The Regulation And Misconduct Of Economic Behavior Among Local Governments In China

In economic development of China, local governments didn't exercise their right in specific law and caused their economic misconduct. It affected and destructed the normal operation of the national economy. It also had a negative impact on the building of the socialist market economy. The paper analyzes the economic behavior of local governments and the reasons for economic misconduct. On the basis of these recommendations this paper put forward some proposals to regulate the economic behavior of local governments. Included in this paper are four parts as follows.Part one outlines the economic behavior of local governments. In different times, the economic behavior of local governments in China is different. Under the planned economic system, China used highly central centralized management model. Local governments implemented the central plan and guided economy in developing in accordance with the central plan. The autonomous right of some regional was smaller. So only in a lesser extent, according to its own characteristics, local governments formulated the plan for the region according to the central plan. Local governments demonstrated clearly in a subordinate position. After economic reforming in 1980s of the 20th century, local governments continued to implement the central plan through administrative measures to ensure the smooth completion; actively explored other hand; gave full play to the role of the market and developed the regional economy upon their characteristics. At present, the economic behavior of local governments in China is gradually adjusted and regulated in the process of establishing the socialist market economic system. Due to the special features of China's market economic system, the economic behavior of local governments has shown some characteristics, such as: chief oriented, utilitarian, short-term and exclusive. Chinese main economic behavior of local governments is influenced by economic development and size, the economic structure, interest groups, the rigid structure of vested interests, the "rule of man" mechanism of the administration and the influence of factors, historical and cultural traditions and so on.In part two this paper discusses local governments'economic misconduct. Local governments and the central government are state administrative organs, and have many common goal, share common social and public interests. They are representation of public interests, the exercise of public power and the makers of public policy. However, local governments also have their independent interests. So the economic behavior of local governments is sometimes irregular. The so-called local governments have misconduct. It refers to local governments destructed national interests for theirs own relative independent interest. The performance of local governments'economic misconduct: First, blind intervention to protect local interests. Some local governments protected local interests, such as partial connivance of local enterprises or interfere with the court's trial through restructuring enterprises. It takes advantage of legal loopholes for dodging bank debts and undermines the normal order of credit. Second, decision is subjective, democratic and scientific. The decision lacks of continuity and stability of policies. The decision is vague, opaque and easy changed. Third, local governments'management functions dislocation. Management of local governments did not do a good job; in the management of economic activities, there are more chaotic management and the authoritative management; the government is inefficient; the results of the government's actions often have gap with expectation. Fourth, local governments obviously want to get more benefit and use the right to seek personal gains. Some local governments promote and implement national policies and regulations which can bring some interests. If national policies and regulations can't help local governments, local governments are passive, slow implementation or non-implementation. Local government economic misconduct caused greater damage: market segmentation, occlusion and hindering the formation of economies of scale, increased competition in revenue out of the system, resulting in rent-seeking activities and corruption. Local government'economic misconduct will not only endanger the development of the local economy, but it also undermines the credibility of the local government, undermines the market's order, and legal and political systems.Part three analyzes the reasons of local governments'economic misconduct. First, it is driven by local economic interests. Since the beginning of reform and opening up, the central government delegated powers and benefit, and lacked a clear distinction and strict definition between central and local power. It also lacked a full expectation to the development of markets and neglected control mechanisms for the rights and interests of the local governments. The economic behavior of local governments used their own interests as a guide and demonstrated the features of internal development and external exclusion. It resulted in the emergence of local protectionism. Second, the concept of political achievements of local governments is wrong. Government officials at all levels generally enthusiastically pursuit the growth of the GDP and "political achievements". They exchanged land for political achievements and put investment on the top. This is actually a short-term guidance and formalism of the cadres. Third, it is caused by the financial system. Financial departments at all levels are not financially independent. It performances that the personnel power and financial power of local governments at all levels are unclear, and local governments lack constitutional and legal guarantees. My overly transitional reform of the tax system lacks checks and balances in the market; also divided the absence of a reasonable mechanism. There is a weakening of the stability of the system. Fourth, it is in the lack of legal norms and regulations. As the law is not perfect, especially the law which bounds governments is a weak link in building the whole law, it is difficult to effectively restrain the powers of local governments.Part four puts forward some proposal which can regulate the economic behavior of local governments. First, it should establish interest-regulation mechanisms. It should establish a horizontal inter-district mechanism; break administrative obstacles which stop the flow of productivity; overcome financial and technical constraints; make combination of production factors optimal. Meanwhile, it should innovate the inter-district mechanisms for coordinating interests. A number of major economic issues related to the regional economy as a whole. Local governments should mutually consult and dialogue, rationally formulate relevant policies, unified arrange, coordinate the interests of all parties and achieve the overall goal of regional economic. Regional development policy should be objective and impartial. According to the regional economic development reality local governments take corresponding measures. Second, local governments should establish a scientific evaluation system of achievement. If local governments want to regulate economic activities, it is necessary to establish a scientific evaluation system of achievement. Selecting and appointing government officials are not only to examine their work performance, but also to examine his style, ideological and political quality, the ability to work and so on. That can help government officials to establish a correct view of achievements. Green GDP should be a major indicator of performance evaluation. It is necessary to "significant and potential" to fight for fairness. It also should reform the appraisal system and use higher-level examination combined with the masses. We should strengthen the punishment mechanism. Third, local governments should establish a sound administrative and oversight mechanisms. Reasonable system can determine a rational division of personnel powers and financial powers, standardize and improve the transfer payment system below the provincial level, strengthen the coordination and cooperation between all levels of government, and enhance the self-implementing nature of the financial system. Finally, it should establish a sound and legal regulations. The market economy is an economy based on the legal system. It not only requires various supporting laws and regulations to regulate and adjust the economic relationship between the market and economic activity, but also demands government intervention in the market under legal control and the supervision and control. Thus, China's legal construction includes regulating and adjusting the relationship between the market economy and the legal system. It also restricts local government to intervene in the market, including the legal system, the legal system as industries, macro-control legal system, and Micro-management regulations. In addition, local governments must also establish a set of standard administrative system and the administrative laws and regulations to standardize local government administrative behavior.