Barreras de la Comunicación

The issue of Intellectual Property Rights (IPRs) has given rise to conflict between China and the United States (US) since the late 1980s. Despite the adoption of several laws on trademarks (1983, amended in 1993), copyright (1991) and patents (1985, amended in 1993), the US has criticised the practical effects o f IPRs in China and has identified Guangdong province as the worst violator of IPRs in China (Isobe, 2000: 129). According to Isobe (2000), Guangdong province finally began to tackle the problem of violation of IPRs in the province in September 1995 The Guangdong Party Vice Secretary (Huang Huahua) was selected to head a leading taskforce to expose the level and scope o f violation Despite evidence o f large-scale production o f pirated versions of CDs, LDs and computer soft-wares, Huang acknowledged the possibility that production of pirated versions could be repeated and criticised the local support given in some areas to illegal production. Guangdong province also began to introduce laws to prevent pirated versions. However, finding the pirate production sites was extremely difficult because they frequently moved to underground factories. In addition, at the level o f local governments (county, township and basic units), local leaders offered protection to the production and sales of pirated copies, and hence the behaviour of these leaders towards the exposure of violation was negative.

This example shows that decisions at the centre cannot always be carried out properly in localities. One of the main problems in this case is that of local protectionism, especially at the sub-provincial levels. As the local governments (under the county level) manage local firms (i.e. TVEs) and depend on the revenue of those firms, they are unlikely to accuse the producers of pirated versions who contribute to local finance. Moreover, producers of pirated goods are likely to offer bribes in order to gain tacit permission for the production and sales of pirated versions. As the public security sector belongs to local government, central orders cannot be carried out immediately. More fundamentally, China’s unique

residence register system (hukou), restricting the movement of people between rural and

urban areas, tends to encourage local leaders to act in the interests of localities (Hang, 1994). Thus, at the basic level, these factors create major obstacles to the resolution of the problem of IPRs. The centre’s control can reach the provincial-level government, but the centre does not have direct measures to control leaders at the basic level. The excessive concentration of power to local Party committees also makes it impossible for the state authorities (prosecutors) to intervene in local protectionism. Thus, at the level of local government (under the county level), the overwhelming dependence on the CCP’s political leadership cannot itself help to enforce IPRs, and local protectionism often results in efforts to circumvent central control.

4.7 Conclusion

The reform of China’s domestic governance along multi-level lines is the key mechanism through which the centre and SNGs have struggled to regain enforcement capacity and institutional legitimacy. The movement over the last two decades towards new forms of MLG in China has created a complex system of governance. From the state regulatory viewpoint, the establishment of various special zones has made it more difficult to identify intergovernmental relationships. In addition, there is now a much greater understanding and recognition of the political constraints on the reform of the constitutional state system. The CCP networks are extended along with the state institutions and still heavily constrain the functions of those institutions. This is very different from the way in which decentralisation is used to enhance local autonomy within a democratic state system. Stemming from China’s traditional Party-state integration, and developed through

marketisation, the CCP itself is under pressure to commercialise, and the Party has already lost its constraining power over local cadres. Although the centre is the initial promoter and provider of reform processes, the forms of governance are being continuously reproduced and reshaped according to the practices of the key participant actors (the centre and localities in both state and Party organisations).

Perspectives drawn from the Open Door Policy and the changing structure and role of Guangdong province help us to understand the political dynamics of the emergence of new patterns of economic governance. The centre’s adoption of the Open Door policy towards

Guangdong was based on ad hoc measures without adequate funds and resources. The role

of Guangdong’s leadership (Party Secretaries and Governors) is thus vital in lobbying and gaining further concessions from the centre and representing Guangdong’s economic interests. Through the implementation of the Open Door Policy, central-local relations have been greatly influenced by the rapid increase of economic power of Guangdong, especially in bargaining with the centre. Guangdong’s growing fiscal power vis-a-vis the centre is remarkable, and enterprise reform and legal decentralisation also help to create a legitimate environment for the autonomous activities of SNGs. Guangdong succeeded in sending Cantonese leaders to the top ranks of provincial political authorities between the mid-1980s and late 1990s.

However, at the level of sub-provincial and sub-municipal-levels of governments, the influence of local factors has been more apparent than that o f national constitutional factors. Indeed, the establishment of SEZs and open economic areas, and decentralisation within Guangdong have further accelerated the deepening o f the Open Door Policy down to local governments. The result is the increasing assertiveness and often circumventing behaviour of localities. The two exemplary cases (GIT1C and IPRs) examined above tell different stories of central control and the circumventing behaviour of localities in Guangdong In the case of GITIC, the centre succeeded in taking back its control capability over the Guangdong provincial-level government, but in the case of IPRs the centre is faced with the difficulty o f controlling local governments (especially under the county level). In terms o f economic governance, the Party is functionally almost redundant at the basic levels o f government. This reveals that the sub-provincial and sub-municipal

governments are less constrained by central control than by the control o f the Guangdong provincial government. Another challenge to the central control capability over localities comes from the increasing gap between economic reality and national planning.

There is particular concern that ‘the institutional foundation underpinning a secure market system in China is far from rationalized and secure’ (Montinola, Yingyi Qian and Weingast,

1995: 81). Thus, the transition to MLG involves both problems and opportunities for further development. As long as the ultimate aim of Chinese leaders has been development, diverse forms of MLG as political processes have been able to evolve. However, full-scale marketisation is not yet a reality and local protectionism remains a major obstacle. Thus, the main need is to co-ordinate the political and economic dimensions of MLG, and to thoroughly settle the relationships between the state and enterprises and between the central and local governments’ (Zhao and Zhang, 1999: 277). This is proving to be a difficult and complex process. No one can be certain what the future will bring. There are interesting debates concerning the possibility of a federal China emerging in the future and even suggestions that China already exhibits federalism in practice (Montinola, Qian and Weingast, 1995), but from the perspective o f the present study a formal federal system might not be capable o f accommodating the fluid and asymmetrical nature of MLG, and, moreover, even in a federal system (based perhaps on territorial provinces) there would have to be scope for the crucial role of cities and provincial sub-units. What makes it even more complicated is that the actors constituting China’s MLG now include foreign firms, which are not restricted by territorial governmental jurisdictions and levels of government. These firms, especially in Guangdong, have emerged as key actors in breaking down territorial jurisdictions through the creation of CPNs. The result is an increasing fluidity, complexity and diffusion of authority that does not fit neatly into the formal territorial patterns of China’s ‘official’ political and administrative structure. The overall impact of China’s new forms o f MLG on micro-regionalisation across Guangdong, Taiwan and Japan, will emerge out of the continuous interactions of Guangdong's political context, national constitutional circumstances and changing external economic forces.

1 For example, the Multilevel Governance Conference at the University of Sheffield, June 2001, discussed the wider applicability o f the MLG concept

2 Prybyla (1996) schematically presents China’s administrative and hierarchical relations 3 The figures are based on China’s Fifth Census (October 2000). See Mitsubishi (2001).

4 At the end o f 1949, there were 50 provincial-level units In 1959, the provinces were reduced to 29 in number In 1967, provincial units numbered 30 See Hu, Shao, and Li (1989)

5 After 1983, 14 cities were designated central economic cities (jihuadanlie chengshi). Chongqing, Wuhan,

Shenyang, Harbin, Ningbo, Dalian, Guangzhou, Xian, Qingdao, Shenzhen, Chendu, Changchun, Nanjing, Xiamen In 1999, Shenzhen, Qingdao, Ningbo, Dalian and Xiamen became CSPs However, other cities and capital cities have retained most o f their administrative authority

6 This provides exemption from tariffs on imports in order to encourage production by foreign firms 7 For example, Cho (1998: 69) schematically explains how the Party’s leading role extends into the state institutions and how vertical and horizontal state institutions interact

8 The main characteristics of the Soviet administrative system were: (1) the number o f levels varied from region to region, (2) local governments were subordinate to the organ of power at the same level and also to the level o f government immediately above them; and (3) the local governments had many departments dealing with different kinds o f work See Chang (1995).

9 For example, under Deng Xiaoping’s leadership, the presidents o f the PRC (Li Xiannian 1983-88, Yang Shangkun 1988-93) were not even ranked in the top three CCP's hierarchical authorities Deng Xiaoping held the top rank only at the military level and not at the level o f the Party or state system

10 According to the lists o f provincial Party Secretaries and Governors in 2000, almost 60% o f provincial First Party Secretaries were transferred from other provinces and 60% of Governors were promoted from local elites See Yabuki (2000: 130-32).

11 Jiang Zemin stressed the need to establish the Party's leading system among private firms in May 2000

(NKS, 5 July 2000).

12 Since 1992, Guangdong has been the top-ranking province in China See DKB,

http /Avww dkb co.jp/houjin/report/china/200002/

13 Beijing, Shanghai and Tianjin were allowed more restrictive variation in sharing total revenue’

14 The figure is from (ZTN, 1999).

15 For example, the rate of self-reliance of local finance at the provincial, city and county levels o f government in 1999 was 72.3% Central government finance transferred RMB 213 8 billion to local government finance (provincial, city and county levels). The rate of township and village finance was 1018% and these levels transferred RMB 2 6 billion to the provincial, city and county levels o f government See lmai Kenichi (2000)

16 In terms of the proportion of price controls in total sales between 1978 and 1992, production goods declined from 100% to 18%, consumption goods declined from 97% to 6%; and agricultural goods declined from 94% to 13%. See Amako et al (1999 109)

17 The Party Secretaries in Shanghai, Beijing, Shandong and Guangdong were selected as members of the Political Bureau

18 Xie Fei, a former Guangdong Party Governor, was selected as a member of the CCP Political Bureau but died in 1999

CHAPTER 5

JAPANESE FOREIGN DIRECT INVESTMENT AND EAST ASIAN