Decentralization and urban land expansion in China

Abstract

With discussion on decentralization, this thesis investigates into the role local governments playing in China’s urban land expansion. Particularly, decentralization is usually thought to be a desirable process during China’s reform era; while massive urban land expansion is considered as a problem accompanying with China’s rapid development. Specifically, China’s reform is considered as echoing and contributing to the trend of decentralization and neoliberalism during this era; but China’s development is considered as a threat to the world’s food security and ecological security. Hence, by revealing the positive relationship between these two issues, this research raises the seeming paradox that a desirable process leads to undesirable problems. This research takes the province-managing-county (PMC) reform in Zhejiang in 2002 as the empirical case. It is argued that the PMC reform, first emerging in 1992, is a practice of decentralization by delegating authorizes from the superior prefectural governments to the subordinated county governments. This argument implies question to the common interpretation on China’s decentralization since 1980s, which tells an oversimplified linear story. Indeed, the 1980s witnesses a wave of centralization represented by the substitution of city-managing-county (CMC) system to the former PMC system. Therefore, a detailed analysis on China’s institution is conducted to demonstrate the indeed anarchy of local economy before the 1980s and the substantial centralization process along with the reform in the 1980s and 1990s. By this clarification, discussions on the decentralization in the 2000s may avoid the mistake committed by previous studies, which views the obvious fiscal centralization reform in 1994 as part of a decentralization process. The fiscal centralization in 1994 substantially undermines the ability of local government to generate revenue and attract investment. The CMC system further deteriorates the condition of counties by an inferior position in resource distribution. Under the unitary fiscal system after 1994, the approaches of local governments to engage in economic activities is limited. Therefore, the public ownership of urban land provides a measure to bypass the unitary fiscal system. As a response, the central government also attempts to reclaim the authority of land management from local governments since late 1990s. However, the undergoing decentralization represented by the PMC reform may offset the effort of central government. On the one hand, the reformed counties have gained more autonomy from the delegation of authority. On the other hand, the control of prefectural governments over county-level economies is decreasing. This situation may promote the horizontal interaction between different counties. The promoted competition and liberated decision power may strengthen the incentives of local governments on economic development and public finance. Considering the role of land conversion and land leasing in local public policies and the mechanism of China’s urban land expansion, the decentralization reform is expected to contribute to the magnitude of urban land expansion. The positive relationship between decentralization and urban land expansion has been verified by the difference-in-differences (DID) analysis and regression analysis. The regression also confirms the positive interactions in policy choices.