This section contains a brief outline of the institutional divisions that structure activities of municipal authorities. This is followed by a short description of the municipal system of budgeting.
Institutional divisions in Chinese cities
The top leadership in Chinese cities consists of a Party Secretary and a Mayor. These two positions are generally reached by passing through a political promotion system. The Mayor is appointed through nomination, followed by election and confirmation by the local People’s Congress, and the Party Secretary is appointed by a higher party organization. A cloudy overlap exists between the institutional responsibilities of local commissions and party affiliations, but it has been observed that where jurisdictions coincide, the CPC committees tend to be more influential (BBC, 2012). Officially, the functions of the local party congress include examining committee work reports, reporting to higher party levels and “passing resolutions on major issues in the region” (People’s Daily, 2010).
Administrative divisions on a municipal level reflect those of the central government. Municipal branches of the NDRC (DRCs) are responsible for drafting development plans, approve major industrial and infrastructure projects, promote industrial restructuring and support technology development. The municipal Economy and Information Technology Commission (EITC) is in charge of enterprise support policies, the Bureau of Commerce for trade policy and the Bureau of Finance municipal tax collection. The Construction Committee (the local branch of MoHUrD) is responsible for spatial planning, resource use in the construction sector, and monitoring and promoting buildings standards. The Municipal Transport Bureau is in charge of providing public transport. The Municipal Environmental
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Protection Bureaus (EPBs) are local branches of MEP that monitors pollution standards, ecological zones and promote environmental protection.
The central government encourages provincial and municipal governments to set up climate change leadership groups, usually made up of staff from departments working with related issues, such as energy conservation and environmental protection, often from DRCs and EITCs. Since the NDRC’s adoption of a National Climate Change Programme in 2007, many local governments have set up this type of groups. Responsibilities of the groups include implementation of national climate change policy, as well as to design and coordinate province level action in the areas of energy saving and pollution reduction (Qi et al, 2008).
By placing climate policy under the remit of Development and Reform Commissions, the issue becomes associated with industrial energy consumption and economic structural reform, rather than environmental issues. In cities that have not yet adopted specific climate mitigation agendas, energy saving and renewable adoption policies are also frequently adopted by departments responsible for industry and construction policy. This means that local environmental protection bureaus (EPBs) often hold responsibility over eco-city building, but not climate action programs. In recent years, the administration of EPBs has shifted away from rigid, hierarchical systems towards greater independence in determining local priorities, strategies and financing arrangements (Lo & Tang, 2006; Mol & Carter, 2006; Mol, 2009). The government is attempting to further strengthen the authority of environmental units and improve coordination between authorities working with environmental issues. At the same time, the status of EPBs remains weak and implementation is affected by limited institutional capacity, in terms of both resources and authoritativeness in relation to other departments (Lo & Leung, 2000; Liu et al, 2012; Kostka, 2014; Mai & Francesch-Huidobro, 2015). Balme (2011) explains the difficulty of local implementation of climate related policy as one of conflicting priorities related to fundamental clashes of objectives.
Tax collection and municipal funding
Ongoing processes of political and fiscal decentralization have increased the autonomy of provincial and municipal governments (Caulfield, 2006; Cai & Treisman, 2007, Liu & Tao, 2008; Liu & Salzberg, 2012). Today, municipal authorities in China are in charge of urban spatial planning, economic development strategies, and provision and funding of public services and infrastructure: electricity, transport, water and wastewater, and waste management, education and health, and enforcement of environmental protection legislation (Saich, 2008). Since 1994, China has a tax sharing system that divides authority of tax collection between government levels. Unfortunately, decentralization of responsibility has not been accompanied with equal capacity to raise funds, which has left municipalities with a low ratio of revenue to expenditures. The easiest way for cities to generate off-budget funds is through land concessions, which creates a disproportionate willingness of urban governments to invest into land development strategies (Liu & Salzberg, 2012). Liu and Salzberg (2012) estimate that through China’s tax sharing systems, subnational governments receive approximately 50%, whereas the funding responsibilities are approximately 70% of the total burden.
This leaves municipal governments permanently underfunded and pressed to search for additional financial resources. A popular strategy of developing land to generate municipal revenues has contributed to rapid expansion of development of commercial property, also known as “construction binges”, resulting in the emergence of ghost towns and inefficient and irregular land use (Caulfield, 2006; Qi et al, 2008). The need for off-budget funding also contributes to support of expansion of major enterprises that contribute to the local economy by increasing the tax base (Liu & Salzberg, 2012). According to previous studies, taxes, fees and dividends from SOEs are a primary source of local government revenue as well as source of funding for local projects, which means that it is in the interest of the authorities to maintain key businesses in the urban area (Qi et al, 2008; Mai & Francesch-Huidobro, 2015).
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Many local authorities in China face large debts while migration into cities places considerable pressure on service and infrastructure provision (Wei, 2015). In response to this problem, the Chinese leadership introduced a new budget law in 2014, with the aim to improve transparency and efficiency of local government spending, and increase trade with bonds and debt (Yu, 2014). Another central government strategy to mobilize funding is to encourage new financing and cooperation models, such as public-private partnerships (PPPs) and build-operate-transfer schemes (BOTs). A fund of 180 billion RMB ($27 US billion) has been set up by the central government to encourage such projects, and in 2015 local governments planned to invest 8.7 trillion RMB ($1.3 US trillion) into 6,650 PPPs in the areas of transportation, environmental protection, public service and infrastructure (Zhong, 2015). Public-private partnerships is seen as a way to mobilize financing for public infrastructure investment, such as in the transport, water and waste sectors (Choi et al, 2010; Stewart et al, 2014; Zhong et al, 2008).