units are interrelated.

This fits with Solinger's findings that the negotiated settlement that paved the way for implementing the central-cities policy saw changes in the accounting procedures but little loss of revenue for Hubei. Based on interviews with Wuhan economists, she found that Hubei got about 100 million yuan per year from the Center, the initial amount the province lost as a result of jihua danlie and decentralization.[42] At the same time, Wuhan gave the Center about 100 million yuan more than Hubei had been doing before the policy was implemented, in large part because of increased economic activity.

Wuhan officials feel cheated by these results, especially after the other cities granted jihua danlie are permitted to retain between 30 and 40 percent of their income. Wuhan had the lowest retention rate of any of the first seven cities (there were fourteen by 1990) given separate listing in the national plan, despite the city's connections at the Center through Li Xiannian. "Wuhan thinks it lost a great deal. It wanted to retain a lot more of its money. The reason it gets the least is because the Center based the amount on the previous five years' experience. This reflects


the low status Wuhan was given by Hubei. The reason for this is the relationship between Wuhan and Hubei. It was very bad for a long long time."[43]

Despite the financial agreement, the Center announced that Wuhan was retaining 28 percent, with 72 percent going to the Center,[44] a point that was not appreciated by the city officials I interviewed. Three city-government sources said Wuhan's retention rate was 20 percent for 1985 through 1987. In 1988 it was decreased to 16.4 percent as part of tax system reform. This lower figure was determined by the Center as part of an incentive to increase production. It has nothing to do with separation, except that Wuhan started the tax reform from a lower retention-rate base.[45] This low retention rate is the key problem in Wuhan's development strategy. "We have a basic capital supply and demand problem. Local financing is very difficult. We have great need for money but a shortage of funds. This is an important reason why Wuhan is what it is."[46]

Despite the financial shell game and Wuhan's relatively low retention rate, the city benefited under jihua danlie because it could determine how to spend its money rather than getting approval from Hubei.[47] For example, Wuhan is now planning construction of a new airport in Tianhe, on the western outskirts of the city. In addition, Wuhan also gained the right to approve foreign investment and import projects up to U.S. $5 million, the same authority as Hubei. Further, city export revenues that had accrued to Hubei foreign trade corporations or were controlled by Hubei's foreign trade apparatus are now controlled by Wuhan's foreign trade organization. In 1984 total provincial revenues from exports was 1.46 billion yuan, of which 17.53 percent, or 256,320,000 yuan, came from Wuhan enterprises. In 1985, the first year that revenue went to Wuhan, the city's export income had increased by 16 percent, to 299,230,000 yuan, which accounted for 14.81 percent of total provincial export revenue.[48] Wuhan officials put the 1985 figure slightly higher, at 333,130,000 yuan.[49]



Once the financial arrangements had been negotiated, the Center on 13 October 1984 officially announced that Wuhan would be granted jihua danlie beginning with the 1985 plan. The central documents state that "in all aspects of planning, finance, banking, taxation, prices , industrial and commercial administration, labor and wages, electric power, materials distribution, foreign trade and foreign economic relations, post and communications, environmental protection, medical administration and inspection, tourism, and so forth, Wuhan enjoys provincial-level status in economic management power (xiangyou sheng yiji jingji guanli quanxian) " (emphasis added).[50] This seems comprehensive. City officials took it at face value and proceeded to exercise provincial-level rights in all these areas, no doubt taking, as was mentioned above, "too many steps too fast." They interpreted the above statement to give Wuhan rights in economics and administration. Hubei officials, however, read this much differently. To them, Wuhan's rights are limited to economic management (jingji guanli quanxian ) and do not include critical items of administration, such as distribution, pricing, and personnel.

The problem for both parties is the lack of any definition of where economics ends and administration begins in a planned economy. Hubei, therefore, has been able to block several Wuhan initiatives in policy areas that directly pertain to the city's economic development. As one economist with close ties to the city said, "In some areas Hubei continues to hold power. They simply refuse to give it up. The line where economics ends and administration begins is very, very thin. There is no definition and I don't know how long it will take before we can get one."[51]

According to a business source with close ties to Hubei and Wuhan, the central documents were purposely left vague. Without the resources to adequately enforce its will on lower levels, the Center is left with little choice but to set general guidelines and let the implementing parties involved bargain-out any disputes between them. "This vague writing is done purposely. They [the Center] are not stupid. They know it will cause problems. But what else can they do?"[52]

Given the already poor relations between the two governments, this differing interpretation has set the stage for a continuing series of prob-


lems between them that require bargaining. Knowing this, both sides have established "leadership groups" to handle problems as they arise. When problems are too critical or solutions too difficult to obtain, the mayor and the governor become active participants in negotiating a bargain that would settle the issue.[53]

The problems caused by the new relationship between Hubei and Wuhan can be found in almost every sector, but brief discussions involving distribution, price setting and food subsidies, and personnel provide clear examples of the bargaining necessary when policies such as jihua danlie are adopted in the absence of the appropriate political and legal means to determine definitions of authority.


Critical to any planned economy is the need for adequate distribution of the inputs necessary for production. According to Wuhan's interpretation of the central documents granting jihua danlie , the city is to be given provincial-level rights in materials distribution. Though directly related to management of the economy, Hubei officials view this activity as proper governmental administration. The province has exercised its authority in this sphere, more often as a means to "get back at" upstart city officials.

As economic reforms have instilled some market forces into the allocation picture, Hubei has been able to use its distribution capacity as a bargaining tool with Wuhan. For example, Solinger found that Hubei was withholding cotton from Wuhan textile mills, thereby threatening their production.[54] Of course, market forces open up opportunities for Wuhan as well. When textile prices are high, Hubei has refused to allocate cotton to city mills, threatening production and forcing the city to buy from more expensive suppliers outside the province. But when textile prices are falling and Hubei wants to get rid of cotton quicker, Wuhan has refused and continued to buy elsewhere.[55] Despite this game playing, it is estimated that "nearly one third of Wuhan's textile productive capacity is idle because of the lack of cotton."[56]

Commodity speculation was encouraged by decentralization of the distribution system. By September 1988, with economic retrenchment under way, Hubei ordered ten measures designed to "rectify the eco-


nomic order" for the entire province, including Wuhan. Among these was the demand that provincial quotas for the procurement of grain, oil, and cotton be met and that speculation be stopped. Distribution was to be recentralized to the provincial level.[57]


The central documents granting jihua danlie clearly state that prices are included in the areas now under Wuhan's competence. Yet Hubei has flatly refused to give the city any real authority in price management. "Hubei still sets the prices and subsidies for food. This is a sensitive problem and the mayor has to negotiate this directly with the governor."[58] For example, provincial and municipal authorities, fearful of "disorderly price increases," announced that basic monthly food subsidies would go up from 10 yuan per Wuhan resident to 13.50 yuan on April 1, 1988.[59] The city had sought to limit the subsidy's increase because inflation, combined with increasing population, makes it increasingly difficult to pay for them. Up until 1988 Wuhan was paying about 1 billion yuan per year for food subsidies. The province, fearful of adverse public reaction to inflationary pressures being felt for the first time in China in two generations, forced the city to accept a higher subsidy than it wanted. The city objected to what it sees as "direct interference" in its new authority, but it had little choice.[60]

By late October strong efforts to control inflation were being pushed by provincial authorities. With pressure from Hubei's first Party secretary, Guan Guangfu, Wuhan city Party secretary, Zheng Yunfei, publicly agreed to follow Hubei's price control index, abrogating city-approved price increases that were made after September 1. Further, the city agreed to forgo any price increases through spring 1989 and expansion of the scope and range of commodities with floating prices, and refused to allow any temporary price increases. Wuhan, at Hubei's insistence, agreed that no authority over prices would be delegated below the provincial level until some undetermined time in 1989.[61]

Wuhan's acquiescence to Hubei in these matters, in contrast to the 1984 effort to bargain with the province, indicates it lost the backing of


the Center on this issue. Indeed, it was the Center that pushed lower levels to, first, deal with public complaints about inflation and, when this failed, to bring it under control by means of the economic retrenchment. By early 1990 that program was clearly in place in Wuhan, where commercial activity was considerably less than that of mid-1988.


The rising costs of basic food subsidies has become a nagging problem for Wuhan. A severe cash shortage for reconstruction of badly needed transportation and communications facilities, factory equipment, and other basic city services is straining Wuhan's capacity to govern. The rising population, coupled with an annual inflation rate of at least 8 percent (in 1987), has meant that an increasing amount of city money has gone into what one disgruntled economist called "keeping the peace." In one year, from 1985 to 1986, the city's population rose by 116,000 to a total 6,199,600. To long-term visitors, the pressure this increasing population is putting on Wuhan's infrastructure is obvious.[62]

Facing increasing costs in food subsidies because of this and a provincial government unwilling to allow Wuhan to forgo raising the per capita subsidies in the midst of inflation, the city sought relief where it could. In autumn 1987 a municipal regulation was circulated through various city departments stating that, beginning on January 1, 1988, any unit bringing a new worker into the city would have to pay twelve thousand yuan. Though city planners hoped to make exceptions for certain skilled labor, the rules for which might take six months to formulate, the nascent Wuhan labor market came to a halt weeks before the January deadline. My business source said, "Even though the rules are still to be issued, many units are no longer accepting new employees because they fear they might have to pay."[63]


Based on information from three city sources, this policy's brief history clearly reflects the tension between Hubei and Wuhan. The city did not act alone but sought and obtained permission from a provincial vicegovernor to implement the program. When the policy documents circulated around city departments, however, Hubei changed its mind. An official with the Wuhan administration put the issue into terms that reflect both the differing opinions as to the extent of the city's authority and Hubei's fears of Wuhan's independence: "Wuhan wanted to limit population growth, which we see as an economic problem. Wuhan would screen who was coming in and determine who would be exempted. A regulation was prepared for this procedure. Hubei said no. If Wuhan implemented the policy, Hubei might have trouble moving its people in and out of the capital city."[64]


There is no doubt that the central-cities policy has permitted the growth of interurban economic networks. Solinger outlined the economic institutional framework built up in the Yangtze River Valley, centered at Wuhan, between 1984 and 1988.[65] This framework, if granted appropriate authority, could help transform the economy of central China from an administrative hierarchy into a regional economic network. The framework includes the creation of a wholesale marketing network; the creation of the Yangtze River Joint Transportation Company by thirteen cities along the river in 1984; establishment of sixty-four networks in commerce, materials supply, transport, and finance, plus the Wuhan Economic Cooperation Region by seventeen cities in Hubei, Hunan, and Jiangxi provinces; and creation of five capital markets to serve the region. Despite the creation of these various networks, the question was whether they would be permitted to act in their own economic interests or whether they would continue to be controlled by government agencies at the local, provincial, or central levels.

Since 1985, when jihua danlie was implemented, relations between Wuhan and Hubei have worsened. A stalemate ensued until China's overall economic situation worsened in the second half of 1988 and, as part of a national retrenchment program and Wuhan's loss of central backing in its efforts to negotiate with Hubei, the province was able to impose its will on Wuhan economic activity once again. Prior to the retrenchment program, however, Hubei continued to exercise authority in areas where Wuhan thinks it should have authority. Provincial and


municipal leaders were locked in debate, largely in scholarly journals, about the efficacy of jihua danlie . The debate involved those who oppose separation and those who think it has not gone far enough. Although the scholars do not say for whom they are speaking, those opposed to jihua danlie are voicing Hubei's opinion while the other side voices that of city officials.[66]

Opponents base their argument on three basic factors. First, the goal of urban economic reform was to diversify into a market economy with limited planning. Separation strengthens planning by elevating another governmental actor to an active role in the planning process. Second, jihua danlie does decentralize enterprises from the province to the city, but in the absence of management system reform "nothing has changed except the grandmother."[67] And third, the only real result has been the creation of "new contradictions" between Wuhan and Hubei, making a bad situation worse.

In my work as trade representative for the state of Ohio, based in Wuhan, I was continually mindful of the growing competition between Hubei and Wuhan. For example, prior to jihua danlie , Wuhan was always included in trade shows and other Hubei efforts to find foreign markets. From 1985 until 1988, however, Wuhan representatives were conspicuously absent from Hubei-sponsored trade promotion events. In 1988 the two began an annual, jointly sponsored trade exhibition in an effort to show greater cooperation. The competition between Hubei and Wuhan foreign trade corporations, trading companies and officials, however, became all the more obvious at these events.

Further, with jihua danlie came a division of the Bank of China, Hankou branch (the provincial branch), to exclude the Bank of China, Jianghan branch, representing Wuhan city. The Hankou branch moved to new, fully automated quarters, leaving the Jianghan branch to the old bank building. Also, the Hankou branch would not permit the Jianghan branch to cash personal checks, written in U.S. dollars, above $134, or about 500 yuan in foreign exchange certificates, even with a credit card as collateral. The Hankou branch, meanwhile, gladly cashed personal checks up to $750 if a credit card was used. This was done to limit Wuhan's ability to earn foreign exchange.

In 1988 interviews in Wuhan, Solinger also found that, in an effort to boost provincial income and to cut Wuhan's, Hubei "forbade lesser cities in the province which are still under its immediate control to order goods—such as shoes or tape recorders—from Wuhan."[68]

Proponents of separation do not dispute the poor showing jihua danlie


has had so far, but lay the blame for this on Hubei's recalcitrance and not on the policy itself. To them, separation must include granting wider powers to the cities if the policy is to succeed. "It is clear Wuhan has not been given enough power. Society is a complex system of laws, administration and economy. ... Presently administration is above law and economy. Administrative separation has not been given to Wuhan, only economic planning. Problems exist when there is a mix. It is hard to say which is which when both are present to Hubei claims the rights."[69]

The bargaining required to find a modus vivendi and to implement policies has become tougher. The result is a vicious circle of poor policy planning or backdoor deals that only heighten mutual mistrust. "When problems arise, everyone adopts a gentlemanly attitude and sits at the table. But when their interests are involved, the result is either no solution or under-the-table bargains and the creation of new contradictions that arise from them."[70]

My sources say it is more and more apparent that a successful negotiation will be difficult. Consequently, Wuhan has begun to ask the Center to mediate, a fact some Wuhan officials admit further alienates Hubei. Despite the Center's interest in pushing jihua danlie , it is apparent that Hubei continues to exercise authority and expects Wuhan to accept this fact. At a conference of Party and government leaders in August 1987, the provincial Party secretary, Guan Guangfu, pointedly told Wuhan it would not be permitted to go it alone: "By giving full play to Wuhan's multiple functions, the city should work in full cooperation with the whole province toward overall development. [But] ... successfully developing Wuhan needs joint efforts by the province and the city."[71] Nine months after this admonition, however, Wuhan had yet to give up ideas of a more complete separation. My sources with the city agreed that reaching an accommodation under the original separation plan was hopeless.[72]

By spring 1988 Wuhan's various research organizations had developed five alternatives to the original separation scheme that could be presented to the Center at an appropriate and opportune time.[73] The first would make an effort to better define the limits of separation by making Wuhan a practice case for more local authority in administrative and legislative activities in addition to economics. Wuhan would still be attached to Hubei but would have more authority that would be better defined. The second plan would make large portions of the city a Special


Economic Zone, similar to Shenzhen. This idea has been studied at length, with a section of Hankou along the north side of the Yangtze River in the city's northeast earmarked for it.

The third plan, which gives Hubei anxiety, is to make Wuhan a provincial-level city, like Beijing, Shanghai, or Tianjin. Both the second and third plans include the fourth idea, setting aside a Special Administrative Zone within Wuhan for the provincial government, allowing it to operate under its own authority without having to move the provincial capital. Finally, there is discussion about making Wuhan a test case for an entirely market-oriented economy with no planning and little government administration of economic activity.

Though these alternatives are being prepared by Wuhan's planners, my sources had no answer as to how these plans could ever be implemented, given Hubei's unwillingness to grant jihua danlie as stipulated and the Center's lack of enforcement powers. The proposals reveal, however, what Downs might call the "excessive territorial sensitivity" of Hubei and Wuhan, which make change more difficult because it leads to irrational policy choices.[74] Such sensitivity makes conflict between territorial actors likely. The bureaus involved, therefore, seek to minimize this conflict either by narrowing the scope of proposed actions or by ignoring their competitors and going for broke. Both reactions, which Downs calls the shrinking violet and superman syndromes, respectively, are irrational.

It is highly unlikely the Center would approve any of the final three plans, while Wuhan's financial problems eliminate the creation of a special economic zone in the near term. Given this, these options are irrational by attempting too much—that is, Wuhan planners are engaging in the superman syndrome. The first plan is more realistic, but, given China's administrative system, its lack of institutionalization and law in determining how power might be shared and how disputes are settled, it too is irrational.


China's clampdown on the prodemocracy movement on 4 June 1989 and the repression of participants afterward makes it quite clear that the political system has changed little in the ten-year reform period of Deng Xiaoping's regime. The regime's violent reaction to the movement could not be foreseen, especially because it involves the loss of international credibility so carefully nurtured by China. But there was clear evidence that the reforms aimed at separating Party from government and admin-


istration from business were superficial: little had changed in the authority relations between various levels of government, especially below the province.[75]

Part of this evidence lies in the lengthy stalemate between Hubei and Wuhan over the limits of jihua danlie . Wuhan could not muster the strength, even with central backing, to convince the province to give up key economic decision-making power. The parameters of bargaining were set by Hubei. Ultimately, Hubei's ability to impose its will on Wuhan's economy in late 1988 doomed jihua danlie to failure. Reimposition of provincial authority came in the wake of inflationary pressure, as was discussed above, and after a January 1989 drop in industrial production in Wuhan and a number of other Hubei cities. Viewing Hubei's overall industrial production increase of 2.4 percent for January 1989 as fifth from the bottom nationwide (the national average was 2.8 percent), the vice-governor, Xu Penghang, noted that production in Wuhan, Huangshi, Shashi, Jingmen, and other areas actually declined. In a mid-February speech, he demanded that "all levels" and "all localities" arrange production in line with "lists ... drawn up by the state and the provincial authorities."[76]

The implication here is obvious; the central-cities policy, as implemented in Hubei and Wuhan, failed. The policy's success, as Li Chonghuai wrote, depended on successful implementation of management reforms designed to cut tiao-kuai lines of authority. But management reforms have not been implemented. Changing the power relations configured by tiao-kuai lines of authority over economic activity requires reform of the political system, not just the economic system, something the events of June 4 have shown is not acceptable to the Deng regime.

Efforts to cut tiao-kuai through economic system reform alone, for example, by creating yewu lines of authority exercised by industrial corporations, has failed in this task. As in the case of the Bengbu City Chemical Industry Corporation, enterprise managers see yewu lines of authority in terms of tiao-kuai lingdao guanxi . The number of lines "tying enterprises hand and foot" have increased rather than decreased.

Efforts to decentralize authority, giving it to provinces in the late 1970s and early 1980s, to key cities in the mid-1980s, and, in some


functional areas, to smaller cities in the late 1980s,[77] have reduced somewhat the power of tiao-tiao lines of authority but, by giving provinces and some cities greater financial resources and authority over such items as materials distribution and personnel, have increased the power and number of kuai-kuai lines of authority. "At the moment, kuai-kuai is tighter than tiao-tiao. Tiao-tiao interference is still great. But the real problem is kuai-kuai interference. At this level, the provincial level, there is no real understanding of what needs to be done for economic development, or at least no real willingness to do it."[78]

The results of jihua danlie , then, at least in Wuhan, have been tension as Wuhan attempted to compete with Hubei for kuai-kuai authority. A business source said that "Wuhan's tiao-tiao is the Center, its kuai-kuai is Hubei. Now [after separation] Wuhan is trying to break its kuai-kuai from Hubei and Hubei is very upset with this. There is a severe lack of cooperation between them. This is compounded by the confusion of the reform period."[79]

The tiao-kuai lines of authority that constitute China's structural organization are, theoretically, supposed to cooperate in a system of dual rule that never really did work.[80] In the absence of cooperation between the two, the Chinese Communist Party is to act as the mediating, unifying force, with leadership coming from the Center.

But how can officials who disagree while wearing their administrative hats suddenly find the willingness to cooperate when they put on their Party hats? They cannot, so tiao-kuai competition exists within the Party as well, a mirror image of what is more easily seen in the government. And, while Wuhan and Hubei vie for kuai-kuai power, their respective Party committees are likewise engaged. This can be seen in the differing points of view expressed by Hubei's provincial Party secretary, Guan Guangfu, and Wuhan's Party secretary, Zheng Yunfei. The latter is also a member of Hubei's provincial Party Committee.

A business source, also a Party member, said, "In reality, Wuhan and Hubei cannot cooperate at both the administrative and the Party level. The split has created a kuai-kuai competition within the Party. There always was tiao-tiao competition between the Center and local Party branches."[81]


Economically speaking, the central-cities policy is an effort to decentralize decision-making power closer to the point of production in order to maximize efficiency and flexibility and to push growth. Politically speaking, it is an effort to decentralize power to a key city that has become a competitor with its provincial government. The competition is a predictable result, given that there is no strong consensus about the policy's goals.

Herein lies China's Catch-22, put into terms of the Law of Countervailing Goal Pressures used by Downs: economic development requires innovation, which, especially in a planned economy, "creates a strain toward greater goal diversity in every organization." But Hubei's fear of losing power to Wuhan is based on its "need for control and coordination, [which] creates a strain toward greater goal consensus." Thus goal consensus "is a vital part of any true decentralization of authority."[82]

But the functional aspects of the central-cities policy encourages heterogeneous goals between the two territorial actors. The policy, with jihua danlie , is broad in scope. It has multiple, highly complex, and vaguely defined functions, which must operate simultaneously. There is considerable conflict about these functions as they relate to relative power between Hubei and Wuhan. All this presages conflict between the actors involved. Despite Wuhan's continuing efforts to wrest greater authority from Hubei, its kuai-kuai leader, in the absence of specific policy changes granting the city greater power, there has been no real decentralization of authority to the municipal level.[83]

When territorial actors compete for power in such an atmosphere of mistrust, under vague guidelines, and with no legal system that might mediate disputes, the result will be continual delay in making timely decisions because required policy action by those in authority, who are caught in the web of tiao-kuai hierarchies, needs to be bargained.


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