Province-Managing-County, City-Managing County And Counties’ Economic Growth

The Province-managing-county Reform is complex, and there is much uncertainty with regard to its applicable scope. Two main questions need to be answered:first, have the province-managing-county(PMC) pilot reforms achieved the desired economic effect? Second, are the city-managing-county(CMC) areas in such a situation that reforms must be implemented? For the first question, our answer is mainly based on evidence from Zhejiang, Henan and Hubei. The three provinces and Hainan have a longer history of PMC reform than others in all 22 provinces in mainland China. Since the reform of Hainan covers the whole province, thus it is not suitable for a comparative study inside the province and it is not included in our study. Mainly based on the results of a quasi-experimental method, namely Synthetic Control Method, the conclusions of the study are as follows:If the provincial government endow the counties with more authority, and at the same time is able to coordinate the interest conflicts between areas, then the PMC system could offer the counties a better economic growth path. When the contradiction between counties is intensified and the provincial government lacks interest coordination and overall management, the CMC is a better choice in terms of promoting economic growth. When the provincial government and the city government treat counties equally, there is no significant difference between the two systems concerning economic growth.The second problem is whether in the CMC areas reforms have to be implemented now. The answer is mainly based on a correlation analysis. According to the city-county GDP per capita gap study of 269 prefecture level cities, we believe that at least in many areas of Eastern China this problem is not urgent, but in Middle China, Western China and Northeastern China, PMC is necessary to the majority of counties. First of all, even excluding Zhejiang Province in which financial PMC is implemented, the average city-county GDP per capita gap is 1.90 and still the smallest in the 4 areas while in Western China it is 1.94, in Northeastern China it is 1.96 and in Middle China it is 2.11. Thus in Middle China the city-county GDP per capita gap is more obvious, and its CMC system may need a larger adjustment. Secondly, and more importantly, the rule that "the higher the central city’s GDP per capita, the bigger the gap" is not significant in the eastern region, while in Middle China, Western China and Northeastern China it’s very significant. So we assume that this rule can be interpreted by the interaction of location factors and CMC system. For Western China, Northeastern China and Middle China, it’s more difficult to develop an export-oriented economy due to location reasons compared to the eastern coastal area. Hence the center city of the prefecture level city may make use of its hierarchical advantage to concentrate the counties’ resources, so as to make up for its location disadvantage and resource shortage. Due to the reason that the center city of the prefecture level city in Eastern China is more likely to attract investment, its willingness to centralize the counties’ resources is not as strong as that of the other areas. Therefore, the difference between PMC and CMC in terms of counties’ economic influence is not significant, especially in the Shandong Peninsula, Southern Jiangsu, Zhejiang and the coastal area of Fujian.