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    Governance of Centrally-Administered Municipalities

    in China

    ***Rung Yi Chen Tse-Kang Leng

    Background and Institutional Arrangements

    The historical background of Centrally-Administered Municipalities (CAM) may be traced back to the early years of the Song Dynasty (around 767 A.D.). The Sanquan County;三泉縣; of Shaanxi Province enjoyed the privilege of reporting directly to the central government due to its special transportation and security status. In the Yuan, Ming and Qing dynasties, some special administrative regions were

    1regarded as Zhili;直隸;, indicating their special status to the central government.

    However, these Zhili administrative units were entitled only to the level of county

    or province. No specific metropolitan area or large city was designated the status of Zhili. The first CAM did not appear until 1926, when the KMT(Kuomintang, the Chinese Nationalist Party) troops of the Northern Expedition occupied Wuhan and established the Hankou Special City, equivalent to a CAM nowadays. After 1927, the KMT administration promulgated the Regulations on Governing Special

    Municipalities and assigned the 8 cities of Nanjing, Shanghai, Hankou, Peking, Tianjin, Qingdao, Guangzhou and Harbin as CAMs. In 1930, the KMT government promulgated a new Organization Law of Municipalities and decreased the number

    of CAMs to three: Nanjing, Shanghai and Peking. In 1947, the KMT government added Chongqing, Tianjin, Harbin, Dalian, Guangzhou, Hankou, Xian, and Shenyang to the list.

     1 Liu Junde, Wang Yuming, Zhidu yu chuangxin : zhongguo chengshi zhidu de fazhan yu gaige xinlun (Institutions and Innovation: A New Aspect of Reform and Development of Chinese Cities) (Nanjing:

    Nanjing daxue chubanshe, 2000), pp. 196-97.


     In 1954, after the establishment of the Peoples Republic of China, the central

    government granted Beijing, Tianjin and Shanghai the status of CAMs. In 1997, in order to promote the go west policy and coordinate the Three-Gorges dam project and related affairs, Chongqing became the fourth CAM in China.

    According to the PRC Constitution, the direct superior authority of the CAMs is the central government; they are divided to districts and counties:

Article 30. The administrative division of the Peoples Republic of China is as

    follows: (1) The country is divided into provinces, autonomous regions and municipalities directly under the Central Government;

    Municipalities directly under the Central Government and other large cities are divided into districts and counties.

     These CAMs select their representatives to the National Peoples Congress to

    exercise their political powers in the central level:

Article 59. The National Peoples Congress is composed of deputies elected by the

    provinces, autonomous regions and municipalities directly under the Central Government, and by the armed forces.

     Constitutionally speaking, the establishment of CAMs is approved by the NPC. The NPC also has the power equivalent to the judicial review to invalidate any law or regulation passed by the CAMs if it contradicts the basic principles of PRC constitution. The enforcement of Martial Law in CAMs also needs to be approved by the NPC:

Article 62. The National Peoples Congress exercises the following functions and


     (12) To approve the establishment of provinces, autonomous regions, and municipalities directly under the Central Government;


     Article 67. The Standing Committee of the National Peoples Congress exercises

    the following functions and powers:

     (8) To annul those local regulations or decisions of the organs of state power of provinces, autonomous regions and municipalities directly under the Central Government that contravene the Constitution, the statutes or the administrative rules and regulations;

     (20) To decide on the enforcement of martial law throughout the country or in particular provinces, autonomous regions or municipalities directly under the Central Government;

     The administrative power and duties of CAMs are under direct control of the State Council:

Article 89. The State Council exercises the following functions and powers:

     (4) To exercise unified leadership over the work of local organs of state administration at different levels throughout the country, and to lay down the detailed division of functions and powers between the Central Government and the organs of state administration of provinces, autonomous regions and municipalities directly under the Central Government;

     (15) To approve the geographic division of provinces, autonomous regions and municipalities directly under the Central Government, and to approve the establishment and geographic division of autonomous prefectures, counties, autonomous counties and cities;

     The main reason for establishing CAMs is that, due to their special importance, the central government need to avoid unnecessary bureaucratic stagnation and constraints, especially the constraints from horizontal and vertical coordination. These cities, under the direct control of the central level, are always political, economic, and cultural centers in China. For instance, the capital city Beijing is the administrative core of China; it also controls major economic as well as cultural resources. Shanghai is Chinas biggest business and economic center, and the most globalized city. Tianjin, adjacent to the capital city, is the major port city and business hub in northern China.


    Chongqing, located in central China, serves as the linchpin to connect coastal and inland China. It is also Chinas major manufacturing center.

     Regardless of the various characteristics and different historical settings, these CAMs are serving as a major locomotive for regional development in China. According to the estimates of Chinese scholars, the status of being a CAM will raise the GDP per capita of city residents 2.36 times more than that of coastal cities without the status of a CAM. The figure will become 3.23 times compared to inland cities.

    2The CAM effect is significant in China. Since the establishment of the CAM in

    the 1950s, these municipalities have shouldered the responsibility of implementing economic, political, and social duties through direct investment from the central government. It is obvious that the functions of these CAMs are not limited to localities. Their real contribution is to upgrade the overall development in the

    3respective locations to the national level.

    Functions and Operation of Chinese CAMs

     The four major CAMs in ChinaBeijing, Shanghai, Tianjin, and

    Chongqingeach reflects different functions of national development. Each CAM is discussed separately in what follows:


     The major difference between Beijing and other CAMs in China is its role as the capital city and political center of China. This special status enhances its position

     2 Chen Lei, ―Zhongguo jingji zengzhang de Dongbu yu zhixiashi xiaoying‖ (The CAM effects and thChina‘s development in the Eastern Region), paper presented at the 7 Young Economists Conference,

    22 September 2007. 3 Liu Junde, ―Ershiyi shiji Zhongguo zhixiashi zhengqu gaige de zhanlüe sikao‖ (A strategic appraisal of China‘s CAM reform), Zhejiang xuekan, No.4 (1998), p. 74.


beyond the economic function and elevates its status as Chinas major focus of

    political as well as cultural development.

     Beijing was called Jicheng (薊城) and became the capital city of the Yan

    Kingdom during the Warring States Period. Around 1000 A.D., Jicheng was transformed into the capital city of the Liao Kingdom. Its name was changed to Yanjing;燕京; afterwards. In the Yuan dynasty, Yanjing became the capital city and the name was changed to Beijing. Three Chinese dynastiesthe Yuan, Ming and

    Qingassigned Beijing as Chinas capital city. In other words, during Chinas

    imperial era, Beijing was the political center for about 796 years (1115-1911).

     Nowadays Beijing has the most advanced information and distribution system in China and serves as the hub of air and ground transportation. After 1949, Beijing was also transformed into a manufacturing center for heavy industries, especially the steel and petro-chemical industries. After 1979, Beijing introduced service sectors and high-tech industries as the major focuses of development. Attracting foreign direct investment has also become Beijings main task in upgrading its manufacturing and

    service industries. According to 2007 statistics, Beijing has introduced 22,944 foreign

    4enterprises and the total investment amount has reached US$876.21 billion. In

    reality, its status as a capital city has enhanced Beijings capacity to become a center

    for enterprise headquarters. Due to the fact that Chinas economic decision-making

    bodies are still concentrated in the political center, foreign enterprises prefer to establish headquarters in Beijing to get access to key institutions and persons. In addition, Beijings economic status is enhanced by the fact that most of the

    decision-making organizations of large state-owned enterprise groups and banks are located in Beijing. These economic power houses buttress Beijing as a political as

     4 Mei Hua Shao, ―Kuaguo gongsi sheli zongbu‖ (Establishing headquarters of multinational corporations), Dongfangwang, 2 September, 2003.


well as economic core of China.

     The weakness of Beijing as a CAM is its inability to integrate adjacent cities such as those in a major economic region like the Yangtze River Delta area. In other words, given its special status as a CAM, the further development of Beijings

    economic role requires it to enhance the horizontal governance with other secondary cities in the region. A single CAM is not able to create economic competitiveness. The concept of comprehensive governance, as introduced by Wu Liangyung, is the key to

    5the further development of the whole region.


     As one traces back the history of Tianjins development, it is found to be among

    the first treaty ports and to have enjoyed a special status in terms of business and

    theconomic development. In Tianjins heyday in the late 19 century, it was the second

    largest business city and most important financial center in northern China. Tianjin was also the hub for sea and ground transportation, and equivalent to Shanghai in southern China. After the establishment of the PRC in 1949, Tianjin was transformed into a manufacturing center. Due to the fact that heavy industry was the first priority for economic development in the 1950s and 1960s, Tianjins status as a service hub in

    northern China declined sharply. During the Cold War era, the central government constrained the coastal development due to national defense concerns. The Tangshan earthquake in the early 1970s further weakened and slowed down Tianjins economic

    performance. Being so close to the national capital, Beijings concern for stability also

    6inhibited the city from launching economic reforms in the 1980s.

     5 Wu Liangyung, ―Mianxiang Ershiyi shiji Zhongguo teda chengshi fazhan de weilai ―(The prospects for China‘s mega cities), Guihua yanjiu, No. 4(1996), pp. 23-27. 6 Jae Ho Chung, ―Recipes for development in post Mao Chinese cities: themes and variations,‖ in Jae Ho Chung (ed.), Cities in China: Recipes for Economic Development in the Reform Era (New York:

    Routledge, 1999), p. 7


     Being adjacent to Beijing, ironically, put Tianjian in a disadvantageous position. In theory, Beijing and Tianjin could be complimentary. Tianjin is only 130 km from Beijing and has served as Beijings major port city. However, Beijing itself has

    intended to become a comprehensive economic center for a long period of time. There is a serious degree of overlap in terms of industrial structure between these two CAMs, such as in the electronics, telecommunications, transportation, and petrochemical industries. In the tug-of-war between Beijing and Tianjin, Beijing always enjoys the

    7advantages of preferential treatment and bureaucratic prevalence. Due to the magnet

    effect of Beijing, Tianjin has survived under the shadow of a political giant. Unlike Shanghai, Tianjin has not possessed a wide range of industrial activities, a large pool of skilled labor, or been favored as a strong financial investment environment by the central government in recent years.

     However, as the Economic Center in the North as described by the State

    Council in 2006, Tianjin still enjoys comparative economic advantages. Compared to over-crowded Beijing, Tianjin still has large pieces of virgin land in the suburban areas. The Tangshan earthquake in the early 1970s provided Tianjin with both a challenge and an opportunity to reconstruct old city regions. The success of the Pudong Project in Shanghai encouraged Tianjin bureaucrats to undertake administrative reforms and attract foreign direct investment. In general, the economic-technical base of Beijing is better than that of Tianjin; but Tianjin prevails over Beijing in international trade and finance. The human resources of Tianjin have better quality in terms of skills and management, thus rendering its enterprises as

    8being more economically efficient than those of Beijing.

     7 Zou Zhaoxi, ―Beijing yu Tianjin de Chanye Xindingwei‖ (New industrial focuses of Beijing and Tianjin), Zhongguo keji touzi, Vol. 9 (2007), p. 58. 8 Ye Shunzan, ―Development prospects of North China‘s coastal region and Beijing-Tianjin

    conurbation,‖ in Anthony Gar-On Yeh and Chai-Kwong Mak (eds.), Chinese Cities and China's

    Development: A Preview of the Future Role of Hong Kong (Hong Kong: Centre of Urban Planning and



    Shanghai symbolizes the clash between Western and Chinese civilizations. After being named one of the five open cities, as provided by the Treaty of Nanking in 1842, Shanghai was opened to Western trade and residence from that time on. It was a combination of unfettered Western capitalism, boundless Chinese entrepreneurial spirit and an unrivalled geographical location that witnessed more than a century of

    9unprecedented and dramatic growth at the mouth of the Yangtze River. Shanghai

    was designated as a Special Metropolitan Area by the KMT government and

    became a CAM in 1927. During the foreign concession era, the Chinese government could control only the northern part of the city and the Chinese quarters in the south of the Foreign Concession Area. The Chinese government did not regain control of the whole of the Shanghai metropolitan area until 1945 following the end of WW-II. Before 1949, the city was Chinas capitalist enclave as well as the hub of the

    communist-led workers movement in the 1920s and underground communist

    10activities in the 1930s and 1940s.

    thThe reemergence of Shanghai in the last decade of the 20 century is closely

    linked to political changes in the central government and to the political will of the paramount leader, Deng Xiaoping. During Mao‘s era, Shanghai was transformed from

    being the ―Paris in the East‖ into a manufacturing base for consumer goods and light

    industries. Shanghai was the most important source of China‘s tax revenues for more than four decades after the Communists took over in 1949. In fact, an enormous range of industries was established in Shanghai. Almost all of the growth took place in the

Environment Management, University of Hong Kong,1995), p. 237. 9 Yeung Y.M., ―Introduction,‖ in Y.M.Yeung and Yun-Wing Sung (eds.), Shanghai: Transformation

    and Modernization under China’s Open Policy (Hong Kong: Chinese University Press, 1996), p. 2. 10 Peter Cheung, ―The Political Context of Shanghai‘s Economic Development,‖ in Yeung and Sung (ed.), p. 50.


    state sector, and the central government rather than the municipality controlled the state enterprises. Shanghai not only acquired a strong base of heavy industry and a highly diversified industrial structure, but also surrendered much of the industrial autonomy it had once enjoyed, becoming a creature of the planned economy

    11dedicated to achieving narrow production goals to the virtual exclusion of all else.

    Shanghai acquired industrial diversity and production experience to an extent that has no parallels in China and few anywhere in the world. Precision machinery , the embedding of defense-related activities within the municipal industrial system, entry into high-technology activities such as electronics, as well as the manufacture of weaponry and aircraft called for research, and this brought into existence a handful of well-equipped laboratories. The importance of Shanghai as an industrial center and as one of the bulwarks of military research sheltered the city from the turbulence and

    12dislocation that plagued the country during the Cultural Revolution.

    Shanghai is currently, however, facing severe challenges and pressures. It has to compete with the coastal areas outside the Yangtze Delta, such as the Pearl Delta in the South and the Bohai Rim in the North. The influence of the

    Suzhou-Wuxi-Changzhou area within the Yangtze Delta is increasingly being felt as it

    13scrambles for markets with Shanghai. As for Jiangsu‘s flourishing agricultural

    economy, Shanghai was the preferred source of consumer goods and a range of household durables. Township and village enterprises that proliferated in southern Jiangsu and nearby Zheijiang turned to Shanghai for skills, equipment, and markets. Many of these were established by workers who were transferred from Shanghai in

     11 Yusuf and Wu, The Dynamics of Urban Growth in Three Chinese Cities (Oxford: Oxford

    University Press, 1997), p. 47. 12 Ibid., p. 49. 13 Gui Gonghao, ―Development of Shanghai and The Yangtze Delta,‖ in Anthony Gar-On Yeh and

    Chai-Kwong Mak (eds.), Chinese Cities and China's Development: A Preview of the Future Role of Hong Kong (Hong Kong: Centre of Urban Planning and Environment Management, University of Hong Kong, 1995), p. 245.


    14the 1970s and not permitted to return because of population controls. Furthermore,

    the immediate hinterland became part of an industrial continuum extending from the city to the lower Yangtze region.

    During the ten years of the Cultural Revolution, the ―Gang of Four‖ had close

    relationships with political and economic forces in the Shanghai region. When Deng launched his economic reforms in 1978, Shanghai was a highly politicized city with a shady infrastructure supporting a huge population. Even during the first decade of Deng‘s reforms in the 1980s, Shanghai was financially squeezed to serve as a stabilizing factor supporting the reform acts and experiments in the southern province of Guangdong. The rebirth of Shanghai began with the Pudong Project following

    Dengs southern tour in 1992 that relaunched Shanghai on a new path of development that transferred it into a global city.

    When Deng launched the Pudong Project to rebuild Shanghai in 1992,

    policy-makers and city planners faced the following severe challenges: (1) Over-concentration of population and industry clusters in the urban center; (2) Mixed usages of industrial and residential spaces in the downtown area; (3) A serious shortage of urban housing;

    (4) Outdated urban infrastructure; and

     (5) Environmental deterioration in the urban region.

    These five challenges were intertwined, and needed a strong hand to solve all the related issues. The relocation of urban industries and the provision of housing were cornerstones of the rebuilding process. Various estimates from 1993 to 1997 indicate that the Shanghai municipal government relocated more than 700 state-owned enterprises and created three square kilometers of space in the city center

     14 Yusuf and Wu, The Dynamics of Urban Growth in Three Chinese Cities, p. 67.


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