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The People’s Republic of China is governed by the Communist Party under a single party system. The territory is today organized in a complex system, including 22 provinces, 5 autonomous regions, 4 directly administered municipalities (Beijing, Tianjin, Shanghai, and Chongqing), and two highly autonomous special administrative regions (SARs) - Hong Kong and Macau which are self-governing under “one country, two systems”.

The organization of the Chinese economy has been undertaken to several reforming operation during the last century. Under state socialism two main massive restructuring processes aimed to tackle macro-regional inequality which despite big manoeuvre had never been solved. In particular Mao Zedong tried to push on redistributive regional policies – “blood transfusion” - such as the People’s Communes and the Great Leap Forward which turned out in a failure and causing million of deaths.

The first opening to a more liberal market model began in 1978 under Deng Xiaoping with his market based economic reforms. The “growth first” mentality has been recognized as an ideological key parameter for the new entrepreneurial model, mainly characterized by an economic devolution. During these years parallel experiments started in different Chinese provinces : the household responsibility system – HRS - by which local managers where responsible for losses and revenues of the owned activity (Xu & Juzhong, 1998) ; the creation of Special Economic Zones (SEZ) which enjoyed various privilege i.e. open trade, retention of foreign exchange earnings, tax advantages and the right to authorize small foreign investments (Wong & Kwan-Yiu, 1987) ; reform of State owned enterprises where a limited number of enterprises were allowed to keep a share of profits. These experiments were the first steps made in order to modernize the Chinese economic system which caused the growth of violent intercity competitions. It turned out in a self-destructive phenomenon causing the construction of redundant infrastructures and industries and uncoordinated development with strong impacts on the environment.

In 2001 China became part of the World Trade Organization (WTO) thus giving a strong boost to the export industry but without solving the internal friction between local governments. For this reason three main regional regulations had been studied and implemented in the last years (Vogel et al., 2010) :

- spatial strategic plans for achieving a higher level of regional coordination and governance ; example of those are the Pearl River Delta Coordination Plan (Pan-PRD) and the Urban System Plan of the Yangtze River Delta (YRD) ;

- administrative annexation in order to create a larger tax base for funding infrastructure and to help the leverage of foreign investment ;

- building soft regional institutions for a better coordination through mayors meeting, joint regional forum / councils.

Each of this reform is led by a common logic which is the partial decentralization of decision-making throughout the empowerment of peripheral administrative bodies. Local governments in China are currently increasing their importance. The decentralization process has been put into reality through different actions, each one resulting in a lightening of the role played by the central government. Some examples concern the investment field where municipal governments emerged as a major agent of investment changing their role from “government control” to “governance guidance” in growth management ; new regulatory, taxation and licensing powers are now delegated to local district and county governments expanding their influence on the socio-economic sphere ; private enterprises enter now in the LG jurisdiction as one component of the local corporate whole ; state-owned enterprises (SOEs) became more autonomous being allowed to base their decisions on the market demand of production.

This analysis belongs to the file « Europe - China Exchange Platform Survey »

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