Market-oriented Economy China's Changing Urban Governance in the Transition Towards a More China's Changing Urban Governance in the Transition Towards a More Market-oriented Economy

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Urban Studies

DOI: 10.1080/00420980220135491 2002; 39; 1071 Urban Stud

Fulong Wu Market-oriented Economy

China's Changing Urban Governance in the Transition Towards a More

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Urban Studies, Vol. 39, No. 7, 1071–1093, 2002

China’s Changing Urban Governance in theTransition Towards a More Market-orientedEconomy

Fulong Wu

[Paper � rst received, November 2000; in � nal form, October 2001]

Summary. China’s changing urban development processes and urban landscapes in thetransition towards a more market-oriented economy have received extensive research attentionin recent years. Relatively, the governing of Chinese cities is still underresearched. This articleaims to analyse the forces released both inside and outside the formal socialist state system andthe impacts on phenomenal restructuring of urban governance, especially at local levels.Marketisation has created new elements beyond the reach of state work-units that represent thestate’s ‘hierarchical’ control. The pillars of the socialist governing structure—the party-state, thework-units system and household registration—are shaken by these forces. The changes in theorganisation of people, capital, production materials, infrastructure and space fundamentallydemand new urban governance. Territorial organisations such as the municipality, urbandistricts, Street Of� ce and Residents’ Committees are reinvented and consolidated to restore agovernable society. The devolution towards the base level and the reinvention of local communi-ties re� ect the state’s attempt to reconsolidate its power to create a governable society as wellas to cope with practical pressures such as the provision of social assistance to poor andaged residents, re-employment of laid-off workers and the management of ‘� oating’ immigrants.The combination of new market elements and decentralised state apparatus has given rise to theentrepreneurial endeavour of China’s governance. This research highlights the micro-foundationof the new urban governance in addition to the ‘globalisation—capital mobility—city competi-tiveness’ thesis.

1. Introduction

China’s changing urban development pro-cesses and urban landscapes in the transitiontowards a more market-oriented economyhave been recently under extensive study (see,for example, Davis et al., 1995; Gaubatz,1999; Logan, 2001). Compared with the in-creasing understanding of the impacts ofeconomic reforms on urban housing (Wangand Murie, 2000; Zhou and Logan, 1996), the

internationalisation of cities (Yeh, 1996), in-creased interaction between the city govern-ment and developers (Wu, 1999; Zhu, 1999),development of rural land (Yeh and Li, 1999)and implications of rural migrants for socialstrati� cation (Chan, 1996), the governance ofChinese cities is an underresearched area.New insights have been gained through theexamination of the nature of the so-called

Fulong Wu is in the Department of Geography, University of Southampton , High� eld, Southampton , SO17 1BJ, UK. Fax: 023 80593295. E-mail: [email protected] . This study was supported by the British Academy grant (SG-30657).

0042-0980 Print/1360-063X On-line/02/071071-23 Ó 2002 The Editors of Urban StudiesDOI: 10.1080/0042098022013549 1



FULONG WU1072

transitional economy (Bian and Logan, 1996;Nee, 1989, 1992), the central– local relation-ship (Chung, 1999) and the role of localgovernment in organising economic activi-ties (Oi, 1992, 1995; Walder, 1995). Theterm ‘local government’ in studies of China’surban politics often refers to the provincial,county or municipal governments (Chung,1999; Duckett, 1998; White, 1991). Compar-atively inadequate research has been conduc-ted into the understanding of urbangovernance at the ‘base’ level under the de-volution of state power. In the Chinese litera-ture, relevant discussions can be found undervarious topics in different disciplines—forexample, ‘administration regions’ in geogra-phy (Pu, 1995), economic institutions andgovernment regulation in economics (Yangand Yang, 2000), community studies in soci-ology (Sun, 1997), urban management stud-ies (Hua, 2000), and, last but not least,effective urban planning (J. Zhang, 1999).

The aim of this paper is, therefore, toprovide a preliminary examination of thecontext of changing urban governance andthe ‘territorisation’ of local states, especiallyas municipalities, urban districts, StreetOf� ces, Residents’ Committees (in contrastto the hierarchy of work-units) in China.

2. The Perspective of Urban Governance

The aim of this section is to highlight theperspective vis-a-vis the concept of ‘urbangovernance’. Considering this rapidly emerg-ing paradigm (Jessop, 1998), the purposehere is not to provide a comprehensive re-view. Urban politics and the function of thelocal state have been one of the most re-searched and documented areas (Judge et al.,1995). The intensive research on the rise ofurban governance pinpoints wide contextualchanges such as globalisation (Amin andThrift, 1994) and the transition from Fordismto post-Fordism (Jessop, 1994). The searchfor theorisation of the change moves beyondlocal government studies into ‘politics ofscale’ (Swyngedouw, 1997). Despite contro-versy around the nature of ‘new’ urban gov-ernance (Ward, 2000; Imrie and Raco, 1999),

there is a sea-change in state–society rela-tionship in terms of the real world of gover-nance. Urban governance, or more broadly,local governance, represents—rather than asingle object—a set of relations and

the process of the formation and im-plementation of public policy at the locallevel involving both elected and non-elected organisations (Painter, 2000,p. 298).

The most common usage of the term ‘gover-nance’ refers to

the mode of conduct of speci� c institutionsor organizations with multiple stakehold-ers, the role of public–private partnerships,and other kinds of strategic alliancesamong autonomous but interdependent or-ganizations (Jessop, 1998, p. 30).

The rise of the governance paradigm as a setof conceptual tools re� ects the reality ofmore complex and unmanageable/ungovern-able multiagency governance (Jessop, 1998).

Because the concept of ‘governance’ wasinvented in a speci� c context, it is natural toassociate it with some particular forms ofgovernance under the capitalist state—for ex-ample, entrepreneurial and competition-based urban policies (Paddison, 1993),increased participation of business actors(Cochrane et al., 1996; Peck and Tickell,1995) and, more generally, the ‘urbanregime’ (Stoker, 1995) such as ‘elitistregime’, ‘pluralist regime’ and ‘hyperplural-ist regime’ or concepts such as ‘urban growthmachine’ (Logan and Molotch, 1987). But itis important to distinguish the general use of‘governance’ and its speci� c forms. As ageneral concept, governance can be referredto as a mechanism that embodies the co-ordination of and relationship between thestate and society. Its speci� c forms includethe Keynesian state and the Schumpeterianworkfare regime (Jessop, 1994, 1998), whichare undeniably subject to the most intensivestudies. The concept of urban governance isalso used in a more general way. We attemptto use urban governance as a perspective tounderstand the new co-ordination mechanism



CHINA’S CHANGING URBAN GOVERNANCE 1073

within the government and the control be-yond the reach of the government after econ-omic reforms.

3. Pillars of Socialist Urban Governance

This section will brie� y review the basis forthe socialist state to organise and governcities as the space of production and con-sumption. The political economy of social-ism has been systematically analysed byKornai with a special focus on east Europeancountries (Kornai, 1992). The Chinese ver-sion was more � exible and decentralised thanwas the Soviet Union model. This resultedfrom a more pragmatic relationship betweencentral and local government in China.

3.1 The Context and Foundation of SocialistGovernance

The emergence of socialism is a major forceto counter the structural coherence of globalcapitalism. State socialism emerged in per-ipheral and late industrialising countries.Thus, on the external front, it was confrontedby the capitalist camp and hence the necess-ity for national defence was overwhelming.Establishing modern industries was the toppriority. On the internal front, the state inher-ited the pre-revolution social structure—which is often characterised by feudalismand (quasi) colonialism. The disorganised so-ciety, described by Mao Zedong as millionsof ‘scattered sands’, was seen as a majorbarrier to state-organised industrialisation.The need for resource mobilisation and anew social coherence requires public owner-ship of production materials, planning con-trol and organisation of collectiveconsumption. The foundation of socialistgovernance should be understood with anappreciation of the imperative for an or-ganised society. The regime of strong statedominance is not only legitimised by themilitary victory at the revolution, but alsoensured by the recognition of the need tocarry out a quick � x of the disorganisedsociety. The confrontation of the Cold Warimposed a condition such that the survival of

the nation was threatened—it is a profoundcrisis and socialist governance was born tocombat such a crisis.

3.2 Party-state, Household Registration andState Work-unit

Built upon public ownership and the econ-omic command system are three pillars ofsocialist governance, namely: party-state,household registration and state work-units.The leadership of the Chinese CommunistParty (CCP) is guaranteed by the hierarchicalparty system which is parallel to the adminis-tration system. Party branches exist at alllevels of government, institutions and work-places, and play a leadership role in theseorganisations. Household registration(hukou) effectively requires the registrationof the place of residence with the publicsecurity agency. Tied with food rationing,employment permission and other welfarebene� ts that were not purchasable, the sys-tem effectively prevented rural peasants frommoving into the cities (see also Chan, 1996,for its implication on Chinese urbanisation;see Solinger, 1999, for a detailed account ofhousehold registration). State work-units aremore than just economic entities but, rather,are a special form of ‘social organisation’.(For pioneering research in China, see Lu,1989; an abbreviated English version isavailable in Dutton, 1998, pp. 53–58. For acomprehensive discussion of their role insocial life, see Whyte and Parish, 1984, andWalder, 1986). For example, the comprehen-sive welfare provision inside work-units cre-ated what Walder (1986) called ‘organiseddependence’ and, as a result, the society wastightly managed by the state system throughworkplace af� liation. These pillars supportedthe super-stable and governable urban so-ciety.

Economic reforms have shaken thesefoundations to various extents. While changein the party-state itself is slow, it is unde-niable that the adoption of the system of‘manager responsibility’ gradually leads tomore executive discretion in the daily oper-ation of the workplace. The power of Peo-



FULONG WU1074

ples’ Congress has been strengthenedthrough the formalisation of legislative pro-cedures. Household registration, mainlytargeted towards rural–urban migration andintercity migration, became less signi� cant inconstraining intraurban migration. However,the material provision of housing as an occu-pational welfare meant that residential mo-bility was hardly an outcome of householddecision-making. By the early 1990s, a pricehad been attached to the ‘blue seal’ hukou, ahousehold registration card issued to mi-grants (Solinger, 1999, pp. 89–91). Throughpayment, migrants would be able to purchasea special hukou. People can also acquirehukou through buying ‘commodity housing’,a measure the city government used to stimu-late the sale of housing. However, the ma-jority of rural migrants simply ‘blindly’ � owinto the cities and live outside the formalcontrol of household registration. Productionand consumption materials are now availablein the market, which allow migrants to sur-vive and even to accumulate new wealth.Some community facilities such as schoolsand health care are even self-funded. Moresigni� cant changes are occurring in the statework-units. Although this is a slow process,work-units have begun to transfer some wel-fare functions to society. For example, someancillary facilities and services are open tothe wider community. In housing provision,state work-units are retreating from directproduction and turning to the market for thepurchase of commodity housing (Wang andMurie, 1996; Zhou and Logan, 1996). Thiswould profoundly change the relationship be-tween workplace and residence. Conse-quently, residential areas are mixed withemployees from different work-units, eventhe self-employed and managers of joint ven-tures. However, even after the abolition of‘material provision’, the linkage betweenworkers and their workplaces would belikely to remain through various subsidyschemes and the contribution to housing in-vestment (Wang and Murie, 2000, p. 409).To sum up, the change in the foundation ofgovernance is sweeping, but there is alsocontinuity of the fundamental party-state

structure. The major change in urban areasperhaps lies in the decline in effective work-unit control due to the fact that many work-unit employees lose their links with theworkplace and become simply members ofsociety. In the next section, I will discuss thechanges in the foundations of urban gover-nance.

4. Driving Forces and Changing Condi-tions

Forces released by economic reform and theopen-door policy are acting inside and out-side the state to create new conditions ofurban governance. It is useful but oversim-pli� ed to characterise these changes as the‘transition to the market economy’. As willbe shown, these changes involve the complexreshuf� ing of people, materials, capital andspace in the cities, which is leading to amixed economy.

4.1 Inside the State

Since economic reform started in 1978, thefocus of CCP policy has shifted from classstruggle to economic development. Toachieve this shift, two concrete tasks must becarried out: � rst, to create new incentives atthe microlevel in order to increase ef� ciencyand production; and, secondly, to transfer thedevelopment pressure confronted by the cen-tral state to lower levels of the state appar-atus. These have been achieved throughreforms initiated inside the state, such as thedismantling of the economic command sys-tem, making � scal contracts with provincialgovernments, reform of the foreign trade sys-tem and commodi� cation of urban space.Urban reforms, including the reform of state-owned enterprises, the � scal system, housingand land, the labour market and governmentrelations, have been widely documented(Davis et al., 1995; Kwok et al., 1990;Lardy, 1998; Naughton, 1995).

The introduction of the central– local � scalcontract effectively started the decentralis-ation of state power (Wong et al., 1995; fordetailed documentation, see World Bank,




1990; for a more recent account of the cen-tral– local � scal relationship, see L. Zhang,1999). The original purpose of reducing the� scal pressure on the central state is, how-ever, achieved. As a consequence of � scaldecentralisation, the proportion of the rev-enue that is under local control has increased.Local government has gained more discre-tion to arrange investment and to promotelocal growth. The permission to retain certainrevenue has given rise to ‘extra-budgetaryrevenue’. Strong localism cultivated by � scaldecentralisation has led some researchers tocomplain about the decline of ‘state capacity’(see, for example, Wang and Hu, 1994). In1994, the central government launched apath-breaking measure to counter the trendof � scal decline. The tax-sharing system hasachieved what it was intended to—the con-solidation of a new � scal regime. Zhangcommented that, through the new � scalregime, the burgeoning but disparate public� nance suggests “a state that is still im-mensely prevalent, but with a dispersed re-source structure” (L. Zhang, 1999,pp. 140–141). The new regime has created amore delicate relationship between centraland local government because

the days when the centre can feel con� dentenough politically to rely on the provincesto collect revenue have surely ended. Whatis also fading away is the bargainingpower that the provinces have hithertobeen able to exercise as the tax collectorsfor the centre (L. Zhang, 1999, p. 141).

In fact, the dispersion of decision-making inrelation to local development is seen by somecommentators as the ‘recipe’ for the successof gradualist economic reforms (Chung,1999). As a result of a series of policy initia-tives, localities have emerged as economic aswell as political entities. For example, Oi(1992, 1995) stressed the role of local statesin the protection of local autonomy and indi-vidual economic activities. Walder (1995)examined the behaviour of local governmentand argued that there is a qualitative differ-ence between the soft-budget-constrainedgovernment described by Kornai (1992) and

the new Chinese local governments. Becauseof the scaling-down of decision-makingunits, the new local governments are becom-ing more like ‘industrial � rms’ (Walder,1995). Duckett (1998) further examined thedirect involvement of local government ineconomic activities and described the localstate as the ‘entrepreneurial state’.

4.2 Beyond the State

Marketisation has created new elements be-yond state control. Resource allocation andcompetition have been transferred from thearena inside the state to one outside the state.Conventionally, the work-unit af� liation wasused as the major criterion to distinguish‘insiders’ and ‘outsiders’ of the state. Whenthe linkage is weakened, it becomes mean-ingless to use the af� liation to make a dis-tinction.

People. The economic reform has been char-acterised by the relaxation of state controlover the private sector. Starting in 1978,resources under the command system havebeen dispersed to the hands outside the work-unit system. Urban private businesses haveemerged. Town and village enterprises(TVEs), for example, have a different mech-anism of resource allocation. Although themajority of these enterprises are owned andoperated by local state organs, they have toobtain resources from the market. In otherwords, they are beyond the state formalchannel of resource allocation and hence freefrom the directive of the work-unit system.The ‘entrepreneurial’ local state inventedvarious practices to defend the TVEs fromdirect intervention from the old system. Onthe other hand, the local state itself oftenbecomes predatory as they treat the TVEs astheir money-making machines. Similarly,employees in foreign enterprises and jointventures cut their links with the state work-unit system. Foreign investments often makepartnerships with the state enterprise. Buttheir operation is different from that of thestate work-units in that they do not maintainan all-inclusive relationship with their em-



FULONG WU1076

ployees. Morever, state-owned enterprisessometimes set up sideline companies that are‘contracted’ out to de facto private hands.

The booming of the private sector hascreated jobs that are not formally af� liated toa work-unit. In 1995, there were 155 700private business households and 39 800 pri-vate enterprises in Shanghai, employing350 000 workers (Lu, 1997). Lured by thehigher incomes, some state employees leftthe ‘iron rice bowl’ and plunged into the ‘seaof the market economy’. The Private Work-ers Association offers an alternative organis-ation but it is loosely organised, equivalent toa non-government organisation. People whowork in the private sector may maintain aconnection with the system through the prac-tice of ‘one family, two systems’. That is,one family member continues working in thestate work-units to enjoy housing, health careand job security, while the other is earningmoney in joint ventures and private busi-nesses. Nevertheless, control over those out-side the system is weakened. Even for formalwork-unit staff, holding ‘part-time’ jobs isquite popular. Such a second job is often farbeyond the scope of professionals or techni-cal staff using their spare time and becomesa major source of economic bene� ts (Lu,1997). For those people who work in theother businesses, the connection with thestate workplace has become weakened.

Moreover, changes in the work-unitsthemselves are weakening the tie betweenthe employee and the workplace. Along withthe reduction in the social functions of work-units, urban employees “walk out of work-unit communities and become socialindividuals” (Ren, 2000). For example, hous-ing reform has produced a signi� cant impacton the relationship between housing andwork (Wang and Murie, 2000). The end ofcollective consumption through the abolitionof in-kind (material) distribution of housingand other welfare bene� ts will have socialand political implications. As Wang andMurie note

As government and employers relax theirresponsibilities in relation to the provision

of housing, they also relax key ways inwhich they exercise control over em-ployees and citizens. For the governmentand the Communist Party, control of theurban population will become moredif� cult in the short term. In the longerterm, the population will change from oneof proletarians and socialist workers intopetty bourgeois and property owners.What impact this will have on the govern-ment is dif� cult to foresee. A key elementis likely to be how far government em-ployees still identify their best interestswith the Communist Party and the govern-ment, and how far the privileged positionswhich have been secured through housingreform and other processes will lead suchemployees to continue to identify with thegovernment and the Communist Party(Wang and Murie, 2000, p. 409).

If leaving to work in the private sector isone’s own decision, one may be involuntarilymade redundant by state-owned enterprisesin industrial restructuring. In the 1990s, overhalf of state-owned enterprises were making� nancial losses. In 1996, the of� cial an-nouncement suggested that the state indus-trial sector as a whole had posted net lossesfor the year, the � rst time this had happenedsince 1949 (Steinfeld, 1998). Those that stillmake nominal pro� t teeter on the brink ofinsolvency. It becomes more and moredif� cult for the government to rescue theseloss-making enterprises through subsidies, asgovernment revenues experience stress as aresult of poor performance by the state sec-tor. According to the Ministry of Labour andSocial Security, to the end of June 2000, thelaid-off workers and unemployed reached atotal of 11.2 million (Ye, 2000), amongwhom are 6.77 million laid-off workers.1

In addition to the expansion of laid-offgroups, retired workers and staff reached 122million nation-wide in 1999 (Hua, 2000,p. 91). In cities like Beijing and Shanghai,the retired population reached over 2 million.The cost of pensions and housing provisionfor this group has become a major burdenon work-units (Wang and Murie, 2000).




Government policy therefore aims to cut thelink between housing and employment andredistribute responsibility for pensioners tothe urban community. Faced with the lack ofsocial services, the task is enormouslydif� cult. In the early 1980s, the Ministry ofCivil Affairs put forward a slogan—“socialwelfare running by the society”. Since thensocial services have been improved. How-ever, in 1999, only about 36.6 per cent ofpensioners received their pensions from thecommunity, far less than what is required bythe Ministry of Labour and Social Security.It was planned that by 2000 the rate shouldreach 80 per cent. If this � gure were to beachieved in the future, the local communitywould have to meet great demands for socialsecurity services.

The most dynamic shift is the � ooding ofrural immigrants into the cities. Since theimplementation of the rural contract system,‘surplus’ agricultural labour has been re-leased. Attracted by the prosperous econom-ies in the coastal region, rural migrants leavetheir homes to � ow into the cities (Solinger,1999). The movement is spontaneous andunplanned, and often mediated through fam-ily ties and clans from the same villages andhome towns. According to surveys in Bei-jing, Tianjin, Nanjing and other cities inChina, the main channel for rural–urban mi-gration is through the introduction of rela-tives (Gu et al., 1999). In contrast, therecruitment of work-units only accounts for5.8 per cent in Beijing and 8.28 per cent inNanjing of total work-related migration. Thissuggests that rural–urban migration is moreor less ‘voluntarily’ conducted by farmers’feet and that the labour bureau is less rel-evant to the process. The movement of mi-grants from one place to another is beyondthe control of the work-units. Rural migrantscontribute to local economic growth, but alsobring extra demand on social services and theinfrastructure. They usually form the poorestgroup among urban residents.

Migrants often � nd it dif� cult to mergeinto community life; thus they remain as‘outsiders’. The household registration sys-tem still effectively excludes those without

hukou from urban services. They have to paya market rent for accommodation as well asschooling and health care. Rural–urban mi-gration has brought the geographical divisionof urban and rural identities to an end, butdoes not break institutional divisions andbarriers. Confronted with a high unemploy-ment rate, city governments recently de-signed various policies to restrict the use ofmigrant labour, thus subjecting migrants to adisadvantaged position. Nevertheless, be-cause of their high mobility, the managementof migrant workers has become a seriouschallenge to the government. For example, itis dif� cult to manage informal housing builtby migrants. Shacks are one of the majorforms of residence of migrants. In 1994, theclustered migrant neighbourhoods in Shang-hai amounted to 212, in which migrants hadself-built 12 747 shacks (Chen, 1999,p. 178). Some of these shacks are poorlyconstructed using cheap materials. Thepoorest shacks are comparable to shantytownhousing. According to the � fth � oat popu-lation census conducted in 1993, about 65.4per cent of migrants choose to live in theurban fringe because the rent is cheaper thereand there are more private houses of farmersavailable to rent.

Production materials and infrastructure.Economic reform introduced marketisationthrough relaxing control over certain pro-duction materials. State-owned enterpriseswere allowed to buy production materialsfrom the market and to sell the surplus prod-uct after ful� lling the state quota. Thus, a‘dual-track system’ has been formed and themarketised proportion has gradually in-creased, eventually leading the state to aban-don the allocation of materials. By the mid1990s, the share of planned allocated materi-als had shrunk dramatically, paving the wayfor elimination of the planning allocation formost industrial goods (Lardy, 1998, p. 2).This gradual approach is noted as ‘growingout of the plan’ (Naughton, 1995). In the� nancial sector, however, the governmentstill maintains a strong in� uence over banks.

While the process of marketising pro- at CHINESE UNIV HONG KONG LIB on December 22, 2009 http://usj.sagepub.comDownloaded from


FULONG WU1078

duction materials is relatively straightfor-ward, the change in land tenure is morecomplicated due to its uniqueness and � xedlocation. The government � nally adopted anad hoc approach through ‘separating theownership and the right of use’ and set up aland-leasing system (Yeh and Wu, 1996).Land leasing inevitably involves bargainingbetween owner and leaseholder. State ap-paratuses are much too big to engage in suchnegotiation. Moreover, the control over landwas in the hands of individual land users.The adoption of the new land-use system hasstimulated the scaling-down of the state’srole in the management of urban land and,further, has created incentives for makinglocal plans and producing new urban spaces.Compared with fully marketised productionmaterials, urban land is still a quasi-commodity. Questionably, however, land inwhatever society is subject to certain con-straints because urban development can pro-duce externalities. In the US, land zoningspeci� es certain use and density and, inEurope, state intervention in land use has along tradition (Marcuse, 1996). Comparedwith rather strict development control in themarket economies, China’s transitional econ-omy has seen a buoyant ‘black land market’outside the formal land-use system. For ex-ample, in Shanghai, the city planning bureau,with the co-operation of district govern-ments, is attempting to tighten the control ofland-use regulations. Nevertheless, the task isdif� cult due to the complexity of land devel-opment. Black land markets and illegal landconversions involve not only individuals, butalso development companies with variousgovernment connections.

The market mechanism has also been in-troduced to the development and use of ur-ban infrastructure. Seen as ‘non-productive’investment, infrastructure provision in thepast had placed heavy � nancial burdens onthe municipalities. Local government was re-luctant to invest in a project that wouldbene� t only the projects under centralgovernment. Except for large projects sup-ported by special funding, infrastructure de-velopment was more or less tied to state

work-units. In the reform period, a number ofutility companies responsible for public utili-ties such as water supply, drainage, domesticgas and urban public transport were � rst setup. Then, services were charged at a marketprice or at least at operational cost. For someservices monopolised by certain governmentdepartments—such as telephones (notcounted as an urban infrastructure item)—theinstallation fee is suf� ciently high to make apro� t for the service supplier. Tolls havebeen used for urban roads, bridges and tun-nels to recover part of the investment. More-over, the development of infrastructure hasbeen tied up with land leasing. For example,the municipality began to lease land plotsaround highways and the land surface abovemetro lines in exchange for the developers’contribution to infrastructure projects.Guangzhou and then Shanghai have success-fully applied this method of land develop-ment. Since the establishment of theland-leasing system, infrastructure invest-ment is no longer seen by local governmentas a waste of money because it can bringland revenue and, more importantly, stimu-lates local economic growth, which in turnincreases government tax-bases. Togetherwith the commercialised operation of theurban infrastructure, these factors have givenrise to the boom in new urban development.

Capital. Besides reform of internal capitalcirculation through � scal decentralisationand the establishment of a tax-sharing systemin 1994, the open-door policy has linked theChinese economy to the world. Since theLaw of Joint Venture of the Peoples’ Repub-lic of China, enacted in 1979, foreign invest-ment has been seen as a signi� cant factor inurban development in China. From the strat-egy of ‘international grand circulation’ in thelate 1980s, to recent effort to gain WTOmembership, the linkage between the worldmarket and China has been strengthened.Foreign investment is outside the state plan-ning system and therefore can choose a loca-tion according to the simple logic of pro� tmaximisation. The mobility of foreign capi-tal leads to intercity competition.




By the mid 1990s, China had become thelargest recipient of foreign direct investmentin developing countries. From 1979 to 1996,China had utilised in total about US$284.5billion foreign investment. The contributionof foreign investment to � xed asset invest-ment accounts for 19.4 per cent (Wang andJiang, 1997), while of� cial statistics for 1997show at least 10.3 per cent of � xed assetinvestment originating from foreign invest-ment. The signi� cance of foreign investmentis greater than merely its contribution tocapital formation. In fact, researchers doubtthat the size of foreign investment might beoverestimated (Lardy, 1996). China has beenmaintaining high capital accumulation andinvestment due to high saving rates. Foreigninvestment is important in that it � rst pro-vides the initial capital for the non-state sec-tor. For example, foreign investors are themajor buyers of land, which provides capitaloutside the state circulation and helps toestablish a land price. Secondly, foreign in-vestment, symbolising globalisation, exertsthe mentality of ‘market’ and new marketpractices, which contribute to the creation ofentrepreneurial governance.

Besides joint ventures, the domestic non-state sector is very dynamic, providing animportant source of employment alongsidethe state sector. In Shanghai, to the end of1999, the number of private companies hadreached 109 974, of which 16 companies hadover 100 million yuan of registered capital.The domestic private sector provided 1.39million yuan, equivalent to 33.8 per cent ofthe state and collective staff and workers(Shanghai Almanac Editorial Board, 2000,p. 1973).

Space. The change in urban space beganafter the launching of so-called comprehen-sive development. Integration between work-place and residence has been transformed bylarge residential development projects. Themunicipality liased with state work-units todevelop comprehensive ‘planned’ residentialdistricts in the 1980s. In these districts, resi-dents are no longer separated by the walls oftheir living quarters. Services and facilities

are shared, and charges are collected fromresidents not by their work-units but by util-ity companies. Since the establishment of areal estate market, intraurban mobility hasincreased. Household registration was onlyeffective in the control of rural–urban mi-gration. Households who buy a ‘commodityhouse’ can register in a new place accordingto a certain procedure. Some households donot bother to change household registration,thus causing a separation of the place ofactual residence and the stated location inregistration. The number of households witha separated place of residence and registeredlocation is not known. This re� ects thedif� culty in managing intraurban migrationsince the housing and land reforms.

Spontaneous land development is anotherfactor responsible for the end of homoge-neous work-unit space. After land was con-verted into a commodity, differential landrents began to emerge. To capitalise this rent,state work-units invented various methods toconvert industrial or residential land to com-mercial use. Factory relocation and the ex-change of land between users are common.Thus, the actual use of land may not bedetermined by the nature of work-units. Landmay be transferred to a third party. Thework-units may also become partners inbusinesses that are totally irrelevant to theirfunction. Because of the retreat from thedirect control of work-units, the state hasseen weakened control over land. Therefore,the need to control land use through land-useplanning becomes more acute than before.To be effective, land-use planning must beable to regulate land use regardless of thestatus of work-units. In Guangzhou, for ex-ample, urban street plans prepared in 1987/88 were unable to overcome the separationbetween the community and work-unit terri-tory, thus leaving the latter as blind spots onthe street plans. As will be seen later, thespace created by work-units inside the localjurisdiction but outside ‘juridical’ control isnow ‘territorised’ through strengtheningland-use planning and community develop-ment.

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and a cellular urban space cannot accommo-date the � uidity of urban activities, informalspace has been created. Rural migrants and� oating workers have developed migrant vil-lages. The ‘Zhejiang Village’ in Beijing, ac-commodating over 100 000 migrants fromZhejiang province (hence its name), is onesuch case (for a detailed account, see Dutton,1998, pp. 47–159; Ma and Xiang, 1998).Despite the police crackdown in 1995, thisinformal space was not eradicated. Instead,when the state retreats, the ‘� oaters’ � oodback. Houses in the Village were let on theblack market by local peasants to migrants.Despite the formation of the Village in anunplanned way, it has established multimil-lion dollar garment businesses, supplyingcheap clothes for remote regions. The econ-omic base formed around the entrepreneurialactivities allows the Village to survive in theface of state intervention.

4.3 Changing Conditions

To sum up the changes in the conditions ofurban governance, we can see that increasingsocial complexity has weakened the govern-ing capacity of the state. This has raisedconcerns for the maintenance of social stabil-ity. Failure of state enterprises to pay wageshas caused social ‘unrest’ in industrial areas.The restructuring of state industries has gen-erated a marginalised social group. Crack-down on illegally built migrant villages hasproved to be ineffective. More importantly,for state enterprises, on the one hand the statewants to remove its burden of responsibilityfor social welfare but, on the other, govern-ment policies such as family planning requiresome control over the population to be main-tained. The management of ‘� oaters’ pre-sents a similar problem. There is a greatdearth of information about rural migrants.The state therefore requires some sort of linkto be established in order to integrate theseelements into a governable society. This needto establish control beyond the state work-unit system constitutes the new condition ofurban governance.

5. Re-consolidation of Local Power

It would be too simplistic to understand theeconomic reform as a total retreat of statepower from economic and social life. Thedismantling of the economic command sys-tem is undeniable. The state apparatus hasabandoned direct allocation of productionmaterials, capital, land and, to a lesser extent,the workforce, while consolidating its regula-tory power at the level of localities. Forexample, the enactment of the City PlanningAct in 1989 gives municipalities the right toprepare urban plans, to issue land-use andbuilding permits, and to enforce developmentcontrol. Even projects that are under the cen-tral government must apply for land-use per-mission from the local government beforethe project can be funded. In addition, land-leasing certi� cates should be acquired fromthe local land administration bureau, if theland is obtained through the market. Thegovernment has also recognised the need toreform the social security system in order toreduce the burden on state-owned enter-prises. This is known as the end of thepractice of ‘enterprises running the society’.

In comparison with the hierarchical systemof state work-units, the layers of localgovernment—municipality, district/county,Street Of� ce/town/township and Residents’Committees/villagers’ committees belong tothe ‘territorial’ system. This is because thelatter has a geographical space and the juris-dictional capacity to regulate all activitieswithin the area regardless of their af� liation.With new activities taking place outside thesystem of state work-units, more manage-ment functions have been added to these‘territorial’ organisations, which are formingthe local governments. Enterprise reformstripped off some work-units’ social servicefunctions and transferred them to the localgovernments. For example, for those whogive up formal employment in the universi-ties and research institutes and work in theprivate sector, their ‘personnel dossier’ willbe transferred to a ‘human resource exchangecentre’ in the city. The centre is responsiblefor con� rming their identity. As can be seen




from this case, citizenship in the state sectorconsists of an ‘identity’, often proved by thestate work-unit to which the person isaf� liated, and by the place of residence, oftenproved by a household registration card inthe public security agency. With the emerg-ence of non-state sectors, more and morepeople are no longer af� liated to a formalwork-unit and thus require services from thelocality and community. To strengthen partyleadership at the base level, a policy has beenformulated to transfer the membership ofretired party members to a local branch (Sun,1997, p. 197). Party members of work-unitsare also associated with the activities of theircommunity branches. In Hongchu Street inShanghai, the community party branch pre-pared a list of 403 party members who wereworking at the place and recorded their par-ticipation in community activities and re-ported to their af� liated party branches at thework-units (Hua, 2000, p. 98). This is a sin-gle example of consolidating party leadershipat the base level. Through the alliance ofterritorial and hierarchical organisations, thestate attempts to recreate a foundation at thebase level to strengthen social stability.

5.1 Municipality

Along with the shift of the CCP’s centraltask in economic development, the role ofthe city in organising economic activities has

been recognised. The city is then seen as theeconomic centre to promote regional devel-opment. While the large cities are still con-trolled under the so-called policy of ‘strictcontrol of super-large cities, reasonable de-velopment of medium-sized cities, and activepromotion of small cities and towns’, theadministrative structure has been changed tostrengthen the role of the central city. Sincethe mid 1980s, the new city-leading-countysystem has been established (Ma and Cui,1987). In 1996, 3 cities under the directleadership of the State Council were incharge of 19 counties; of a total of 2141counties and county-level cities, 1101 wereled by prefecture-level cities (Pan, 1998,p. 16). In 1986, the State Council announceda new standard of city designation and imple-mented the conversion from county to citystatus. By 1996, the number of county-levelcities had increased to 445. In the same year,the National Congress amended the Organis-ation Law of Local People’s Congress andGovernments, which endorsed the local Peo-ple’s Congress to enact local legislation. Ac-cording to the City Planning Act, localgovernments also control land developmentthrough land-use permission. These measureshave laid the legislative foundation for localstate power. The structure of Shanghai localgovernment is shown in Figure 1 and thenumber of local governments is shown inTable 1.

Figure 1. The structure of local governments in Shanghai.



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Table 1. The structure of local government in Shanghai at the end of 1999

Type Number Note

The Municipal Government 1Urban Districts 17 Huangpu, Nanshi, Luwan, Xuhui,

Changning, Jing’an, Putuo, Zhabei,Hongkou, Yangpu, Pudong New Area,Minhang, Jiading, Baoshan, Jinshan,Songjiang, Qingpu

Counties 3 Nanhui, Fengxian, ChongmingStreet Of� ces 100Towns 204 137 belong to Urban Districts; 67 to

CountiesTownships 8 3 belong to Urban Districts; 5 to CountiesResidents’ Committees 3703Villagers’ Committees 2801

Source: compiled from Shanghai Almanac (2000).

As a result of these changes, municipali-ties now have substantial power in regulatinglocal development. The role of municipalitieshas changed from a complementary one thatsupported state projects to a more proactiveone that prepares the local development strat-egy. Municipalities are now using variousmethods to mobilise resources to increaseinvestment.

5.2 Urban Districts

Despite the function of base-level govern-ments, the role of the urban district wasperipheral in the era of state socialism. Dis-trict governments had limited resources andadministrative capacities. The dominance ofstate work-units as the basic unit of societalorganisation overshadowed district govern-ments. In the 1960s, there was an attempt tointegrate several work-units belonging to dif-ferent hierarchical systems into the territoryof ‘urban communes’, but the experimentfailed. This is hardly surprising—the urbandistrict, according to the administrative rank-ing system, may have a lower rank than alarge state enterprise under the centralgovernment.2 It was impossible for the urbancommune to organise the ‘productive co-operation’ of work-units inside the district(Hua, 2000, p. 89). As a result of this failure,

the urban commune was abolished. Urbandistrict governments could organise the de-pendants of workers’ families, housewivesand people without work-units into collectiveenterprises. In some old cities like Shanghai,district-level collective enterprises providedan important source of employment outsidethe ‘wholly state-owned sector’.

After the implementation of � scal con-tracts and land leasing, urban districts be-came important in terms of organising landdevelopment. The municipality, confrontedby the increasing pressure of revenue mobil-isation, further signed a ‘contract’ with dis-trict governments. Since 1990, the urbandistricts of Shanghai have gained a wholearray of administrative powers, includingplanning, public works maintenance, ap-proval of local foreign trade and commercialadministration. In 1995, the municipalgovernment proposed a new administrativestructure of ‘two levels of government andthree levels of management’ in the urbandistricts and ‘three levels of government andthree levels of management’ in the suburbancounties (Fang, 1998). Since then, the urbandistricts have gained important functions re-lating to the organisation of urban develop-ment. Competition among urban districts forattracting investment has become severe. Forexample, each district wants to set up its own




commercial and business centre and develop-ment zones to draw business to its jurisdic-tion. The interest of local business ratherthan the interest of the whole city is oftenseen as a priority by district governments.

Con� ict between the municipality and dis-tricts/counties is not uncommon. The expan-sion of the built-up area encroaches onprevious rural areas at the fringe. Recently,the municipality has attempted to adjust itsjurisdiction to convert suburban counties intourban districts. In Shanghai, for example,Songjiang and Qingpu County have beenconverted into urban districts. The conver-sion from counties to urban districts is usu-ally welcomed because the ‘county’ is a ruraldesignation while residents in urban districtsare treated as ‘urban population’ under thehousehold registration system. Local govern-ments will also be allowed to use a higherstandard in infrastructure development.Some jurisdiction adjustment, however, maylead to tensions between the municipal andthe local governments. In Guangzhou, forexample, the municipality has annexed thecity of Panyu, a county-level city underGuangzhou’s jurisdiction, into an urban dis-trict. This has met with some resistance fromthe locality because Panyu has city desig-nation and the city government is afraid thatby changing to a district status its importancewill be damaged.

5.3 Street Of� ces

The Street Of� ce (jiedao banshichu) is not,strictly speaking, a level of government, butrather the representative or agency of Districtgovernment. Immediately after 1949, theCCP successfully extended its power to ur-ban streets (Hua, 2000, p. 86). Prior to 1954,there had been three types of street-levelorganisation. In Wuhan, Dalian andZhengzhou, for example, the Street Of� cewas consolidated as base-level government.In Shanghai and Tianjin, it was the agency ofmunicipal or district governments. In Beijingand Chongqing, it was an administrativeteam, taking care of civil affairs inside thelocal police. In 1954, the National Congress

enacted ‘The Rules on the Organisation ofUrban Street Of� ces’, stipulating that citieswith populations of more than 100 000should establish Street Of� ces; in cities withbetween 50 000 and 100 000, if necessary,Street Of� ces could be set up as an agency ofthe district government or of the municipalgovernment if there was no district govern-ment (Hua, 2000, p. 87). Despite the import-ance of Street Of� ces in politicalmobilisation, policing and basic health care(Whyte and Parish, 1984), there is no Peo-ple’s Congress at the Street level and thus,according to the Constitution, the StreetOf� ce does not form a level of government.Rather, its divisions are responsible for thetasks prescribed by the respective depart-ments in the municipal or district govern-ment.

Similar to the complementary role of themunicipality, Street Of� ces played a moremarginal role, managing those who were notformally af� liated to a state work-unit. Ac-cording to the perception of the CCP leaders,along

with national industrialisation and tran-sition to socialism, street residents outsidethe working class will be reduced in size.There will be no need for the Streetgovernment nor should it be set up at themoment. … Because there are still someunorganised residents who do not belongto any factory, enterprise, school, and in-stitute, to reduce the workload of districtgovernments, it is appropriate to set upmunicipal and district agencies—our opin-ion is that these should be Street Of� ces(Peng Zhen, the report to CCP in 1953;cited in Hua, 2000, p. 87).

In this sense, the Street Of� ce was mainlycomplementary to the state work-units. Innew industrial cities, the role of Street Of� cewas even more marginal because large enter-prises had already undertaken the majormanagement functions.

5.4 Residents’ Committees

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the Street Of� ce in that the former is a‘self-organised mass organisation’, accordingto the ‘Rules on the Organisation of Resi-dents’ Committees’ promulgated in 1954 bythe National People’s Congress. Residents’Committees should be elected by residentsand play their role under the guidance ofbase-level government or its sending agen-cies. In reality, the Residents’ Committeeshad become the ‘legs’ of the base-levelgovernment and were � nanced by localgovernment under the budget for administrat-ive expenditure (Hua, 2000). Residents’Committees undertake many tasks assignedby the government, such as the maintenanceof public order, basic welfare provision andmobilising people during political move-ments (Duckett, 1998). Typically, a Resi-dents’ Committee is in charge of 100–600households and is staffed by 7–17 people.Business activities managed by the Resi-dents’ Committees were few except for someworkshops run by housewives and retiredpeople. However, in the 1980s, in order toarrange for the employment of the urbanyouth returned from the rural and inner re-gions, the Organisation Law of the Resi-dents’ Committee of PRC (later amended in1989) allowed Residents’ Committees to setup community services. As a result, the en-terprises under the Residents’ Committeeemerged, in addition to those under the Min-istry, Province, City and District govern-ments. In fact, the enterprises provide amajor resource for the Residents’ Commit-tees. For example, in Wuling Street inHangzhou, the self-generated revenue ac-counted for 74 per cent of the expenditure(Hua, 2000).

Consolidation of local state power at theStreet Of� ce and Residents’ Committee hasled to the proliferation of the new functions.Figure 2 summarises the typical structure ofa Street Of� ce in Shanghai. The Street Of� ceusually undertakes more than 150 daily man-agement functions. Since the mid 1980s, theStreet Of� ce has begun to be involved inlocal social security, employment arrange-ments, administration of migrant workersand maintenance of market orders.

5.5 Reorganisation of Spatial Flows

Whether economic decentralisation has in-creased local autonomy still remains a ques-tion. However, reconsolidating local statepower did lead to the reorganisation of spa-tial � ows of capital and information. Thecapital � ows between the supervisory depart-ment of the government and the subordinatedwork-units (speci� cally, the allocation of in-vestment and the turning-over of pro� ts)have diverted from ‘vertical’ to ‘horizontal’ones. Similarly, the transmission of com-mands downwards and reports upwards arechanged. Vertical � ows dominated in thepre-reform governance, which is revealed bythe fact that each level of government had its‘own’ enterprises and agencies. Thus, work-units were ranked by their administrativeaf� liation. As local governments began toplay a greater role in spatial (local) economicdevelopment, the af� liation was weakened atleast by horizontal connections. For example,the municipality can levy charges on thework-units that do not ‘belong’ to the cityand grant land-use permission to develop-ment projects. Work-units have been askedto contribute their investment to housing de-velopment projects that are organised by ei-ther the local government or developmentcompanies. While the work-units may stillbene� t from the project, the link betweenworkplace and residence is broken and thusthe cellular urban space is being transformed.The implications for urban space will bediscussed later.

6. Entrepreneurial Endeavour

In the advanced Western economies, thechange of urban governance from ‘manageri-alism’ to ‘entrepreneurialism’ is related tothe discourse of ‘globalisation’ (Harvey,1989). Parallel to this transformation is theentrepreneurial endeavour of the post-reformgovernment. The Shanghai municipalgovernment, for example, adopted a proac-tive role in urban development. Place pro-motion has been achieved through a widerange of approaches such as privatisation of




Figure 2. The organisational structure of a typical Street Of� ce in Shanghai. Source: adapted from Chen(1999, p. 65).

urban services, charges on the use of infra-structure, converting managerial departmentsto companies (for example, from the housingbureau to property management companies),increasing investment in infrastructure devel-opment, the use of land-leasing instruments,designation of development zones, formationof business partnerships with the private sec-tor and image creation (Wu, 2000). More-over, such entrepreneurial endeavour isconsciously promoted in daily management;the government urges that managementshould ‘follow the international norm ofpractice’ and should aim to create a ‘pro-development investment environment’. The

transformation of (post)-socialist governancetowards entrepreneurialism is an emergingresearch area. The de� nition of the en-trepreneurial city varies in different contexts(Short and Kim, 1999). Duckett (1998, p. 14)refers to the entrepreneurial state as the directinvolvement in business by pro� t-seekingand individual state bureaux and their subor-dinate agencies. Through analysing real es-tate and commercial departments in Tainjin,it is argued that the local state is engaging inentrepreneurial activities that cannot be con-signed to the category of corruption or rent-seeking (Duckett, 1998, p. 171). Space heredoes not permit a more detailed account of



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entrepreneurialism in Chinese cities. How-ever, our observations generally suggest thatthe emergence of entrepreneurialism at thelocal District and Street Of� ce governmentlevels may not be a direct result of globalisa-tion, but rather a response to the internaladjustment of governance capacities. In thissection, we focus on two main aspects ofentrepreneurial behaviour at the local levels.

6.1 Forming Local Business Partnerships

Scaling-down the government leads to thehardening of budget constraints. Whengovernment becomes smaller, it is easier forit to monitor its enterprises (Walder, 1995).The government has very strong incentivesto develop its own business activities in orderto increase local revenue sources. For exam-ple, in Shanghai, the Street Of� ces havesigned the � scal contract with the Districtgovernment since 1988. Each Street Of� cereceives around 300 000–400 000 Yuan foradministrative expenditure, which is barelyenough for the salaries of the formal posts ofResidents’ Committees. As a result, � rst, theStreet Of� ces began to set up small storesand shops, and then gradually to developthese ventures into a wide range of commer-cial and industrial businesses. Some StreetOf� ces even developed joint ventures withforeign investors to take advantage of loca-tion and land. Since the 1990s, the Streetbusiness has become the second-largest local� scal income generator. The new resourcesallow Street Of� ces to expand their socialfunctions and services such as assistance topoor groups. Street Of� ce managers alsobene� t from the increasing extra-budgetaryincome and become an ‘admired professionalgroup’ (Sun, 1997, p. 202). In the past,housewives and retired people were the mainstaff of the Street Of� ce. Many of themworked voluntarily, while only a few formalposts were supported under a quota. Theentrepreneurial ventures provide a viableway of solving the Street Of� ce and Resi-dents’ Committee staf� ng problems.Younger and better-educated people are will-ing to join in these local organisations due to

the improved income and good careerprospects.

The opportunity to earn higher salariesprovides a direct incentive for the changingbehaviour of of� cials. Together with the lackof clear legal regulations on the limits ofof� cials in economic activities, this createsthe space for entrepreneurialism (Duckett,1998, p. 166). At the local level, the linebetween government and business becomesmore blurred than it is in the municipalgovernment. The current practice is that themunicipal or district government returns, atleast partially, the tax gained from the local-ity, to the Street Of� ce as a � scal subsidy.The Street Of� ce treats this input as extra-budgetary income and therefore is allowed tospend the fund more � exibly. Consequently,income and expenditure at the local level seevarious irregularities. The close relationshipbetween the governing and the governed ineconomic activities at the local level forms abasis for entrepreneurial endeavour. Thissuggests that local of� cials can actively seekeconomic advantages by increasing businessactivities.

6.2 Creating Local Space

Space creation refers to the insertion of newphysical or regulatory boundaries into theexisting urban fabric. Inside the new space—such as a special development district, a free-trade zone, a high-tech business park, abusiness centre/street or a commercial com-plex—the government can adopt some spe-cial policies such as tax exemption and feerelief. The creation of space allows morelocalised urban governance. Within clearlyde� ned boundaries, more adventurous exper-imental measures can be tried and, if suc-cessful, further extended to other places.

The creation of space itself opens a newmethod for urban development. Some ofthese development zones are developedthrough the establishment of ‘land develop-ment corporations’. For example, in thePudong New Area of Shanghai, the munici-pal government allocated land to the JingqiaoExport Processing Development Zone Cor-




poration, Waigaoqiao Free Trade Zone De-velopment Corporation, Lujiazui Finance andTrade Zone Development Corporation. Theland, rather than � scal investment, is used asan initial input from local government. Afterland allocation, these corporations began tosub-divide land and transfer the land-userights to developers. By using land leasing asan instrument, the development corporationsstimulate land development. This representsa new mode of development, because, it

creates ‘virtual’ capital circulation, thusallowing land-use right to be transferred.Development corporations receive theland, while no further expenditure is in-curred to the municipal � nance. This is adistinctive feature of the real estate devel-opment in Pudong New Area. Of course,these corporations, each with billions of‘registered capital’, must � nd banks to getreal capital to organise construction worksuch as demolishing old buildings, relocat-ing existing residents and providing infra-structure and services (Xie and Huang,1995, p. 225).

Another example is the redevelopment ofThe Bund, Shanghai’s central business dis-trict (CBD) in the pre-revolution era. Afteryears of socialist transformation, the clus-tered banks and � nancial institutions hadbeen gradually converted to administrativeand industrial uses. The government promul-gated a regulation in the 1990s, followingwhich a development company has been setup, which is responsible for the relocation ofpublic organisations and enterprises in thearea. Under the government’s promotion, theBund is now reconverted into a central busi-ness area.

Image enhancement can be seen as part ofspace creation/modi� cation. The localgovernment has paid more attention to land-scaping than ever, as this improves the localinvestment environment. From the munici-pality to the Street Of� ce, great efforts havebeen directed towards symbolic urban land-scapes. In Shanghai, skyscrapers, the Orien-tal TV tower, parks, theatres, the museumand landscaped avenues all present images of

a booming city. The ‘ecological city’ hasrecently become a new catchword. From citygovernment to Street Of� ce, this means thedevelopment of green space. Real estate de-velopers began to claim that their projectswould meet the ‘basic’ needs of residents.More often than not, this means greening andarti� cial landscaping. The result is an osten-tatious middle-class orientation in residencesof ‘commodity’ housing.

7. From Street Of� ce to Community:Towards a Civil Society?

Rebuilding urban communities is seen by thegovernment as a top priority, which is crucialto social stability. Community developmentis fostered through the penetration of statepower to the base level. In Shanghai, a majorworkshop of community construction wasorganised in 1996. In the workshop, MrHuang Ju, the Shanghai CCP Secretary, em-phasised that the

community is the cell of a city. … Thebasis of consolidating the Party construc-tion, strengthening spiritual civilisationand maintaining social stability is at thebase level. The base level is the carrier [ofthese activities]. Only by reinforcing com-munity development and management canwe realise the co-ordinated economic andsocietal developments (Huang, 1996, seeSun, 1997, p. 167).

According to the mode of ‘two levels ofgovernment and three tiers of management’in Shanghai, the Street Of� ce has been con-verted from a subordinated agency (paicujigou) of district government to the base-level government. As a result of the devol-ution of state power, the Street Of� ce hasgained a comprehensive set of regulatoryfunctions. Rather than responding to com-mands from ‘hierarchical’ government de-partments as it did in the past, the StreetOf� ce can now act as a ‘comprehensive’ and‘territorial’ entity. For example, in Wuliqiaoin the Luwan District of Shanghai, various‘agencies’ set up by ‘hierarchical’ govern-ment departments are consolidated now un-



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der the administration of the Street Of� ce.These agencies include the legal assistanceof� ce, the business and commercial adminis-tration of� ce, the streetscape maintenanceteam and the real-estate administrationof� ce. The Street Of� ce is responsible forthe nomination and evaluation of leaders inpublic security, housing management, busi-ness and retail administration and directlyappoints the head of the Sanitation and Hy-giene Of� ce. In order further to strengthenthe Street Of� ce, the government devolved tothe Street Of� ce a number of regulatoryfunctions including approval of the residen-tial plan, the housing development plan andthe completion of housing projects, site occu-pation licensing, outdoor advertisement man-agement, the licensing of restaurants andcatering services operated by private busi-nesspersons, and penalties for illegal con-struction.

As the Street Of� ce is overloaded withthese numerous administrative functions, itbecomes formalised and thus different fromwhat is commonly noted as the ‘urban com-munity’. In this sense, the concept of ‘urbancommunity’ is different from what has beenused in government policies. The latter refersto the

social entity that is based on currentboundaries of Street administration andunder the leadership of the Street Of� ceand participated in jointly by enterprises,institutes, and residents in the region toundertake construction, management, anddevelopment activities that target the goalsto enhance urban civilisation and urbanliving quality (Sun, 1997, p. 171).

The de� nition emphasises the Street Of� ceas the core of the urban community.

Scaling-down the state to a local and man-ageable size will certainly lead to a more� exible and responsive government. Thestate also attempts to foster voluntary groupsto increase input from the community to copewith people’s increasing mobility and to helpin alleviating urban marginality. In theLuwan District of Shanghai, the district or-ganised 555 voluntary service groups, in-

volving 33 000 people and 22.1 per cent ofhouseholds in the district. In Ganquan Streetof the Putuo District and Oyang Street of theHongkou District, enterprises within the ar-eas have donated money to set up a ‘lovingheart foundation’ to provide social relief andsupport (Sun, 1997). Other non-governmentorganisations have also emerged. For exam-ple, the Private Workers Association togetherwith the Chinese Communist Youth Leaguedeveloped a partnership with children fromlow-income families to help them pursuetheir studies. Nonetheless, the Street Of� ce isevolving towards a more-or-less governmentbody. Despite the effort to build up the com-munity on the framework of the StreetOf� ce, the Street Of� ce itself is still distinc-tively different from a basic urban com-munity. The mechanism to develop moreinclusive participatory activities with resi-dents is still waiting to be found.

Reinforcing the Street Of� ce and evenResidents’ Committees as the base-levelgovernment or governmental agencies mightdefer community development, because

The Residents’ Committee uses adminis-trative methods to handle local affairs.This is a typical example of combinationof state and society in our social life.Circumstance will not change for the timebeing. But in the future of communityconstruction, if [we] only emphasisestrengthening the administrative controlover the Residents Committee, we may notbe able to achieve the practical results [wedesired] to set up an appropriate manage-ment system of the community (Sun,1997, p. 191).

New experiments are now being tried toincrease base-level democracy by establish-ing residents’ self-governing bodies. InShengyang, for example, the civil affairs bu-reau redivided 2700 Residents’ Committeesinto 1200 community organisations that areto be self-governed and self-managed (Shi,2000). A community council, made up ofresident representatives, a community nego-tiation committee and a community com-mission are set up in each community. They




play the roles respectively of decision-making, advising and monitoring, and ex-ecution. The managers and staff are recruitedfrom the public. The new organisationalstructure, similar to those in self-governancevillages, would strengthen the managementof social affairs such as domestic assistance,health, re-employment and property manage-ment. Residents can call a service number toget immediate help from the community. InShanghai, elected residents’ representativesare introduced into the Residents’ Commit-tees to enhance voluntary participation.

As organisational changes at the base levelare mainly driven by top–down directives, itstill remains to be seen whether these effortswill eventually help to create a civil societyin urban China. Liu has observed that

The relationship between District–StreetOf� ce–Residents’ Committee has com-pletely become one of supervisory andsubordinate systems of government. Resi-dents’ Committees (RCs) shoulder re-sponsibility for carrying out administrativeworks. The major jobs of the members ofRCs are to ful� l the tasks assigned byStreet Of� ces (SOs) and various functionaldepartments of the government and tocope with various meetings. In these cir-cumstances, RCs move away from thetarget of community self-governance. Thisis the institutional factor that makes itdif� cult to implement democratic self-governance, though many RCs have be-come restructured through democraticelections. … The major obstacle to com-munity self-governance lies with the su-pervisory government, because of therelative delay in urban political and insti-tutional reforms (Liu, 2001, p. 12).

8. Conclusion

This paper examines China’s changing urbangovernance towards a more market-orientedeconomy. We observed that the majorchange had been the shift from a systembased on party-state, household registrationand state work-units to one led by the local

state. In conclusion, I re� ect on the causesand consequences of changing urban gover-nance. First, the major cause underlying thechange is the vacuum in governance createdby economic reform. The complexity andvelocity of the transitional society goes be-yond the reach of the formal state work-unitsystem. In this sense, the perspective of ‘gov-ernance’ is truly useful in that it emphasisesthe need to understand the changing state–

society relationship rather than only focusingon the structure of government. The emerg-ence of governance is a response to so-calledunstructured complexity (Jessop, 1998).Here, there is a similarity in the emergenceof governance between the market transitionand the post-Fordist transition, although thecomplexity has unfolded in different dimen-sions. Bob Jessop notes

A fundamental secular shift in state–

market–society relations has occurred.This implies that important new economicand social conditions and attendant prob-lems have emerged which cannot be man-aged or resolved readily, if at all, throughtop–down state planning or market-mediated anarchy. This secular shiftre� ects the dramatic intensi� cation of so-cietal complexity which � ows from thegrowing functional differentiation of insti-tutional orders in an increasingly globalsociety—which leads in turn to greatersystemic interdependencies across varioussocial, spatial, and temporal horizons ofaction (Jessop, 1998, p. 32).

However, the increasing complexity in thecontext of post-socialist transition cannot beattributed simply to globalisation—to alarger extent, it is due to the transition to-wards a more market-oriented economy. Therelaxation of planning controls, which leadsto the mobility of production factors acrossdifferent scales, has created enormousdif� culties for maintaining the hierarchicalorganisation of society. At the regional level,devolution of state power to the localities hasfostered localism. For example, cities in thePearl River delta and Yangtze River deltabegan to build airports and ports without



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giving consideration to the formation of aregional transport system. At the urban level,district governments are competing to be-come retail and business centres. Vested in-terest in landed properties has driven them tonegotiate with developers (Wu, 1999). Localgovernments are also engaged in the pro-motion of their own areas through providingexternal investors with various incentiveschemes and partnerships (Wu, 2000). De-spite differences in concrete forms of promo-tional practice, this is not drastically differentfrom what has been found in the literature.

Secondly, the consequences of changingurban governance is different from the for-mation of a new civil society. The vacuum ingovernance are � lled up by the extension ofgovernment functions into the base levelrather than by self-organised local gover-nance. Marketisation has led to many spon-taneous changes outside the state—theincreasing mobility of people and capital andthe expansion of those elements ‘outside thestate system’. However, the resultant trans-formation of governance is far from an unco-ordinated one. What we have seen in thiscontext is the leading role of the state inre-establishing its contact with these mo-bilised elements (such as private en-trepreneurs, laid-off workers and migrants).Fostering urban communities is seen by thestate as an urgent matter to achieve domi-nance in governance. Behind the effort arestrong political imperatives for maintaining agovernable society as well as the practicalpressures of social service provision to mar-ginal groups, the re-employment of laid-offworkers and the management of rural mi-grants. The reformation of urban communi-ties on a territorial basis re� ects continuityrather than transition. The fact is that most ofthe entities discussed in this paper, rangingfrom municipalities to Residents’ Commit-tees, have their origin in the 1950s, but havebeen modi� ed during the past two decades.3

Moreover, the all-important party-state sys-tem is reconsolidated through the establish-ment of the link between workplace-basedand community-based party branches.

What has changed is, however, the rela-

tionship between the state and the market.Whereas marketisation creates an ungovern-able tendency, it also provides the oppor-tunity for the state to innovate within itssystem and consequently to solve institu-tional constraints. The entrepreneurial en-gagement in markets provides capital to easethe lack of resources. Indeed, marketisationis being used to solve the major problems ofpensions, medical insurance and re-employ-ment. However, only institutional innovation,mainly through more localised governance,could allow the state to take advantage ofmarket opportunities to enhance its gover-nance capacity. In fact, the establishment ofmultilevel government is only being experi-mented with in the most economically ad-vanced cities, such as Shanghai. This is notonly because marketisation there has createdsuch an imperative, but also because moreurban managers are available with better ed-ucational backgrounds and experience indealing with the market. In fact, someof� cials of the Ministry of Construction ex-pressed their concern over whether Shang-hai’s experience could be transplanted toother cities.

A � nal remark emerging from this casestudy is that we need more ‘microscopic’investigations of local territories, organisa-tions and structures in order to understandthe change in urban governance. Similar de-mands for governance can lead to differentforms of response, which are contingentupon the historical and territorial context. Ina sense, the understanding of urban gover-nance is contextualised knowledge. As forthe study of urban governance in China, itwill be interesting to see whether the en-trepreneurial endeavour currently encouragedin Chinese cities complements or contradictsthe social functions of governance. It can beforeseen that the development of urban com-munities should be a key theme of futureresearch into urban China.

Notes

1. The term ‘laid off workers’ refers to thosewho left the workplace but still maintain a




contract with the work-unit. The de� nitionthus require three conditions: the reason forleaving the workplace is due to the operationof the enterprise rather than personal circum-stances; the individual concerned has physi-cally left the place (rather than simplybecome idle); the labour contract with thework-unit still remains. This contract rela-tionship is usually re� ected by the work-unit’s responsibility for keeping the‘personnel dossier’ (Zhang, 1998, p. 12). Re-cently, the laid-off (xiagang) workers havebeen relocated in the ‘re-employment cen-tre’. They will be able to claim compensationif their contract with work-units is removed.After the removal of the contract relation-ship, the laid-off workers can obtain unem-ployment insurance for a � xed term. Afterthe � xed term, if the person cannot � nd ajob, he/she becomes unemployed and will besupported by the security line for minimumliving standards. In 2000, there were1 279 000 people claiming unemploymentinsurance (Ye, 2000).

2. For an explanation of the rank system, seeLieberthal who commented that

China is such an extraordinarily bureau-cratic society that virtually all organisa-tions, whether formally part of the state ornot, are assigned particular bureaucraticranks (Lieberthal, 1995, p. 210).

3. I would like to thank the anonymous re-viewer for bringing up this important point.

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