Chapter 5 Intermediary Role of Provincial Governments Abstract This chapter examines the role of provincial governments in the urban housing sector of China. Evidence from Shandong and Shanxi provinces is used to analyze the influence of the provincial institutions of leadership, legislation, land use, and living culture in the allocation, construction, and distribution of com- mercial and affordable urban houses. The evidence shows that provincial govern- ments, as the intermediary, play an increasingly important role in coordinating policy initiation and implementation by the central and municipal governments, respectively. The central government provides the broad guidelines with institu- tional space for municipal and county governments to adapt and implement poli- cies according to local socioeconomics conditions.
The provincial governments intermediate the coordination in the formulation and implementation of policies by the central, municipal, and county governments, respectively. Keywords Institutions · State planning · Provincial government · Urban housing · China 5.1 Introduction The most important aspect of the institutional change after market reforms has been the decentralization of policy design and coordination where the central gov- ernment confines its role to general policy planning, municipal governments to implementation, and provincial governments to intermediation. This chapter seeks to examine the intermediary role of provincial governments in the decentralization process on urban housing, which has hardly been documented in the literature. Indeed, the provincialization and localization of state policy have become one of the most outstanding features of the new institutional settings.
Primordially, policy at central level was designed with constraints and opportunities, which encourages acting actors to devise adaptive institutional solutions that are not offi- cially sanctioned. By so doing, it has been increasingly engaging local participation © Springer Science+Business Media Singapore 2015 65 M. Rasiah, Institutionalization of State Policy, Dynamics of Asian Development, DOI 10.1007/978-981-287-570-9_5 66 5 Intermediary Role of Provincial Governments in policy design and implementation, as a uniform set of solutions for every issue is obviously unrealistic for China given its large population and huge variance in socioeconomic conditions. The new institutional arrangement governing urban housing sector has been designed in such way to give provincial a uthority institutional space ensuring national policies being customized accordingly to prepare for an effective implementation.
While any central policy and regulation is issued in a uniform format with its legitimacy to be honored by every provincial authority, provincial varieties in the housing development also require autonomy and discretion to be given to provincial authority, so that central regulatory frame- work can be enriched with more practical details based on local socioeconomic situation. Hence, a comprehensive understanding on China’s urban housing policy system shall not overlook the important role of provincial authority, which formu- lates action programs differently although they are facing same policy instructions from the central. The rationale of the localization of state policy could be traced in the deeply embedded Confucian cultural. Fumu Guan, when literally translated meaning parental official, was appointed by the central government with the discretion to make decisions on local affairs.
The increasing shift toward provincialization and localization has attracted again autonomy in China. Hence, as Ramo (2004) has noted, China does not have in place a uniform set of solutions for every issue. With its large population size and regional socioeconomic differences, the “grop- ing for stones to cross river” approach is widely adopted in China (Turin 2010). National policies have to be shaped by provincial governments to fit local con- ditions before they are intermediated to prefectural level for implementation, as China’s decentralized administrative structure has given the provinces strong insti- tutional space to coordinate economic activities (Cheong and Goh 2013, p.
Following the housing reforms, a growing number of literatures have become available with special focus given on the changing institutions in urban hous- ing market, which governs the interactions among different stakeholders, such as governments at different levels. Despite Murdoch and Abram (1998) had argued that the central state generally overrides local demands hierarchically, Deng, Shen, and Wang (2009) argued that local governments eventually bear most of the costs in the construction of affordable houses. Nevertheless, Wang and Murie (2011) argued that scale and impact of the affordable schemes was limited as local authority views it as unprofitable and resource-draining activity. As a result, the relationship between central and local becomes complicated, whereas local gov- ernment executed affordable housing policy under strong pressure from the central, but subsequently relaxed the control when the pressure is eased off (Wang et al.
In addition, by discussing the relationship among different local govern- ments from the perspective of administrative annexation, Zhang and Wu (2006) found that China’s regional government is gradually changing from a traditional top-down to a bottom-up structure which is increasingly dominated by local gov- ernment. However, while a growing body of literature focuses on the interrelation- ship between central and local in affordable housing provision (Zhou and Logan 1996; Wang and Li 2006; Yeung and Howes 2006), scant attention has been 5.1 Introduction 67 devoted to sufficiently analyze the role of provincial government in the investment, construction, and delivery of affordable housing in urban China. Hence, this paper seeks to examine the increasingly important role of provin- cial institutions in urban housing sector of China. Specifically, we wish to examine how institutions on provincial level intermediate central policy instruction to local government for implementation of state policy on urban housing.
We consider a prerequisite discussion on how state policy is institutionalized at provincial level is pertinent before going further down to examine the institution supporting policy implementation on the municipal and prefectural level. The rest of the chapter is organized as follows. Section two presents the theoretical considerations, while section three discusses the methodology adopted. Section four presents regional differences in urban housing development.
Section five compares Shandong and Shanxi by analyzing the four provincial “L” institutions of leadership, legislation, land use scheme, and living culture. Section six concludes.2 Theoretical and Methodological Considerations As government plays a key role to build institutions in allocating resources, state theory was put in first place to understand how institutions help guide the rules of governance targeted at developmental goals (Poulantzas 1973; Johnson 1982; Evans et al. Chang (1994) went further by arguing that the effectiveness with which states seek and deliver developmental objectives depends on the relative autonomy they enjoy from instrumental capture. Evans (1995) accorded subsequently by noting that the capacity of states to assume developmen- tal roles also depends, inter alia, on strong developmental leadership and an effi- cient bureaucracy.
We adopted the definition of institution as the “rules of the game” with organi- zations and entrepreneurs being the “players” (North 1991). A study to map the complex interactions between institutions, such as markets, states, regulations, and social norms, is especially necessary to understand an economic system, which is like a web of relationships between various institutional players with diverg- ing interests (Commons 1934; Coase 1992). In the meanwhile, the importance of institutions is also captured by evolutionary economists (Nelson and Winter 1982; Nelson 2008a, b). Meso-organizations are often created to translate macro-influ- ences for micro-agents to solve collective action problems, as successful economic transition requires smooth institutional coordination among macro-, meso-, and micro-agents (Rasiah 2011, p.
Provincial governments, a meso-organization as such, have sought to solve collective problems by taking account of a complex interplay between agents, such as national and local government, laws and regulations, and economic and cultural influences (Paddison et al. Zhang and Rasiah (2014) had argued that redefinition of critical institutional agents, such as state-owned enterprises, following market reforms led to changes in the mode of housing allocation and 68 5 Intermediary Role of Provincial Governments distribution. Indeed, the changed institutional framework has altered the govern- ance structure in China by redefining the role of important institutional players, such as provinces and municipalities, who is given the autonomy to perform in national policy system. The legacy of a centrally controlled economic system driven from Beijing of the prereform era has been disappearing rapidly, replaced by an emergence of new governance structure where governments at different lev- els cooperate and coordinate tightly in policy execution.
Despite this study looks at urban housing sector in China, special focus has been given to affordable housing scheme, as the housing sector after reforms has not only targeted on the construction and distribution of commercial houses to those who can afford market prices, but also focused on the provision of afforda- ble houses to middle- and low-income household1 (Zhang and Rasiah 2014, p. Unlike commercial housing sector where market is the major force to distribute resources, government intervention is more vital in affordable housing sector as the developmental role it plays taking care of housing welfare to urban dwellers. It presents us a lens to look into policy dynamic itself without disturbances from other irrelevant factors, such as market fundamentals. Methodologically guided by the three-level evaluation approach promoted by Kiser and Ostrom (2000), where 1.
The highest level analyzes the constitutional decision-making where political and legal arrangements are established. It is where decision-makers determine how collective choice participants will be selected and the relationship among members of the collective choice body, such as voting rules. The second level examines the regulatory framework, which is collectively chosen and formulated by officials. The collective choice is where decision- makers create actual rules to impact the operational level activities.
The operational level, which is in the third level, allows actors who are individ- uals or organizational units to interact within the institutional framework. Role of actors should be studied to capture the actual implementation of the policy. Day-to-day activities at this level affect the system directly. We conceptualize a new governance structure where policy is initiated at the highest level—central government, intermediated at second level by provincial gov- ernment with regulatory details, before policy is fully implemented by municipal governments at the third level (Fig.
While policy delivery from central to pro- vincial government, which emphasizes on policy infusion within the governmental hierarchy, takes on a linear path, the policy transmission from provincial to munici- pal level targets on diffusion and adaptation though multiple effect of institutions. In the meanwhile, with the distinction made by Helmke and Levitsky (2004) that formal institutions are openly codified, established, and communicated through channels that are widely accepted as official, whereas informal institutions 1The Affordable Housing Program was introduced by the government of China to provide subsi- dized houses to the urban middle- and low-income households. It comprises four sub-programs, namely Economical Comfortable Housing, Low Rent Housing, Public Rental Housing, and Price-Capped Housing.2 Theoretical and Methodological Considerations 69 are socially shared unwritten rules which are created and enforced outside offi- cially sanctioned channels (North 1991), we identify three institutional variables, namely informal factor—leadership and living culture, and formal institution— legislation and land use scheme, to analyze how provincial institution influences provision of affordable housing in different provinces. Instead of exhausting all the possible variables causing the provincial difference, the purpose of this study is to give an example on how provincial institutions influence affordable housing provision, as the case study we use is interpretive rather than exhaustive (Doyle 2003).
Hence, by embedding the three variables into the three-layer governance structure, we present the analytic framework of this study in Fig. In-depth case studies are undertaken as the predominant qualitative research approach since it has unparalleled advantages in interpreting policy formulation and implementation compared to other approaches, such as phenomenology, eth- nography, and grounded theory (Adelman et al. Instead of examining all the counties across China, this article is based on a case study of two provinces, namely Shandong and Shanxi Province. Except for data availability, the selection of the two provinces is based on their different levels at urban housing develop- ment.