The Political Economy of Noncompliance in China: the case of industrial energy policy

Abstract

One of the greatest challenges facing China today is the central government's ability to ensure that policies are implemented effectively at the local level, particularly policies that seek to make China's economic growth model more sustainable. These policies face resistance from local authorities and enterprises that benefit from the status quo. This raises a key research question: why do some provinces more fully implement these central policies? We argue the extent of local implementation is best conceptualized as a rational balance between economic and political incentives: localities with regulatory autonomy, low regulatory capacity and alternative interests will not fully implement policies that are at odds with local economic imperatives. By examining a critical case of central policy implementation—industrial energy intensity reduction in the eleventh five-year plan—this article demonstrates that, regardless of industrial makeup or economic development, provinces that have greater regulatory autonomy for noncompliance coupled with alternative economic interests do not, on average, perform as well. Using a nested analysis approach this study illustrates this argument with both quantitative analysis and original case study evidence from fieldwork interviews.

Notes

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^37. EI = 1 ton standard coal equivalent (SCE)/10,000 RMB.

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^52. Price, ‘Assessment of China's energy-saving and emission-reduction accomplishments’, pp. 49–50.

^53. Price et al., ‘The challenge of reducing energy consumption of the top-1000 largest industrial enterprises in China’, p. 6. However, this is only true if officials scored below 60 out of 100 on their evaluations.

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^65. Many researchers emphasize the importance of relative provincial autonomy in policy success. Sheng, Economic Openness and Territorial Politics in China, p. 3; Naughton, ‘A political economy of China's economic transition’, p. 124; Zheng, ‘Center–local relations’, p. 197; Shirk, The Political Logic of Economic Reform in China, p. 83.

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^74. Taxes are not just used to prop up industry; new regulations include provisions to reduce taxes for companies that comply with EI reduction goals. See the 11th FYP Top 10 Projects Implementation Plan ‘十一五十大重点节能工程实施意见’.

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^78. Government officials responsible for industrial regulation from across western China expressed similar opinions at the ‘Project completion meeting of low-carbon upgrading of industrial parks in western China’, Chongqing, 20 April 2013.

^79. The energy intensiveness of secondary industry is correlated to LME presence (r = 0.4884).

^80. Industrial GRP and energy intensity of industry are not correlated (r = 0.1098).

^81. The study included measures of the proportion of SOE investment in total provincial fixed asset investment and of investment as a percentage of economic output. Investment levels, changes in investment and the origin of investment had no explanatory value.

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^83. Brødsgaard, ‘Politics and business group formation’.

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^88. Interview with former provincial party official, Beijing, February 2011.

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^90. According to the ‘Industrial Transfer Guidance List’ published by the Ministry of Industry and Information Technology, Shaanxi is classified as a receiving province for heavy industry ‘产业转移指导目录 (2012年本)’.

^91. LMEs are concentrated in mining, which faces heavy central oversight.

^92. Interview with regulatory official, Shaanxi, March 2011.

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^94. Ninety percent of Chongqing's industrial output is sold domestically. Zhiyue Bo and Chen Gang, ‘Bo Xilai and the Chongqing model’, East Asian Policy 465, (2009), pp. 42–49.

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^105. Interview with Guangdong factory owner, Beijing, January 2011.

^106. Email correspondence with Guangdong-based businessmen, 31 January 2011 and 1 February 2011.

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^108.Ibid.

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