On The Transition Of Chinese Local Government's Economic Functions

As the economic globalization deepens and social-economic transition moves into its mid-later phase, many deep-rooted conflicts and problems have become more and more closely interwoven with the government. In recent years, a large number of social-economic phenomena, which attracted nationwide attention, have highlighted the importance of reform on the part of the local government and given rise to large-scale arguments about the limit of the local government's economic functions. With the outbreak of the American sub-prime mortgage crisis in 2007 and its subsequent sweeping influence on the global economy, people are urged to rethink about some fundamental issues concerning the government: What are its functions? What are its do's and don'ts? How can the government better fulfill its functions? Therefore, the orientation of Chinese local government's economic functions has become a theoretical issue worthy of research and studies. And all the following realistic problems need to be solved urgently and satisfactorily: How can we facilitate the transition of the local government's economic functions? How can the local government meet the challenges better that the social-economic development confronted in its mid-later phase? And how can the local government minimize the negative effects on the regional economy that the American sub-prime mortgage crisis has brought about?In this thesis the interactive paradigms between economics and politics are adopted, and the approaches of historical analysis, empirical research method and induction analysis are employed. Guided by Marxist State Theory, this thesis also refers to the latest research achievements in the fields of Free Market Theory, Government Intervention Theory, Public Choice Theory, New Management Theory, New Public Management, Theory of Property, Institution Change Theory, Transaction Cost Theory, Principal-agent Theory, Game Theory, Governance theory, etc. By combining the analytical approaches of economics with those of politics and taking economic and political factors as intrinsic variables, this thesis probes into the necessity and inevitability of the transition of Chinese local government's economic functions from the perspective of history, thus trying to orientate, on a theoretical level, the local government's economic functions during the transition. With the help of empirical research, this thesis makes a systematic study of the experience that the local government has accumulated in fulfilling its economic functions and the problems still to be solved. Based on the above-mentioned analyses and studies, this thesis puts forward some possible pathways and strategies for the successful transition of Chinese local government's economic functions.With regard to the local government's economic functions, western politics and economics mainly focus on how the local government, under the perfect conditions of market economy, is to provide local public goods and services, in order to compensate for the market failure due to the inherent deficiencies in market mechanism. However, during the social-economic transition in China, apart from making up for the above-mentioned market failure, the local government also has to find solutions to the market failure due to the imperfection of market mechanism, and to the"market distortion"likely to occur when the central government imposes a macro control over the economic operation under the planned economy system. Consequently, apart form the provision of public goods and services, the Chinese local government in the social-economic transition is to lay down guidelines and adopt measures for the implementation of macro-control policies of the central government, to make plans for the future development of the local economy, to carry out system innovation and guarantee supply, to promote the perfection of market mechanism and to standardize the market order.Under the planned economy system, Chinese local government's economic functions are identical to those of the central government. In the past 30 years of reform and opening, the Chinese local government has played a leading role in the development of the regional economy. During that period, the local government has gone through the transition from the integration of the government and enterprises to the separation of the two, and it has nearly withdrawn from the private goods sector. With the deepening of social-economic transition, the social and economic development is now confronted with various challenges, thus making the further transition of the local government's economic functions more urgent but more complicated. The successful transition of the local government's economic functions from economic construction to the provision of public goods and services, from the cultivation of the market to the standardization of the market, is restricted by many factors, which involve not only the local government itself, but also the interrelationship between the governments, and the relationship between the government and various non-profit organizations, enterprises and the market. Therefore, the transition of the local government's economic functions should be studied in a large context of the existing system and the complex relationship between all parties concerned in order that all kinds of relationships——between the governments, between the government and the market, between the government and enterprises, between the government and the society——can be handled smoothly. Only in this way will the transition of the local government's economic functions have greater possibilities and a wider range of options, and will the transition achieve its final success.