This is how Chinese provinces compete to bring in new projects. This is called localized negotiation

A popular cliche among opinion writers writing about China is that everything works through guanxi – personal ties. While valid, the bargaining between provincial officials and central bureaucrats is much more complex.

Xiao Ma, an assistant professor of political science at Peking University, argues that the Chinese Communist Party does not just distribute funds to the provinces. Instead, there is a localized bargaining process in which cities and provinces compete for Beijing’s largesse.

Chinese provinces, even municipalities, have such high-end offices in Beijing that they could be mistaken for consulates of foreign countries. They are called “Beijing offices” and act as nodal offices for lobbying and negotiating new projects with the central government.

Until recently, provincial officials knew that carrying out a project, such as a high-speed railroad, could result in windfall profits in the form of bribes from the promoters of the project. Local officials were encouraged to lobby the central government for projects since their political fortunes were tied to the projects they could bring to their region.

Ma estimates that the annual cost of operating all “Beijing offices” is RMB 10 billion ($1.427 billion). These offices run their restaurants and hotels in the capital to generate revenue. Ownership of restaurants allows provincial officials to conduct business with central ministries out of the public eye, thereby institutionalizing corruption.

In 2010, there were at least 10,000 offices in Beijing of local governments, local public enterprises and even social organizations and universities.

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An elaborate operation

The concept of regional offices dates back to the Han Dynasty (206 BCE – 220 CE), when regional authorities established ludi – residence halls – to accommodate local officials visiting the Han capital. But today’s regional offices serve a very different purpose.

Astute provincial networking officials thought that the success of the Beijing offices could be achieved by targeting central-level bureaucrats.

“Some offices in Beijing even operate their own bars and karaoke clubs, as demand is high. They also distribute gifts during the holidays or invite central officials to visit their localities,” writes Ma in Localized Bargaining: The Political Economy of China’s High-Speed ​​Rail Program.

The restaurants, located near the Beijing offices, can be difficult to book as they can be booked months in advance for meetings between provincial officials and someone from the ministry.

Central ministries that “Beijing offices” can target for lobbying include transport, China Railway Corporation, housing and urban-rural development, and natural resources, which are likely to award a project. infrastructure to a province.

A case illustrates how an office in Beijing can gain an advantage by lobbying central bureaucrats.

A staff member of a city office in Beijing learned from a bureaucrat in the central ministry – due to good personal relations – that the State Council was going to issue an ordinance requiring the local government to obtain approval from the central level. center for land purchases. Using this information, the city purchased large tracts of land for its 20-year building plan before the Council of State issued the ordinance. The city gained a major advantage over other regional cities when the order was finally announced.

But then these cases of local government using Beijing offices to gain advantages by hosting big dinners, free trips for central officials and other programs became public. In January 2010, the State Council acted by announcing a measure to close the offices of entities below the municipal level. But the closure of Beijing offices owned by small entities means local government powers have been consolidated as they can now carry out various lobbying-type activities with the approval of the State Council.

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“Cardinal” cities and high-speed train

The connection between provincial politics and real estate developers working in tandem to bring projects to an area and mutually enriching each other in the process, has led to a large real estate bubble centered on a small group of premier cities. The Evergrande Group problems are an example of a real estate bubble running its course. Despite all the scandals, Evergrande has now resumed construction projects.

In some cases, provincial localities, which Ma describes as “cardinals,” have greater bargaining power to influence central government policy-making – a kind of grassroots authority. “Cardinal” cities, or localities, are those whose leaders hold concurrent leadership positions, which are a rank above themselves – giving them access to other CCP decision-making bodies. Ma concludes that cities or localities with such rulers have greater bargaining power and even influence Beijing’s policy-making.

The success of “cardinal” localities in China is exemplified by the process of bringing high-speed rail projects to a particular region.

“Cardinal cities are not only among the first to build the high-speed railways; they are also allowed to build more stations in their jurisdictions,” Ma writes.

Other factors also add to the “cardinal” phenomenon. Cities with a deep history or ties to the communist revolutionary era are likely to introduce high-speed rail to their area first, especially if their leader is in a competing position at the provincial level.

China’s northeastern regions, with few overlapping “cardinal” factors, have been slow to develop a high-speed railway, despite its proximity to Beijing, reflecting the complexity of the political bureaucracy to bring infrastructure projects to a region. Huang and Zong conclude that central and eastern China received the most high-speed rail services, with a high concentration of such services in the southern coastal provinces and central Yangtze River regions.

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Cities must jostle

Negotiating high-speed rail projects became even more complex when the Beijing government began allowing private companies to finance these projects in 2014. The provinces now have other sources of funding than just the benevolence of the Beijing government. . But the influx of private funding has not eliminated the role played by Beijing offices and the “cardinal” phenomenon in ensuring that some cities and provinces get the lion’s share of infrastructure projects.

Even where cities lack the social and cultural capital or political bargaining power, localities have mobilized en masse to convince the Beijing government to reward a high-speed rail project.

In 2009, a “high-speed rail battle” was reported between Xinhua and Shaoyang County in Hunan Province to bring a project to their area.

“To win the ‘high-speed rail battle’ at the local level, local elected officials must not only lobby their superiors through the conventional channels of the system, but also increase their bargaining power with the help of public opinion. turbulent. As a result, the local government and the people form a tacit and interactive relationship,” wrote Yan Jiuyuan, founder of the Zhigu Trend Research Center.

Lobbying from Beijing offices and endemic corruption have fueled growth in parts of China. But the new policy under Xi Jinping has sought to put the genie back in the bottle by sanctioning more than a million party officials on corruption charges. Despite these efforts by Xi, the localized bargaining power of regional entities decides which cities in China thrive and which have to scramble.

The author is a freelance columnist and journalist. He is currently pursuing an MA in International Politics with a focus on China at the School of Oriental and African Studies (SOAS), University of London. He was previously a Chinese media reporter at the BBC World Service. He tweets @aadilbrar. Views are personal.

(Edited by Prashant)

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