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Industrialization strategy financial constraints and China Rural Governance

Author: LiMing
Tutor: LiHuiZhong
School: Fudan University
Course: Political Economics
Keywords: Fisical Constrain Industrial Strategy The Rural Governance within China Institutional Supply Political Development
CLC: F424
Type: PhD thesis
Year: 2011
Downloads: 150
Quote: 0
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With reference to existing literature on the distinction of first runner and catching-up industrialized countries, and observation in the early stage of industrialization of many catching-up industrial countries of the coexistence of public goods supply shortage in rural areas, structural bias and backwardation of political development, this paper discussed the logic of endogenous rural governance within industrial development strategy.Different from first runner industrial countries, industrialization initiated with both internal and external forces of catching-up industrial countries was limited by insufficient national capital accumulation. Therefore, governments had to directly stimulate industrialization either by direct investment or capital transfers. The problem was that such decision was constrained by fiscal capability of the catching-up countries such as China. Considering the absolutely advantageous position of agriculture in national economy, agricultural industry as well as peasantry had to take the task of industrial accumulation. The decision makers therefore eagerly desired both fast advancement of agricultural production and restructuring within agricultural industry, together with further transfer to secondary industry. However, due to contradictions between such desire and historical agricultural production mode, as well as the spontaneous consumption and accumulation decision of peasants, governments had to intervene with agricultural production and product distribution.China’s policies to realize such strategy are not substantially different from other catching-up countries’(especially some East Asian countries and areas). In order to stimulate agricultural development, Chinese government chose to allocate sources in public goods provision which had significant contribution to increase agricultural production, with the basis of agricultural production ownership adjustment. Meanwhile, since sufficient accumulation cannot be reached only by democratic consultation or free market, decision makers also chose top-down intervention of rural governance at the same time of biased public goods provision. In other words, Chinese government adjusted the degree of rural governance intervention according to the degree of production elasticity of agricultural inputs and the political governance intervention according to the need of agricultural surplus transfer ratio, in general.Theoretical and empirical researches support above logic. In this paper, theoretical studies suggest that following logic is applied to rural governance determined by secondary industry development targets with fiscal revenue constrains; Government tends to support public goods provision which make bigger contribution to agricultural production; at the same time, rural political governance has an inner solution with a lower level than solution by autonomous decision-making among villagers after political empowerment. Conclusions from; empirical researches with Chinese provincial panel data and CGSS2005 database provide supports to theoretical conclusions on Chinese rural economic and political governance.Policies have impacts and Chinese rural governance mode does too. When villagers discovered after studies and communications that the results of policy makers’ strategy were contradictive to needs of themselves, they surely had reactions in behaviors and attitudes. Based on such logic, this paper also discussed the impacts of Chinese endogenous rural governance mode within secondary industry strategy on villagers’ political behavior and attitude. Researches show that despite the economic and political governance model determined by secondary industry first strategy is different from the governance model by autonomous decision making process by villagers after political empowerment, villagers’political attitude tends to be relatively more positive when policy makers adjusted rural governance intervention due to social pressures. Therefore there are in general three peaks of villagers’ political attitude after New China’s foundation. Meanwhile, as a series of institutional political participation arrangements including voting lacking sufficient impacts on decision makers due to limited room of public life, villagers are less active in participation of political voting besides common daily and legal resistance.Based on above-mentioned researches, the paper reached conclusion at last that policy decisions with secondary industry consideration generally tend to ignore necessary concerns on agricultural industry with strengthened self accumulative capability of secondary industry (therefore less fiscal revenue constrain). The paper furthered the conclusion as below:to realize harmonious developments of agricultural and secondary industries, urban and rural areas, as well as to avoid bottom-up revolution powered by social conflicts, it’s necessary to strengthen the top-down provisions relating rural political and social institutions and build up incentive compatible mechanism to push local governments to implement the strategy of industry nurturing agriculture. In order to realize such targets, decision makers in the short term should continue refining policies on rural economic and political governance, and at the same time relieve local government’s fiscal revenue constrains by standardizing fiscal and political empowerments among provincial governments, with the purpose of discouraging local governments to ignore or implement biased rural economic governance and political intervention. In the long term, besides rural political empowerment, decision makers should improve supports to rural public goods provision in accordance with evolutions of productivity elasticity.

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