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Officially and unofficially : processes of land development in Chinese planning Cao, Dawei 2006

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Officially and Unofficially - Processes of Land Development in Chinese Planning by Dawei Cao B.E., Wuhan University, 1998 A T H E S I S S U B M I T T E D IN P A R T I A L F U L F I L M E N T O F T H E R E Q U I R E M E N T S F O R T H E D E G R E E O F M A S T E R O F S C I E N C E in P L A N N I N G in T H E F A C U L T Y O F G R A D U A T E S T U D I E S T H E U N I V E R S I T Y O F BRIT ISH C O L U M B I A October 2006 © Dawei C a o , 2006 Abstract In the Ch inese planning sys tem, there are two planning p rocesses : a ru le-based process and guanxi. In a rule-based process, planning p rocesses are based on legal procedures whereas in guanxi, the planning p rocess is based on "relationships", which can lead to corruption. T h e s e dual p rocesses are a controversial aspect of the C h i n e s e planning sys tem. However, the two often oppos ing p rocesses operate in conjunction. Scho la rs have debated the fate of guanxi for severa l years. S o m e bel ieve that guanxi will d isappear gradually with the enhancement of "rule of law" whereas other scho lars bel ieve that guanxi will cont inue to occur. Therefore, investigating whether guanxi practice will remain a part of the Ch inese planning system is a meaningful endeavor that may help to dec rease corruption in C h i n e s e planning. Th is thesis argues that guanxi works for two reasons: benefit seek ing and abuse of discretionary power. Benefit seek ing is a part of human nature that cannot be gotten rid of - as is culture. Therefore controll ing the abuse of discret ionary power is the main purpose of decreas ing the pract ices of guanxi. Ch inese planners are aware of this. However, they are attempting to limit discretionary power by using statutory means . Th is thesis argues that the focus should be p laced on how to superv ise the abuse of discret ionary power instead of the removal of discret ionary power. S imply speak ing, this thesis examines opportunit ies to superv ise dec is ion-making p rocesses within the planning sys tem. Within the gradual progress of global izat ion, Ch inese planners must real ize the importance of bottom up planning p rocesses in the t ransparency that it offers. It is the key to supervis ing the abuse of discretionary powers in the current C h i n e s e context. Many meaningful planning methods, such a s des ign charrette and open house, should be the next step for Ch inese planning pract ices. ii Table of Contents Abstract . ii Table of Contents iii Chapter 1: Introduction 1 1.1 Guanxi, official process and unofficial process 1 1.2 Scope of study and research questions 5 1.3 Methodology, limitation and organization 7 Chapter 2: Guanxi 10 2.1 Introduction 10 2.2 What guanxi is and how it works 10 2.3 Why guanxi works 12 2.4 Further investigation on why guanxi works 16 Chapter 3: Chinese Cadre Rotation System and Administrative Law 19 3.1 Introduction 19 3.2 Chinese cadre rotation system 21 3.3 Chinese administrative law reforms 24 Chapter 4: Case study - Xin Real Estate Development Project 30 4.1 Introduction 30 4.2 Chinese planning law 31 4.2.1 Selecting Land 32 4.2.2 Land Use Planning Permit 32 4.2.3 Land Use Right .33 4.2.4 Construction Permit 36 4.3 Case study 39 4.3.1 Site Selection and Land Acquisition 39 4.3.2 Acquisition of the Land Use Right 43 4.3.3 Acquisition of the Land Use Planning Permit 45 4.4 Findings 48 4.4.1 Guanxi Practice 48 4.4.2 Administrative law works to a certain level 49 4.4.3 What is the point? 50 Chapter 5: Case study 2 - Zoning Practice in China 52 in 5.1 Introduction , 52 5.2 Attributes of the Chinese planning system 53 5.2.1 Lack of Appropriate Legislation 54 5.3 Zoning practice in Wuhan 57 5.4 Findings 64 Chapter 6: Conclusion 66 6.1 What is the purpose? 66 6.2 Implications 69 Bibliography 71 Appendix : Selection of interviews 74 IV Chapter 1 Introduction 1.1 Guanxi, official process, and unofficial process In the Peop le ' s Republ ic of C h i n a , it is widely accepted that guanxi (relationship) is an important principle in socia l exchanges . It is common for someone to say la guanxi (guanxi practice) or "open the back door" in order to get the resources they need . Th is is a common practice throughout C h i n a , in Beij ing, in Shangha i , and throughout the countryside. The practice of guanxi is deeply embedded in C h i n e s e culture and is an essent ia l tool for successfu l ly complet ing tasks in virtually all spheres of soc ia l life (Gold, Guthr ie & Wank 2002, p. 3). B e c a u s e of the significant status guanxi has in Ch inese society, it is important to have a sol id understanding of it in order to research activities focused on or related to socia l exchanges . In C h i n a , land development is based primarily on one particular socia l exchange -land transfer. Accord ing to statutory law, all C h i n e s e land belongs to the state therefore the first step in the p rocess of land development is almost universally an exchange in which land use rights are bought by deve lopers from the central government. In this exchange process , there are at least two parties involved, l government and developers, representing the resource al locator and the petitioners respectively. The resources that will be al located in this p rocess include potential development lands, permits for land development, and permits for construct ion, to name a few. There are rules which guide the exchanges between petitioner and al locator known a s planning procedure law and local planning procedure regulations. Al l land exchange interactions are to follow the principles of these planning laws and regulations. For example , in the p rocess of obtaining potential development lands, planning regulations require that the government organ izes a bidding p rocess in order to best select the right developer for the endeavor at hand. T h e s e formal rules are cons idered to be an official p rocess and by following this p rocess it is a s s u m e d that certain ou tcomes can be guaranteed, such a s predictability and equity, to name a few. However, in reality, there are other procedures deve lopers use a longside the official procedures. Genera l ly speak ing , these spec ia l procedures could be understood a s an unofficial p rocess . For instance, in the land distribution p rocess , a local government might al locate lands to a developer directly without bidding. Though this is no longer often the c a s e s ince the creation of the Land Bidding Center, this might still happen in some smal l C h i n e s e cit ies (interviewee). In this scenar io , the government 's role in land al location is different from what the legal requirements cal l for, therefore this p rocess could be deemed a s an unofficial p rocess which is problematic because it c reates inequity. Many people bel ieve that guanxi p lays an 2 important role in this unofficial p rocess . From here on in, these p rocesses will be referred to a s rule-based patterns (official process) and guanxi patterns (unofficial process) . Ru le -based patterns and guanxi patterns in the Ch inese planning system have their own respective precondit ions. Ru le -based patterns infer that planning officials' act ions in the p rocess of land development are bound by procedural laws. In this model , all of the act ions have to follow a pre-establ ished statutory "process instruction". If the real p rocess of land development does not follow the instruction, people who are affected have statutory resources to apply for a judicial review to protect their inal ienable human rights. Th is way, at least theoretically, equity and fa i rness can be ensured. O n the other hand, the gtyanxZ-based system al lows planning officials to determine the land development p rocess a lone, without signif icant legal constraints. To a certain extent, they have the autonomy to do what they choose . There are two condit ions that al low this to happen. First, there is no procedural law to guide the planning p rocess or in some c a s e s , the procedural law is simply ineffective. S e c o n d , there is no effective supervis ion on officials' discret ions. In C h i n e s e land development p rocess , the official p rocess and the unofficial p rocess are in play s imul taneously (interviewee). The coex is tence of these two 3 processes in the Ch inese planning system confl icts with scholar ly studies on guanxi, an issue which many researchers have debated. S o m e bel ieve guanxi will d isappear with the gradual enhancement of the rule of law. Others argue that it will cont inue operat ing, with different degrees of abatement. Yang and Guthrie provide semina l works that attempt to predict the fate of guanxi. Yang argues that guanxi will cont inue to be a part of the Ch inese transaction system (1994, 2002) while Guthr ie thinks guanxi practice will decl ine with the enhancement of "rule of law" (1998, 2002). Their different perspect ives are likely the result of research in different C h i n e s e communi t ies. Therefore, there remains much confusion regarding the relationship between guanxi and statutory process . O n e focus of these scholars ' debates is whether a wel l -developed legal sys tem would increase or dec rease guanxi pract ices. In my opinion, the key to understanding the existence of guanxi practice is not determined by the existence of wel l -developed procedural law. Al though procedural law clearly institutionalizes the dec is ion-making p rocess , it will not necessar i ly prevent guanxi practice from occurr ing. Guanxi works because of two reasons: the abuse of administrative power, especia l ly abuse of discret ionary power, and the desire of resource al locators and petitioners to seek benefits. Officials working a s resource al locators have the 4 administrative powers to distribute materials that the petitioners need. Conversely , petitioners can provide benefits to officials, no matter what form the benefits may take. A wel l -developed legal sys tem helps set up rules for officials' practice of administrative power and therefore dec reases opportunit ies for guanxi pract ice. However, the legal sys tem cannot el iminate the other factor influencing guanxi practice - officials' discretionary power. It is the officials' discretionary power that creates opportunit ies for guanxi practice in many planning procedures. Officials could use their discretion to exchange benefits by practicing guanxi without breaking laws. Therefore legal reform could dec rease guanxi however it is not appropriate to say it will el iminate all guanxi pract ice. Th is is why guanxi and procedural laws operate in unison throughout C h i n a . I bel ieve we want to limit guanxi practice, hence limiting the potential for corruption. W e must focus on improving t ransparency of officials' dec is ion-making p rocess in order to superv ise officials' discret ionary act ions. 1.2 Scope of study and research questions The research quest ions of this thesis are: why does guanxi work in the C h i n e s e land development sys tem? A n d , how to limit guanxi practice in the Ch inese planning sys tem? 5 In order to understand why guanxi works, we need to understand what guanxi is and its role in the Ch inese land development process . Additionally, one a lso needs to know the current superv is ion system on officials' behaviors in order to comprehens ive ly understand the roots of guanxi practice. Therefore this paper begins with literature review of guanxi, fol lowed by a review of Ch inese administrative law and its cadre rotation sys tem. T h e s e two reviews of C h i n e s e administrative law and cadre rotation system reveal how the Ch inese government is trying to limit guanxi through legal and institutional reforms. Fol lowing the literature review is two case studies. The first c a s e study investigates a real estate development project initiated by a company cal led "Xin" , located in a vi l lage. Th is c a s e examines the land development p rocess in the rural context and all s takeholders involved represent ones in rural land development p rocess . The c a s e supports the thesis that guanxi exists primarily because of officials' discret ionary powers. Even though many of the appropriate legal procedures were fol lowed, guanxi p layed a role in this c a s e , demonstrat ing the role of officials' discret ionary power. The second c a s e examines how C h i n e s e planners are trying to remove officials' discret ionary powers, which, in my opinion, is not the solution. Therefore, a s a conc lus ion, I a m stating two opinions. First, improving t ransparency of dec is ion-making p rocess could help to ameliorate the situation. S e c o n d , public supervis ion methods used in Western planning sys tem, such as open houses , des ign charrettes, to name a few, could be introduced into the 6 C h i n e s e planning system in order to improve the t ransparency of dec is ion making process . 1.3 Methodology, limitation and organization This thesis is based on field research in C h i n a during the summers of 2003 and 2006 as well a s a review of current soc ia l , polit ical, and legal literature from journals and other publications. The fieldwork component of this research took place predominantly in the city of W u h a n , Hubei Province - where I interviewed a number of scho lars , government officials, and members of the private sector. I a lso participated in a government project to help prepare new legal planning documents related to zon ing. Through my work with Wuhan 's planning department, I was able to a c c e s s many valuable government documents and meeting minutes, which further added to my understanding of current C h i n e s e planning and its planners. To gain addit ional perspect ives, I a lso visited professors from my undergraduate university a s well a s officials in the planning bureau, in order to hear their opinions of the Ch inese planning sys tem, particularly their ana lyses of its constraints and opportunit ies. It must be noted that the physical context of C h i n a creates limitations for this 7 thesis. Different cities have different methods to oversee planning practices; therefore, it is somewhat inappropriate to assume that the conclusions of this thesis adequately represent the whole country. However, the conclusions generally reflect the current context of the Chinese planning system. To guarantee anonymity and confidentiality in my interviews, I have labeled the in-text citation of interviews as "interviewee" and interview documents (appendix) as "interviews" without reference to actual names. The content analysis of this thesis includes two main parts, that of the scholars' works and that of the planning documents of the City of Wuhan. The scholarly literature includes many different areas ranging from political science, sociology, and legal studies to special planning journals. This thesis is essentially structured in three parts. The first part is a literature review on guanxi and a review of the Chinese legal and cadre management system. The second part introduces the case study components of this work. Through interviews and other data collection methods, readers can see a realistic picture of how guanxi happens in day-to-day planning practice in China. As the final part of this thesis, a conclusion provides an analysis of why guanxi can still work with the enhancement of legal planning reform. Furthermore, some planning methods used in Western countries are indicated as these may help to decrease 8 guanxi practice in the Chinese land development system. Chapter 2 Guanxi 2.1 Introduction Guanxi is a general term for-various interactions in C h i n a . Many scho lars have noticed this phenomenon and have researched it from many different perspect ives s ince Ch inese reforms began (Gold et a l . 2002, p. 77). In this chapter, I will examine three i ssues related to guanxi: its connotat ions, how it works, and the predominant reasons for it ex is tence. 2.2 What guanxi is and how it works In C h i n e s e , guanxi roughly means "connect ions" (Gold et a l . 2002 , p. 3), "relationships", or "socia l networks". It d o e s not have a precise definition in the C h i n e s e dictionary because it is more of a cultural phenomenon than a descriptor. In my opinion, it mostly refers to the relationships between people who have strong interpersonal connect ions. Guanxi is a relationship, but any relationship is not necessar i ly referred to as guanxi. The difference between guanxi and an ordinary relationship is that guanxi is more specif ic. Accord ing to J a c o b s , guanxi refers to those relat ionships that have "particularistic t ies" (1979, p. 243). For instance, kinship, native p lace, 10 ethnicity, schoolmates, military mates, and shared exper iences - these are all particular t ies. T h e s e ties make the people who have guanxi have stronger connect ions than general relat ionships. Secondly , guanxi suggests reciprocal obl igations. Yang argues that "once guanxi is recognized between two people, each can ask a favor of the other and expect the other will repay for his/her k indness" (as cited in Go ld et a l . 2002, p. 7). Th is is true and very familiar to the Ch inese . In C h i n a , if a person does not repay another 's k indness without quest ion, he/she will be deemed an unthankful and abnormal person. Without fulfilling this obl igation, nobody will help them in the future. Therefore, reciprocal obligation is at the core of guanxi a s a rule for soc ia l exchange . C h e n ment ions how the use of guanxi is cal led guanxi xue (as cited in Go ld et a l . 2002, p. 6). The way guanxi works depends on how strong people 's relat ionships are. It may include entertainments, gifts, meals , or money, to name a few. If the relationship is general , entertainments and meals are almost a lways used . If people know e a c h other wel l , money can be transferred because there is less risk of being caught. Th is is a negative aspect of guanxi. Through these act ions among particular relat ionships, people interact with one another over t ime, maintaining guanxi and furthering their own agendas . Th is al lows for great n potential for corruption. 2.3 Why guanxi works Peop le like to interact with others they have guanxi with because their interactions are rooted in trust. Trust is an important factor in C h i n e s e transact ions, especia l ly in a society without sufficient legal recourse (Wong & Leung 2001 , p. 40). W o n g and Leung cal led this t rust-based relationship a "defense theory" (2001, pp. 37-41). Accord ing to them, C h i n a does not have a wel l -developed legal sys tem and market. A s a result, people prefer to dea l with others they already know because it can make their interactions more secure , predictable and expedient. Redd ing argues that for survival purposes, Ch inese tend to interact with others by using guanxi (as cited in W a n g & Leung 2001 , p. 39). It is a way of smoothing relat ionships. Furthermore, guanxi not only can secure a transact ion; it can a lso lower transact ion costs. Car r and L a n d a argue that the "c lub-based transact ions" can lower costs (1983, p. 156). Economis ts know this a s a "Transact ion C o s t Ana lys is (TCA)" . In their book, "Guanx i : Relat ionship Market ing in a Ch inese Context ' , W o n g and Leung explain expressively: One of the principles of TCA is that decision makers have limited information and may 12 pursue their self-interest with incomplete or misleading information disclosure. Even in a well-developed market economic system, markets may fail to allocate services and goods efficiently due to natural and government-induced operation conditions such as market and regulatory barriers (Kogut 1988; Root 1987; Teece 1986). Therefore in China, with a developing market economy, people prefer to get information through their Guanxi networks. Each of the two partnering actors can improve its efficiency because the costs of transaction in terms of production and technology innovation, are minimized in this manner (2001, p. 21). S o m e scho lars bel ieve that the reason for guanxi practice lies with the institutional structure of Ch inese society (Guthrie 1998, p. 255). B e c a u s e there is no wel l -developed procedural law that can formalize interactions in C h i n a , guanxi works a s a substitute. Therefore, they bel ieve that with the enhancement of the rule of law, guanxi practice will eventual ly d isappear. Accord ing to Guthr ie, as the state constructs a rational-legal sys tem and the market economy emerges gradually, society begins to accept the formal official procedures and people begin to trust the system of law instead of guanxi (1998, pp. 272-274). Consequent ly , people alter their behavior away from using informal p rocesses toward more formal legal procedures. From his argument, we can conc lude that Guthrie p resumes formal legal p rocesses could lead to a standard procedure and this legal procedure could regulate all of the behaviors and interactions. Therefore 13 resource al locators and petit ioners would no longer have the option to practice guanxi. S o m e other scholars suggest otherwise. For instance, Yang argues that guanxi was revived in the midst of the Cultural Revolut ion and has historical connect ions with Confuc ian ism (1994, p. 153; 2002, p. 472). Furthermore, C h i n a has its own particular type of legal culture in history, which did not stop the guanxi practice; thus, she argues that gft/anx/'will not d isappear. In the system of Confuc ian ism, lun is an important principle that formulates the bas is of people 's relat ionships. Lun, a lso cal led five lun, determines hierarchies in the Ch inese community by descr ib ing human relationships in five categor ies. The five categor ies respectively are parent-chi ld, ruler-subject, husband-wi fe, friend-friend, and elder-younger. In this sys tem, everybody is connected to others through one of these five relations. C h e n and C h e n argue that lun has three implications for a society, which are the "human relationships", "orderly society' ' and "moral principles" (2004, pp. 307-308). The "Human relationships" theory suggests that every C h i n e s e person is connected to others and that C h i n e s e society is a relationship oriented one (Chen & C h e n 2004, p. 307). Therefore guanxi actually is just a bas ic reflection of soc ia l structure. "Orderly society" argues that the "human relat ionships" are categor ized by different kinds of t ies 14 and that each person has his/her own responsibilities according to his/her position in the web of gfL/anx/'(Chen & Chen 2004, pp. 307-308). This connotation could be used to explain why some relationships work better than others. As an example, developers A and B separately asked official C to allocate a parcel of land. C only satisfied A because the guanxi between C and A is stronger than C and B. Finally, "moral principles" determines how the responsibilities of different people depend on how strong their guanxi is (Chen & Chen 2004, pp. 307-308). A general relationship and a guanxi relationship are therefore very different. Jen is another important aspect of Confucianism meaning goodness and benevolence. Jen educates people and points them in the direction of goodness. One way to achieve this is reciprocal behaviour. By using reciprocity, a person becomes righteous because he/she shows favour to others. In Chinese ethics, the obligation of reciprocity is quite important (Wong & Leung 2001, p. 74). In this way, reciprocal interaction is rooted in the core of Chinese philosophy. Because Confucianism has dominated Chinese society for thousands of years, guanxi is deeply embedded in Chinese culture. Yang argues that the reason for guanxi is not simply due to the absence of a well-developed legal system (2002, p. 463). To support her argument, she claims that guanxi will continue to operate in China despite the construction of a formal 15 legal sys tem in recent years (1994, pp. 222-244; 2002, p. 472; s e e a lso Chapter 3). 2.4 Further investigation on why guanxi works The debate between Yang and Guthrie represents a major scholar ly d isagreement . The focus of the debate is how far the rule-based process can regulate peoples ' behaviors in soc ia l exchange . This focus cannot be adequately investigated to date as C h i n e s e legal reform is still underway. However, I argue that if we step back from the inquiry into the usability of law, if we v iew the primary subjects of exchange (power and capital), we will find there are s o m e other reasons a s wel l . In my opinion, the reasons for guanxi practice lie within two issues: benefit seek ing , and abuse of administrative power, especia l ly abuse of officials' discret ionary power. Guanxi practice is used for benefit seek ing. In the interaction between resource al locator and petitioner, trust is one significant requirement and reason for guanxi practice. However, benefit seek ing is another and perhaps the more important reason. For instance, in the land al location process , the official works a s the al locator who determines the distribution of land. Th is person is a benefit seeker 16 as well . In this interaction, he/she can receive benefits from developers. Therefore the practice of guanxi is an exchange between administrative power and the power of money. Officials' administrative power is not problematic. What is problematic is the abuse of administrative powers. If officials use their administrative powers to exchange benefits, problems will occur. Therefore supervis ing officials' behaviors becomes important. In order to limit officials' abuse of administrative powers, C h i n a has undertaken many reforms regarding, for instance, the cadre rotation sys tem and C h i n e s e administrative law, to name a few. The purposes of these reforms are to dec rease the use of personal relationships in administrative work and provide procedural rules for officials' behaviors. However, s ince these reforms are still being undertaken, it is difficult to say whether or not these new methods could regulate all officials' behaviors. Furthermore, within the range of officials' abuse of administrative power, there is a spec ia l situation in which officials do not necessar i ly break the procedural administrative regulations in order to get benefits, meaning that officials could use their discretion to exchange benefits without breaking legal requirements in their day-to-day pract ices. For instance, in the land development p rocess , officials could influence a project by using their subjective opinions on des ign proposals. P lanning officials' subjective opin ions are their discret ion. A s we know, discretion is necessary in government 17 administrative work therefore we cannot remove them by procedural administrative legislations. Thus officials a lways can use their discretion to gain benefits from their cl ients through the practice of guanxi. For this reason, I bel ieve guanxi practice will keep occurr ing if we cannot limit abuse of officials' discretionary power. In order to superv ise officials' practice of discret ionary power, the t ransparency of officials' dec is ion-making must be improved. The C h i n e s e government is using legal and institutional reform to superv ise officials' behaviors. Legal reform helps create rules to govern officials' work and regulate officials' behaviors and institutional enhancement could help to improve the accountabil i ty of government work. The next chapter will review two important C h i n e s e reform methods: Ch inese administrative law reform and the cadre rotation sys tem. The review of these two sys tems will provide readers with an overview of current methods being used to limit guanxi practice in C h i n a . 18 Chapter 3 Chinese Cadre Rotation System and Administrative Law 3.1 Introduction A s noted in Chapter two, guanxi works for two reasons: benefit seek ing and officials' abuse of administrative powers. In order to limit officials' abuse of administrative powers, we need to understand where administrative powers come from and the current sys tem for superv is ing officials' administrative work. Understanding the root of officials' administrative powers is thus the first issue to be examined. Ch inese local governments have acquired increased administrative power s ince the beginning of reforms. A s T ing argues, "the economic reforms and administrative reorganization s ince 1978 have resulted in a diffusion of state power to local governments. . . " (2006, p. 88). In the p rocess of reform, local governments have "obtained increased discret ionary power to make and implement pol ic ies" (Ting 2006, p. 86). Th is distribution of power from central government to locals benefits economic development. C h i n a is undertaking its economic reform to move from a plan-oriented to market-oriented economy. In a market economy, the central government cannot make dec is ions regarding local development i ssues because each local government has its own unique situation. Therefore transferring management powers for economic and administrative 19 dec is ions from central government to locals can provide a better environment for the market economy. With the transfer of manager ia l power from central to local governments, local governments a lso gain responsibil i ty for " local economic principals to protect, promote and even directly manage local economies" (Ting 2006, p. 86). Loca l governments not only acquire more discretionary powers from central government, but a lso take more responsibi l i t ies for their own revenues. Therefore their incentives to advance economic development have been raised significantly. The increased interest on monetary value provides possibi l i t ies for local governments to seek benefits by using their increased manager ia l powers. Many scholars a lso s e e this phenomenon as "rent-seeking". Accord ing to Lu , "rent-seeking" is one attribute that has become an issue in the C h i n e s e administrative system s ince reforms (1999, p. 354). "Rent -seek ing" refers to "public agenc ies seek ing profits generated by their monopol ies over certain resources or powers for their own gains" (Lu 1999, p. 354). B e c a u s e local governments have more administrative powers after reform, they can use their powers to exchange benefits. Furthermore, officials in local governments are the people who practice the administrative powers in day-to-day work; they a lso have big potential to abuse their increased administrative powers for their own 20 purposes. A s one interviewee in Lu 's research sa id , "Government power has become departmental ized, departmental power personal ized, and personal power privatized. It has become a terminal d i sease in some state agenc ies and one hard to cure "(Lu 1999, p. 362). It is very true in current Ch inese administrative system that officials use their administrative power to exchange benefits by practicing guanxi with their cl ients. In recent years , more and more high-rank local officials, such as , C h e n Kejie (former v ice-chai rman of the Standing Commit tee of the National Peop le 's Congress ) , C h e n L iangyu (former C C P Shangha i chief), to name a few, have been arrested, giving a picture of how officials use their administrative powers to exchange benefits with their cl ients. In these exchanges , guanxi works as a way to bridge officials' administrative powers and their cl ients' benefits. 3.2 Chinese cadre rotation system In order to limit the exchange between officials' administrative powers and their cl ients' benefits, the C h i n e s e government initiated administrative reforms to enhance supervis ion of officials' behavior in recent years . In these administrative reforms, the cadre rotation system is one important mechan ism a imed at decreas ing guanxi relat ionships between officials and their cl ients. 21 Legal ized by Civi l Servant Provis ional Regulat ions in 1993, the cadre rotation system requires that officials regularly rotate among equal ly-ranked posit ions (Huang 2002, p. 72). The rationale behind this sys tem is that the rotation of officials' posit ions can limit fact ional ism and guanxi relat ionships. If officials know they will be rotated to different posit ions in a short t ime, their behaviors will abide pol ic ies because "they gain little by pursuing interests assoc ia ted with their current posit ions that they will leave shortly" (Huang 2002, p. 72). The transfer of cadres might occur among any provinces or administrative sys tems, even in different sys tems. For instance, "the governor of J iangsu may be appointed as the governor of Zhej iang, or the minister of electronic industry may be reass igned to head of Peop le ' s Bank of Ch ina" . (Huang 2002, p. 72) However , the rotation system has its own limitations. Accord ing to Ed in , the rotation is select ively appl ied in the Ch inese administrative sys tem. "Leader cadres of local governments are primarily rotated however ordinary local cadres are not rotated. Party leaders are more often rotated than government leaders" (2003, p. 49). Furthermore, "the C C P takes greater care to control important local leaders, especia l ly from economical ly success fu l a reas" (Edin 2003 , p. 50). Th is means that the rotation sys tem only works in a limited scope in reality. It is a lso impossible to apply the cadre rotation system to all posit ions in the C h i n e s e 22 administrative system because many posit ions are technical ones that require officials' professional knowledge. For instance, in the Planning Bureau , many planning officials are a lso professionals who have planning degrees. Even in the s a m e planning bureau, it is hard for an economic planner to take on a position which is responsib le for physical des ign . Therefore in reality, the rotation system is limited in its appl icat ion. It is c lear why the cadre rotation system cannot remove officials' guanxi practice because not all officials will be rotated. C h i n a has appl ied another reform in the cadre management sys tem in order to increase its administrative accountabil ity. A n examinat ion system is used for cadre appointment in its civil personnel select ion process . Every official is required to take an exam in order to acquire a posit ion. However, the problem with officials' abuse of administrative powers is related to their incentives for seek ing benefits, not whether a person can pass exams or not. "One person may be very eligible for a posit ion, but he may not be willing to perform his public function". (Chang 2004, p15) Furthermore, implementation of these new cadre management methods has a lso met local cha l lenges. Accord ing to C h i n a Daily, the new cadre management methods were being refused in some areas , "in s o m e government departments, civil servants continue to follow the old rules and refuse to innovate although C h i n a has promoted civil serv ice sys tem for 10 years" (Sep 23, 2003 , C h i n a 23 Daily). The Ch inese government is willing to introduce new methods to enhance accountabil i ty of government work. There is little doubt that all these cadre management reforms help to a certain level, yet the effect iveness of these methods is still not clear. Put another way, whether these new methods could limit officials' abuse of their administrative powers is still not d iscernable. Therefore one is not able to say that institutional reform at its current stage works very effectively. At the s a m e time, C h i n a has a lso appl ied other reforms in order to formalize its government administrat ion. C h i n e s e administrative legal reforms a lso deserve to be ment ioned in this d iscuss ion . 3.3 Chinese administrative law reforms C h i n a began its modern legal reforms after 1978. The first landmark of this p rocess w a s the 1982 Const i tut ion, which upheld the principle of equality. Article 5 conf i rms that "the state shal l uphold the dignity of the social ist legal sys tem and article 33 dec lares that all c i t izens are equal before the law" (Peerenboom, 2002, p. 57). At the s a m e time, the judiciary and legal profession were reestabl ished and educat ion programs were introduced. In this legal reform process , the concept of "rule of law" is being introduced to Ch ina . Rule of law focuses on controll ing officials and rulers by restricting their monopolist ic powers. The bas ic character of 24 "rule of law" is that rulers are bound by law. Therefore administrative law which limits governments ' power is essent ia l to the rule of law. The beginning of Ch inese administrative law started in the 1990s. There is no accepted definition for administrative law among C h i n e s e scholars (Lin 1996, p. 3). S o m e scholars bel ieve that administrative law should focus on controll ing government monopoly power whereas others argue that the role of administrative law is to meet the needs of public administration (Lin 1996, p. 3). Genera l ly speak ing , the concept of Ch inese administrative law covers substantive administrative legislation and procedural administrative legislation. Substant ive administrative legislation grants power to administrative bodies to make dec is ions, whereas procedural administrative legislation has two functions. First, procedural administrative legislation sets up procedures for administrative bodies to follow; and second , procedural administrative legislation grants chal lenging powers to parties who are affected by administrative behaviors (Lin 1996, p. 13). Issued in 1989, Administrat ion Litigation Law (ALL) represents the creation of C h i n e s e administrative law. Protected by this law, individuals could sue the government if they bel ieve government act ions violate their rights. Th is a lso requires that government administrative work should be undertaken accord ing to legal requirements. The Administrat ive Litigation Law "actual izes the 25 constitutional concept that the Ch inese government is itself constrained by law and accountable to its c i t izens at least in certain respects" (Horsley 2006, p. 4). S o o n after the adoption of the A L L , in 1990 the Administrat ive Superv is ion Regulat ions and the Administrat ive Reconsiderat ion Regulat ions were p a s s e d (Peerenboom 2002, p. 398). In order to set up regulations for controll ing cadres , the Ch inese government issued the Civi l Servant Provis ional Regulat ions in 1993; the examinat ion mechan isms for cadre appointment and cadre rotation sys tem were introduced and legal ized by these regulations. In 1994, the State Compensa t ion Law was publ ished. It provides legal rights to individuals to receive compensat ion when their rights are neglected by unlawful government work (Horsley 2006, p. 4). Enac ted in 1996, Administrative Punishment Law introduces "procedural due p rocess" into Ch inese legal sys tem. With gradual publication of these laws and regulations, a comprehens ive administrative law sys tem is being establ ished in Ch ina . In all of these administrative laws and regulations, the Administrat ive L icens ing Law is a landmark. The C h i n e s e Administrative L icens ing Law w a s adopted on August 27, 2003 and c a m e into force on July 1, 2004. O n e aim of this law is to prevent officials' seek ing benefits from issuing l icenses and franchise rights. Accord ing to Horsley, the purpose of the C h i n e s e Administrat ive L icensing Law is to restrain government 26 activity by "restricting the number of government agenc ies that have authority to issue approvals in the form of l icensing and limiting the types of activity that can be so regulated" (2006, p. 4). In day-to-day government administrative work, officials could use the rights for granting permits or f ranchises to seek profits. Th is explains how administrative powers have been abused by officials. The creation of this Administrat ive L icens ing Law is a legal attempt by government to prevent abuse of administrative powers. A s one Ch inese official argues, in the past, Ch inese v iewed law a s a means to control the people; now law is a lso being used to control government behavior (as cited in Hors ley 2006, p. 5). T h e s e administrative laws clarify officials' administrative powers. However it is difficult to say whether these administrative laws will remove officials' abuse of their administrative powers anytime soon , for a number of reasons. First, "rule of law" in C h i n a actually is far removed from the western definition. "Rule of law" is a western concept of law which fol lows a bas ic assumpt ion that rulers are bound by law. However in C h i n a , the legal culture in history is referred to a s "rule by law". In a "rule by law" sys tem, law is s imply a pragmatic tool for obtaining and maintaining political control and socia l order (Peerenboom 2002, p. 33). The "rule of law" focuses on controll ing officials and rulers by restricting their monopol ist ic powers whereas "rule by law" suggests controll ing people and achieving soc ia l order by promulgating general commands reinforced by punishments. Al though C h i n e s e 27 "rule of law" has in theory been operat ing s ince reform, it is still not appropriate to say the current Ch inese legal sys tem is a "rule of law" sys tem. Therefore, it is not c lear whether officials' behaviors will be strictly bound by law. S e c o n d , the weak C h i n e s e court sys tem could undermine legal rationality. The C h i n e s e court is not independent because it is a part of the government structure answerab le to National Peop le C o n g r e s s (Horsley 2006, p. 6). Loca l government provides f inancial support for local courts therefore courts naturally are reluctant to chal lenge administrative agenc ies (Peerenboom 2002, p. 399). Furthermore, judges somet imes refuse to accept c a s e s that will cha l lenge government officials in order to avoid breaking guanxi with local government (Peerenboom 2002, p. 399). Therefore it is impossible to predict whether or not C h i n e s e administrative laws will work a s expected and remove all abuse of administrative powers in reality. Furthermore, as noted in Chapter 2, there is a spec ia l situation in terms of abuse of administrative power which is abuse of officials' discret ionary power. The creation of an administrative law sys tem helps to regulate officials' behaviors. However, procedural laws cannot remove all officials' discret ion because the amount and role of discret ion desirable in an administrative system is debatable. A s Dav is argues, "every government and legal sys tem in world history has 28 involved both rules and discret ion. No government has ever been a government of law and not of men in the sense of eliminating all discret ionary powers." (1969, p. 17) If officials' discret ionary powers cannot be removed, opportunit ies for abuse of administrative powers will continue to exist. In order to limit abuse of officials' discret ionary powers, we should not only focus on bureaucrat ic reform and administrative legal reform, but a lso on improving the t ransparency of officials' dec is ion-making p rocesses , which will further help superv ise officials' behaviours. Currently it is not c lear whether the cadre management sys tem and administrative legal sys tem can remove all abuse of officials' administrative powers or not. Other methods to improve t ransparency of officials' dec is ion-making p rocesses need to be deve loped. The following c a s e study verif ies my assumpt ion that abuse of officials' discret ionary power should be noted in order to regulate abuse of officials' administrative power. It exams how guanxi was used in a land development project and it explains that although administrative laws were estab l ished, guanxi was still used in the exchange between officials' discret ionary powers and developers ' benefits. 29 Chapter 4 Case Study - Xin Real Estate Development Project 4.1 Introduction The X in Rea l Estate Development C o m p a n y (Xin) was initiated in 1998 in the city of W u h a n . It was a subsid iary of another company in S h e n z h e n which is very success fu l . In W u h a n , X in was a smal l new company which had just entered the market. Normal ly in C h i n a it is not easy for a company to enter a new city (market) due to var ious forms of protection set out by the local government. The owner of X in , Lu C h a n g , was definitely aware of this difficulty but because of c lose guanxi with Wuhan ' s municipal officials he dec ided to enter W u h a n market. The connect ion between W u h a n municipal government and Lu C h a n g dates back to the middle 1990s. At that t ime, a municipal government-owned company which was located in Hong Kong exper ienced a ser ious f inancial cr is is. The W u h a n government was unable to help because of central government restrictions on local authority's participation in the market (which were in p lace to dec rease the possibil ity of government corruption). B e c a u s e of this, the company had to find other means to gain ass is tance. Lu chose to help the company, creating a scenar io where the municipal government was indebted to Lu , i.e. owed him a favor. A s a reciprocal gesture, the leaders within the W u h a n government 30 supported X in 's entrance into its market. Th is guanxi has provided many benefits for X in . A s many are aware, project implementation p rocesses are controversial in Ch ina . Guanxi p lays a role and creates many opportunit ies for corruption in the land development process . C h i n e s e central and local governments are trying to deve lop a legal sys tem to regulate the officials' behaviours and in doing so ; many new planning regulations have been deve loped in cit ies throughout C h i n a . Before investigating the c a s e , s o m e background information, most of which is related to the formal implementation p rocess - P r o c e s s Manua l and Planning Law - will be introduced. 4.2 Chinese planning law C h i n e s e planning law is currently in a transitional reform phase. The City P lanning Act was enacted by the National Peop le 's Cong ress on 26 December 1989 and has been effective s ince 1 Apri l 1990 (Yeh & W u , 1998, p. 181). Th is is the landmark act for the legal reform of the Ch inese planning sys tem. S ince then, many new regulations have been publ ished by local jurisdictions in order to enhance the City Planning Act at local levels. Accord ing to the Planning Act , there are four s teps in a development p rocess which involve select ing land, acquir ing planning permits, obtaining land use rights, and acquir ing construct ion permits. 31 T h e s e four s teps could be cons idered the first procedural administrative rules in C h i n e s e planning sys tem. 4.2.1 Selecting Land C h i n e s e cit ies are p lanned cit ies. E a c h parcel of land is des ignated by land use type(s) prior to any development. The process of land select ion guarantees that the proposed land development conforms to local urban planning and is subject to planning administrat ion. W h e n a deve loper initiates a project, he/she goes to the Planning Bureau for the "Opinion on Site Select ion" . The project is checked against the Master P lan and Detai led Development Control P lan ( D D C P ) for the agreement of the proposed land development (Leung 2003 , p. 28). 4.2.2 Land Use Planning Permit If the land development proposal conforms to the urban plan, the developer then acqui res a planning permit which provides controls of physical des ign for his or her subdiv is ion or site des ign. With the Land U s e Planning Permit, the Planning Bureau will provide a sheet of codes for the developer which tells him/her what he/she can do and what is forbidden. T h e s e codes are used to direct subdiv is ion planning and site des igns. 32 4.2.3 Land Use Right In C h i n a , all land belongs to state. At the municipal level, the representat ives of the state compr ise of three parties: the municipal government, Danwei (or other land owners, such as military army), and vil lage col lect ives. Before the creation of the Land Distribution Cent re , developers had to lease the land use right from one of the three parties before undertaking construct ion. In order to acquire state-owned lands, most of which are located in the city's core area , a developer needed to go to the Planning Bureau to pay the lease directly. To acquire col lect ive-owned lands, most of which are located in the peripheral v i l lages around the city, a developer needed to negotiate with the vil lage col lect ive, in order to obtain land-use right. For a Danwei -owned land, the developer fol lowed the s a m e process as he/she did for vi l lage lands. Before the creation of the Land Distribution Cent re , there was major problem in the rural land development p rocess , a s seen in confl icts occurr ing between deve lopers and vil lage col lect ives. Deve lopers were able to acquire land select ion permits (opinions on site selection) from the Munic ipal government agency, the Planning Bureau , when the land use right in fact belonged to vi l lage col lect ives. In other words, the municipal government was al locating v i l lage-owned land to developers . Theoret ical ly municipal government had the right to dec ide future development within its jurisdictions but in reality, the municipal government did not 33 own vil lage col lect ives' land use rights, and therefore conflicts occurred. For instance, municipal government might designate a current vi l lage's land to become a new urban residential a rea in its development p lan. By doing this, the municipal government w a s able to dec ide how to use a vi l lage's land in the future. The municipal government, however, does not own the land use right of the vi l lage. Therefore when a developer obtained land select ion permits from the City P lanning Bureau , he/she had to negotiate with the vil lage first in order to acquire land use rights. Al though vil lage people could not refuse the government 's dec is ion, they could a lways ask a high price for their re imbursement from the developer because they knew the developer could obtain more value from the land. The negotiation between the developer and the vil lage collective therefore became crucial for a project. In reality, much v io lence occurred in this p rocess , as s e e n in newspaper reports in different cit ies (Wang 2003 , para 1). The creation of Land Distribution Cent res ended this problem. A Land Distribution Centre is a government organizat ion that controls ownership of all state lands. It is responsible for the transfer of land use rights from the vil lage to the state. In other words, the Land Distribution Cent re takes responsibil i ty for the transfer of land use which was previously conducted by developers. The Land Distribution Cent re , rather than the developer, now negotiates with the vil lage col lect ives in order to obtain v i l lage-owned land use rights, a transaction which 34 can occur at any time without any developers involved. The rationale for this transaction is based on the fact that the state wants to regain land use rights from vil lage col lect ives in order to reserve lands for the city's future development. Therefore the Land Distribution Centre works a s a "land sav ings bank" in this process . It buys land use rights from vi l lages and keeps land a s "state-owned". Th is p rocess el iminates the conflict between deve lopers and vi l lages because the state has many methods and options in negotiating with vil lage col lect ives. First, there are many optional lands around the whole city that the Land Distribution Centre could buy. For instance, in negotiating to buy a parcel of land, if the vi l lage collective a s k s for an unreasonable reimbursement, the Land Distribution Centre could give up this transaction and buy other vi l lages' lands instead. Furthermore, city government a lways sets up a "directive price" for reimbursement around the city. Al though this "directive price" is not law and vi l lages are able to negotiate it, in reality, the vil lage will not ask for an unreasonable price for reimbursement s ince col lect ives do not want to damage relationships with city. The Land Distribution Cent re is a lso responsible for sel l ing land to developers . After transferring vi l lage land use rights to the state, the Land Distribution Centre can place the land into a land market. In this market, developers bid for the land they want. In the c a s e of transferring of Danwei 's or vi l lage col lect ives' lands, the Land Distribution Centre a lso works a s a land market. For instance, if a Danwei 35 wants to sel l its land use right, the Danwei needs to ask the Land Distribution Cent re to provide a bidding opportunity for it (interviewee). In the current situation, most big cit ies in C h i n a now have a Land Distribution Centre although the Land Distribution Centre might take different forms and have different names in different p laces. For instance, in the City of W u h a n , there are two departments within the Planning and Land Management Bureau that conduct Land transfer and sel l ing. They are cal led the Land Management and Bank ing Centre (tu di zheng Ii chu bei zhong xin) and the Land Bidding Centre (tu.dijiao yi zhong xin) respectively. With regard to rural land management , the Land Management and Bank ing Cent re ( L M B C ) buys vil lage col lect ives' land use rights accord ing to city plan in order to transfer rural land use rights to state first. The Land Bidding Cent re (LBC) provides a bidding market in which deve lopers are able to bid for land. For Danwei -owned land, if the Danwei w ishes to sel l its land use right out, it is required to ask the L B C to provide a bidding opportunity for it in order for it to put its land on the market. 4.2.4 Construction Permit After acquir ing the land use right, the developer can apply for the construct ion permit for the final product. The construction permit is used for check ing whether the site des ign or subdiv is ion plan conforms to the development codes and 36 planning permit. T h e s e four s teps constitute the major procedural administrative legislation for development. They address the interactions among government agenc ies , developers, and other stakeholders, such as col lective farmers. T h e s e four s teps however, are not entirely sufficient for regulating the whole implementation process . Officials therefore have numerous opportunit ies to use their administrative powers to exchange benefits. For example , these four s teps do not impose a time limitation for deve lopers to acquire a planning permit. Therefore officials can strategically delay a review of a project and influence the implementation. Th is creates many problems for planning sys tems in all cit ies. The fundamental problem is the abuse of administrative powers of officials' in day-to-day pract ice. To solve this problem, many cit ies have conducted further legal planning reforms by publ ishing their own set of regulations to provide greater detail for these four steps. Issued in 2002, the W u h a n Planning P r o c e s s Manua l instituted formal procedures for the land development process . It provides substant ive administrative regulations a s well a s procedural administrative regulations. Through substant ive administrative regulation, it grants administrative powers to planning officials. The administrative powers include issuing a planning permit and a construct ion permit, 37 to name a few. For procedural administrative regulation, the manual sets up procedures for planning officials to follow as well a s sys tems for those affected by unlawful behaviour to chal lenge administrative powers. Written in two vo lumes, the procedures establ ished through the manual provide greater detail than the four s teps required by Planning Act. The first vo lume directs the planning official's work outlining how to deal with the project application from beginning to end. During early s tages of the planning permit application process , planning officials are told what they need from developers and how long they have to reply to the appl icat ion. Addit ionally, the manual oversees the requirements for the developer to follow. Prior to the development of the manual , there was no formal document that def ined the p rocess in detai l , creating the scenar io where officials' discret ionary powers were more or less unchecked. The publication of the manual formal ized this p rocess . In the first vo lume, most of the regulations are related to the time requirements of officials' work. The second volume - for the developer - dictates the p rocess which they should follow in order to dea l with the different permiss ions within the corresponding allotted time. Th is manual is the first official regulation in W u h a n in terms of local planning administrative regulation, which organ izes a formal detai led p rocess for project development from beginning to end . The c a s e study below investigates a project development in order to provide the reader with insight into the effect of legal planning reform in W u h a n . 38 4.3 Case Study W h e n Xin entered the W u h a n market in 1998, there was no local regulation for directing a detai led project implementation p rocess as ide from the Planning Act. Therefore many early administrative powers were still in the hands of officials. X in 's project is located on rural land therefore the rural land development p rocess is the topic of this c a s e study. Another issue which needs to be noted is that in the City of Wuhan , there is only one department which dea ls with land use management and planning management together, cal led the Planning and Land Management Bureau ( P L M B ) . P L M B has many departments which are responsible for different work. For instance, the Land Management and Bank Centre and the Land Bidding Centre are managed by P L M B . A s soon as X in was set up in W u h a n in 1999, it initiated a project. Al though the W u h a n Planning P r o c e s s Manua l was not publ ished at that time, the Planning Act was already in effect. Therefore the p rocess fol lows the general guidel ines only. 4.3.1 Site Selection and Land Acquisition A s soon as X in entered the W u h a n market, it received 100 hectares of vi l lage land directly from the Planning and Land Management Bureau (cheng shi gui hua yu guo tu zi yuan guan Ii ju) based largely on having good guanxi with municipal 39 government. At that t ime, the developer d id not have a c lear idea of what he would do with the land and how much money the project would require for making this a unique project, even for a local company. Normally, a private company initially se lects potential land then makes an appl icat ion to the Planning and Land Management Bureau ( P L M B ) to buy it. Occasional ly , the P L M B will not sel l , after consider ing the reputation of the private company. However for this project, the P L M B al located the land to the company directly because X in has good guanxi with the municipal government. It should be noted that it is very difficult for even a local private company to acquire such a large parcel of land at one time. Thus , in this p rocess , guanxi p layed a very important role. Acquir ing land is a lways looked at a s the most important issue for a developer consider ing most of their ability for profit der ives from the land. Prior to the establ ishment of a land market, personal guanxi was the eas iest way to obtain land. However, this soon changed . With the introduction of a land market and establ ishment of the land distribution sys tem in 2002 in W u h a n , the municipal government 's interventions into land al location p rocess dec reased rapidly. The Land Bidding Centre created, for the first t ime, a market for urban land. W h e n asked whether government interventions into land al location were likely to occur again in the future, an interviewee sa id , "I think it is impossible, because 40 after 2002 (creation of land distribution system), all of the potential development lands will be sold through land markets (Land Bidding Centre) in which every company, theoretically, is al lowed to make a bid in order to get the lands it wants. The bidding p rocess is relatively transparent for public supervis ion by al lowing people to hear. Even if the company has a good guanxi with the municipal government, the government dares not do that (interventions on land al location process) because of the transparent bidding p rocess and public superv is ion. S o government cannot intervene too much" (interviewee). In other words, after 2002 the major determinant of land al location is the market. However, in October 2006, when I ca l led another interviewee to gather stories about the land al location process in W u h a n , he provided me with an interesting story on rural land al location p rocess after creat ion of the land market. A s introduced above, within Wuhan ' s current land al location sys tem, there are two departments: the Land Management and Bank ing Cent re ( L M B C ) , and the Land Bidding Cent re (LBC) . The major work of L M B C is to buy lands and save them a s state-owned lands for future development. A s we know, rural land use rights belong to vi l lage col lect ives living on the rural lands. Therefore the municipal government is required to buy the land use rights from vil lage col lect ives before any new project appl icat ion can occur on the land. However this does not mean L M B C will buy all vi l lage col lect ives' lands around city. The L M B C select ively buys 41 rural lands accord ing to the master plan and its own criteria. Th is creates problems because officials of L M B C have the discret ionary power to dec ide which parcels of rural land to buy. There is another c a s e that expla ins the problem of the L M B C . In 2005 , the director of the L M B C , Z h u J i sheng was arrested because he leaked a secret to someone with whom he had a guanxi relationship, W a n g Kerong, that L M B C w a s ready for buying 800 hectares of rural land within a vi l lage. After acquir ing this internal information, W a n g approached that vil lage and s igned a contract with the vi l lage, al lowing W a n g and the vil lage to share the profits from the transfer of land use right to State in the future if the government were to buy those land use rights. W h e n the vil lage s igned the contract, it w a s unaware of the impending p lans of the municipal government to buy its land in the near future, therefore the vil lage agreed to share the profits with W a n g in exchange for very little. S o o n , the government bought the land and W a n g earned 18 million R M B (Ch inese Yuan) for his share . Through reciprocal obl igation, W a n g gave 400 thousand R M B to Zhu . The Guanxi relationship not only works in the L M B C , but a lso appl ies in the work of the L B C . Accord ing to the s a m e interviewee, every company is theoretically a l lowed to bid for land in the L B C . However, in realty, the L B C will set up many requirements for the select ion of compan ies . For instance, if C o m p a n y A has good 42 guanxi with officials in the L B C and wants to bid for land, before a bidding process , the L B C will issue a sheet of requirements for compan ies who want to bid for the land. These requirements will uniquely satisfy C o m p a n y A and eliminate other potential compan ies . Therefore C o m p a n y A can easi ly get this land by "bidding" without facing ser ious competi t ion. Th is a lso happens a s a result of officials practicing their discret ionary powers. Th is explains how in light of continuing legal planning reform and the development of many new methods to control guanxi, guanxi still can work. In X in 's c a s e , because the formal land distribution sys tem had not yet been created, guanxi p layed a major factor in land acquisi t ion. The municipal government asked P L M B to al locate the entire land to X in directly. 4.3.2 Acquisition of the Land Use Right Fol lowing land select ion, the acquisit ion of land use rights was a crucial step and many projects have encountered conflicts at this s tage. In this p rocess , major confl icts cons is ted of d isagreements regarding the reimbursement for the people who were living on rural lands. Th is is an issue which c a m e into play during X in 's project development. In the c a s e of X in 's project, the farmers on the land desired more money than the 43 developer wished to contribute. To solve this d isagreement, the municipal government c a m e to the ass is tance of X in . Accord ing to my interviewee, municipal government staff stood on X in 's s ide and negotiated with vil lage col lect ives in order to ask them dec rease their expectat ion. Th is tactic was success fu l because vil lage col lect ives are unlikely to totally refuse municipal governments ' opinion s ince the municipal government is the vil lage col lect ives' boss . Futhermore, the vil lage col lect ives needed to appear to maintain good relations with the municipal government in order to ensure good guanxi. Many officials were involved in the negotiation p rocess , such a s municipal government officials who superv ise this vi l lage's work and the leaders of local communit ies. Al l this does not mean X in was able to get the land for free, a s X in a lso paid significant re imbursements. For instance, X in helped the farmers who lost their land to obtain new jobs and helped the vi l lage to prepare its vi l lage development plan. Therefore the best outcome was acquired without conflict between them. Al though my interviewee refused to mention the price they paid, I bel ieve the price they paid was reasonable because other interviewees indicated there was no ser ious conflict in X in 's project in terms of transfer of land use rights. After solving the negotiation with the col lective community, X in was required to pay the land tax to the government. B e c a u s e of guanxi, X in received addit ional benefits from the government. Accord ing to land management law and regulations, 44 there are many different types of land tax in C h i n a such as land lease fee (tu di you chang shi yong fe/), land transferring fee {tu di chu rang jin), land value improving fee {tu di zheng zhi shui), to name a few. For the requirements of these fees, central government issue "directive pol ic ies" to local governments. However local governments have discret ionary powers to dec ide how much deve lopers should pay for different fees, creating opportunit ies for guanxi practice. B e c a u s e X in has guanxi with the municipal government, many types of land tax were removed for X in 's project (interviewee), helping X in to save a great dea l of money. W h e n I asked my interviewee whether or not this phenomenon still occurs , he sa id it does (October 2006) because there is no law or regulation to strictly control officials' dec is ions (administrative powers). Many regulations only stipulate minimum and maximum for these fees. 4.3.3 Acquisition of the Land Use Planning Permit The planning permit is issued by the P L M B . A major component of the planning permit is the development codes which are very important for the company. For instance, the height limitations have a far-reaching influence because this affects how many stories the developer can build and therefore determines the monetary value the developer can obtain. Al though the developer may have a good relationship with the municipal government, this does not mean that every official 45 of the P L M B which oversees the day-to-day planning practice will necessar i ly follow the developer 's w ishes. P lanning officials who oversee day-to-day planning practice can use their discret ionary power to influence developers ' projects, as indicated by my interviewee. A s a legal administrative regulation, the Planning P r o c e s s Manua l sets up project procedures and time limitations for the issuing of planning permits. O n c e the developer del ivers his appl icat ion, officials in the P L M B have 18 days in which to provide feedback. Th is is a significant amount of time (i.e. delay) for a project development in C h i n a . Therefore, for the process ing of one 's case , developers need to practice guanxi with officials on an informal bas is . For instance, developers could treat officials to mea ls and buy many gifts for him or her. Th is phenomenon is very common , especial ly in the c a s e of planning permits. The plethora of development codes provides huge discretionary power to officials, who are free to criticize a deve loper 's site plan and architectural des ign . The codes predictably regulate max imum and minimum limitations. For instance, typical sen tences in the codes , in no particular order, are as fol lows: (1) The new buildings should not be higher than 30 meters. (2) The style of the buildings should respect the historical context. 46 (3) The windows should reflect the context of the street. (4) The minimum height of a floor should be 2.7 meters. (5) The minimum of green space should be no less than 30%. S u c h criteria for officials' evaluat ion provide ample space for their professional assessmen t and officials could easi ly use their negative opinions to defer the process of a project. For this reason developers are inclined to find ways of accelerat ing the process , leading to a scenar io in which guanxi could take p lace. After receiving a planning permit, the major work is construct ion. Accord ing to my interviewee; the construct ion of the X in project went wel l . Currently (October 2006), the project is still ongoing because it was divided into different s tages. The first and second s tages were sold out and third stage is just now ready for sel l ing. For each stage, X in needs to follow the p rocess descr ibed above and guanxi cont inues to work throughout the whole project. In order to understand the system for supervis ion officials' guanxi pract ice, I contacted my interviewees again in October 2006 to ask them how often planning officials are rotated. No one was able to give me an exact time because it s e e m s to be the c a s e that if a planning official does not make a ser ious mistake, he/she will stay there. A s an example , the former director of the P L M B , Zhang Lin, was 47 just rotated to be the head of X in Zhou District in Ju ly 2006. Before her rotation, she stayed as director of the P L M B for more than 10 years (interviewee). Land is very important in C h i n a and every government agency which has powers related to land has the potential for corruption. For instance, the L M S C and the L B C , although they are quite new, have much more opportunity for corruption than other departments because land is a valuable resource. Furthermore, officials who have discret ionary powers have opportunit ies to practice guanxi without breaking regulations. B e c a u s e these officials are dec is ion makers who can influence development projects, developers have to practice guanxi w\Vr\ them in order to expedite their projects. 4.4 Findings 4.4.1 Guanxi Practice From this case study, we can determine that guanxi practice is effective and is still popular in this industry though it has perhaps reduced in importance in other industries as some scholars have argued. Within the real estate development industry, guanxi will likely continue to play an important role s ince discret ionary power remains as part of the nature of government. O n e responsibil i ty of the government is to regulate market uncertainty in order to benefit the public. Therefore the nature of planning could be seen as a tool used by government to 48 regulate negative impacts on society. Government cannot abandon the power of planning; therefore officials' discretionary power in planning sys tem will be perpetuated. The developers desire to build guanxi with officials because the officials have the power to control the project development process . Therefore good guanxi p lays an important role in this industry. Th is suggests that even well deve loped administrative law is unable to entirely control officials' behaviours because it is necessary to maintain the role of discretion in government decis ion making. 4.4.2 Administrative law works to a certain level A s is demonstrated in this c a s e , the W u h a n Planning P r o c e s s Manua l d o e s help to regulate officials' administrative powers. Before its publ icat ion, p lanners were able to use their discretion related to time requirements to influence a project. The Planning P r o c e s s Manua l provides time requirements for a project which planning officials are required to follow in their day-to-day pract ice. Th is il lustrates how administrative legal reform helps dec rease officials' abuse of administrative powers. However because the Planning P r o c e s s Manua l only limits the max imum time, which is 18 days, deve lopers are still likely to practice guanxi W\\h officials in order to shorten the waiting time. It is probable that there are no administrative laws which can provide further limitation for the time requirement. In other words, there is no administrative law which can eliminate officials' discret ions and 49 officials' discret ionary powers provide opportunit ies for guanxi practice. 4.4.3 What is the point? The major problem in this c a s e , probably in the whole planning sys tem, is the abuse of the officials' discret ionary power. The officials in the Planning Bureau who dea l with day-to-day practice could use this power for personal benefit. In a project development p rocess , the developer w ishes to obtain all of the permits a s soon as possib le and with the fewest possib le changes and postponements. P lanning officials who have the power to regulate the p rocess (the four steps) can easi ly s low down the process . Currently, detai led regulations do not exist to control the officials' discretionary power and to set up a formal detai led process . The Manua l does not clearly address issues related to the officials' discret ionary power, al lowing a grey area for the potential abuse of power. Regard less , it is impossible in reality to create c lear guidel ines to regulate discret ionary powers. Th is problem greatly troubles C h i n e s e planners and planning officials, which has prompted an effort to dec rease the abuse of discret ionary power. Legal planning reform remains a s a mechan ism to control officials' discret ionary power; though there are other ways Ch inese planners could think about solut ions. For instance, they could cons ider ways to increase the t ransparency of officials' dec is ion making p rocesses . In my next chapter, a c a s e study will show how Ch inese planners are trying to solve these problems in terms of officials' abuse of 50 discret ionary powers, illustrating C h i n e s e planners ' wills and efforts for planning reform. 51 Chapter 5 Case Study 2—Zoning Practice in China 5.1 Introduction A s noted earlier, abuse of officials' discret ionary power represents an important instance of guanxi practice. Ch inese planners are aware of this problem and they are interested in finding ways to control this abuse . The implementation of zon ing is an attempt by p lanners to control the abuse of discret ionary powers, the rationale being that by creat ing legislation and using the 'rule of law', the need for officials' discret ion is reduced. In other words, Ch inese planners want to be able to use legal documentat ion to control officials' discretionary power. Prior to 1997, the term 'zoning' did not exist in the Ch inese planning sys tem. The method planners used to regulate development in day-to-day practice w a s titled Detai led Development Control P lan ( D D C P ) , which designated many codes for different land parcels in order to regulate new development. A s seen in the previous chapter, the codes are not s o detai led as to prevent officials from using his or her discretionary power, opening up the possibil ity for corruption to take p lace. In 1998, zon ing was proposed by the city of S h e n z h e n a s a mechan ism to bring legit imacy to the land development p rocess . Learning from S h e n z h e n , W u h a n planners proposed the implementation of zoning in 2002. W u Zh i l i ng , the 52 director of the W u h a n Planning and Des ign Institute, was the lead official advocat ing this idea. In the summer of 2003 , I returned to the W u h a n Planning and Land Management Bureau to undertake field research on this subject. In a conversat ion with W u , I was asked to join the "zoning team" as no one in the office at the time had any exper ience with zon ing. I accepted this internship opportunity a s the subject of my second c a s e study. In the following sect ion, I will provide details to further the reader 's understanding of Ch inese planning. Before examining this c a s e study, some background on the Ch inese planning system is needed . Th is chapter begins therefore with an introduction to the motivating forces in C h i n e s e P lann ing. 5.2 Attributes of the Chinese planning system The C h i n e s e planning sys tem is currently in a period of transition with many soc ia l and economic reforms taking p lace, making it difficult to general ize in many c a s e s . Th is thesis is intended to d i scuss only the most obv ious attribute of the C h i n e s e planning sys tem, that is, a lack of appropriate legislation. A s d i scussed in the last chapter, discret ionary powers in the C h i n e s e planning system play a large role in 53 determining outcomes, creat ing many opportunit ies for corruption. It is said that the reason for this is the lack of appropriate legislation which can regulate the abuse of discret ionary power. 5.2.1 Lack of Appropriate Legislation Accord ing to Khakee , during the pre-economic reform period, urban planning in C h i n a w a s character ized by a lack of appropriate legislation (as cited in Yeh & W u 1998, p. 171). There was no need to employ legal measures in planning s ince planning was a management tool of the social ist government (Yeh & W u 1998, p. 171). Its only use was to al locate resources and to control development. After the adoption of economic reforms in 1978, C h i n a began to recognize the importance of a legal sys tem in a market economy. However, because the nature of planning is to control and direct development, there was not a lot of conflict between the old sys tem and the new requirements in terms of planning. The only difference l ies in the level of control. The first issue that underwent change in the planning sys tem is the control of the al location process , from state control to the market, in order that government could not designate speci f ic projects for each parcel of land a s before in a p lanned economy. Now, the control of land in the market economy is limited to designat ion of land use type, i.e. agricultural use , industrial use, for example. This is precisely 54 what was descr ibed in the 1989 Planning Act, the purpose of which was to define a comprehens ive planning system in line with the reform period goals (Yeh & W u 1998, p. 181). It was in this Act that the most critical planning tool, the master plan, was created. The master p lan, which is authorized in the Planning Act making it a legal document , outl ines the general land use pattern of a city and provides a vision for a city's future development. Accord ing to the explanatory note of the Planning Act , the master plan usually has a planning horizon of 20 years (Yeh & W u 1998, p. 183). B e c a u s e of its relatively large sca le however (normally 1:10 000), it cannot direct the smal l parcel development in day-to-day pract ice. For instance, in development projects on a single parcel , the developer needs to know the controll ing codes , such a s the max imum height, density and stories, which he or she can follow for site des ign , architectural design and construct ion. The master plan does not provide information on these set limitations; therefore a plan focused to regulate the specif ic site developments is needed in addit ion to the Planning Act. The Detai led Development Control P lan ( D D C P ) meets this need (Yeh & W u 1998, p. 196). In 1991, the Ch inese Ministry of Construct ion issued N O . 12 C o m m a n d — Plan-Mak ing Methods (Cheng Shi Gui Hua Bian Zhi Ban Fa). In this report, D D C P was instituted a s a new planning tool for instructing day-to-day pract ice (Xiong 2002, p. 27). 55 " D D C P is prepared for the a rea facing immediate construct ion; it inc ludes the implementation regulation of land use and building management , such a s building height, density, floor space ratio (Yeh & W u 1998, p. 184)". In other words, D D C P is the management tool used by planning officials in day-to-day development. B e c a u s e the D D C P w a s not legislated by the central government and the local government carr ied the responsibility, problems ensued . For instance, accord ing to the C o m m a n d , the local planning bureau has the responsibil i ty to issue the D D C P and to change it accord ing to spec ia l c i rcumstances. In reality, the local planning bureau legislates, executes and superv ises. Furthermore, the D D C P can easi ly be changed accord ing to the officials' subjective opinions. The changes will be determined by the level of power. A s an interviewee expla ins: DDCP is a government tool designed by professional planners; planners thought that officials who deal with planning practice should strictly follow the implementing codes in DDCP to evaluate the project application. But in reality, officials often can find some reasons to change them if they really want, such as inadaptability, etc. So the officials' discretionary power is very important for developers. It decides whether or not a project can be implemented easily and how much a developer could get. The lack of appropriate legal status is assumed as the major problem of DDCP by 56 planners (interviewee). Planners bel ieve that if D D C P was legislated by the local Peop le 's C o n g r e s s this problem could be solved (interviewee). If w a s felt that the discretionary power would be dec reased if the D D C P was legislated because it then becomes difficult to change a law. Th is represents an attempt by planners to introduce more legal rationality to planning, as in the c a s e of zoning. Ch inese planners bel ieve that the legal rationality of zoning would reduce the discretion of the urban planning system and equip the planning authorit ies with the rule of law (Yeh & W u 1998, p. 196). Under this c i rcumstance, S h e n z h e n initiated its urban planning reform in 1998. Later on , W u h a n began its own zoning practice in 2002. 5.3 Zoning practice in Wuhan A s noted in Chapter 4, the W u h a n Planning and Land Management Bureau compr ises many departments including the Planning and Des ign Institute which provides technical support in a role similar to a design company in the Western context. The Planning and Des ign Institute (PDI) has planners and des igners preparing the master p lan, the D D C P and other technical documents . T h e s e are professionals who dev ise physical development plans. The director of PDI , W u Zhi l ing, leads the zoning practice in W u h a n . 57 W u , a new director (beginning in 2002) of PDI , is a v igorous young leader. He convened severa l meet ings within the PDI and dev ised a plan to organize a spec ia l team to work on this project at the beginning of 2002. A senior planner in PDI, Duan Yu (Wu's c lassmate in university) was appointed the leader of this working team. W u also asked other people in his agency to provide support to this working team. A s a department, they began to concentrate their work on initiating zoning in one particular street (jie dad). In October 2002, the working team took an investigative trip to the S h e n z h e n Planning Bureau and upon return initiated W u h a n zoning, which was named a s "Statute for Management of Urban Planning" or the "Statutory P lan " (SP) . The major component of zoning is a physical plan (diagram). Th is physical plan dictates land use types and development codes . From my observat ion, this physical plan is the s a m e a s the D D C P , the only difference being that the zon ing plan is access ib le to the public and legal ized by local legislative body, the Peop le 's Cong ress . In contrast, the D D C P is used only for planning officials and is a policy legislated by the planning bureau itself. During the creat ion of the physical p lan, planners put a great deal of time into d iscuss ing land use types, intensity and spatial relations. More importantly, there was much d iscuss ion on the extent 58 to which they should regulate a development. For instance, they d i scussed the "best max imum" height restriction of a building in a des ignated parcel so that once legal ized by the local legislative body, the "best max imum" could not be altered by officials' discret ions. This increases accountabil i ty within the government administration because it dec reases the potential for abuse of power. A s noted earlier however, no legal sys tem is able to remove all discretion in administrative work and zoning is no except ion. The development codes in zon ing are similar to the D D C P (see chapter 4, a lso see online zon ing documents of city of Wuhan) . Therefore officials still have discret ion to influence a project. For instance, officials can argue that the building height of a proposal conflicts with city skyl ines although it is in the scope of "best max imum" height. Th is demonstrates how legal rationality cannot remove all of discretionary powers in administrative work and why guanxi cont inues to occur. Another contribution of W u h a n zoning is the introduction of var ious methods of public participation. Prior to the W u h a n zoning implementat ion, public participation in urban planning w a s limited to handouts and quest ionnaires (Chen , J . 2000, p. 54). The W u h a n zoning practice included the use of more forms of public participation, such as in-depth interviews, focus groups, and an online survey, to name a few. Speci f ic s teps in the p rocess for developing zoning were a s fol lows: 59 (1) 2003.3-2003.5 Site Investigation The purpose of this step was to clarify which landowners were involved and to determine their intent for future development in order to ensure the planned land use pattern in the Statutory P lan (zoning) would match the landowners ' preferences. In doing this, p lanners hoped to dec rease the l ikelihood of conflict and of having to make continual adjustments to the plan in the c a s e that landowners ' were unhappy with the plan (interviewee). In this step, p lanners establ ished goals prior to visiting the site and so had a general v is ion in mind. Through negotiations with landowners (land use right owners) , p lanners were able to obtain the results they wanted (interviewee). G o a l setting is the first step of their work. (2) 2003.5-2003.6 Publ ic Opin ion Col lect ion In this goal setting and visioning step, the planners attempted to involve the public in order gather their opinions. Three different methods were dev ised in order to accompl ish this. First, p lanners went to the local communi ty unit, cal led the "Street" (Jie Dad) in C h i n a , to organize workshops and convene public representat ives (Jie Dao Wei Yuan Hui). S e c o n d , quest ionnaires were des igned and handed out by street commit tees. P lanners helped the street commit tees select the samp les groups in order to accurately reflect the diversity of opinion of the m a s s e s . Third, planners used in-depth interviews to col lect the opinions of 60 staff working for the street commit tees s ince these staff work with local people every day and know what they need better than those separate samp les typically se lected in a quest ionnaire survey. Through these three steps, p lanners were better able to grasp public opinion which in my opinion represents significant progress in the land development sys tem. This inf luences the role of the planner, making them more of a facilitator or mediator than an expert. (3) 2003.6-2003.8 P lan Mak ing In my observat ion, the methods for making the plan and the contents of Statutory P lan are exactly the s a m e as in the D D C P . After complet ing the public consultat ion, planners ana lyzed public concerns , introduced the site analys is , and then formul ized the problems at hand. Therefore, they used their own knowledge to so lve the problems which they identified and were able to propose development pol icies and regulations for the future. Th is could be seen a s a blueprint p rocess , where first problems are def ined, fol lowed by a gathering of information, the development of a p lan, act ion and then the actual implementation. P lanners have a pass ion for this p rocess , see ing themselves a s " technic ians" or "experts". They a s s u m e their work would be the best solution for the future development and that the behavior of the public will follow their des ignated course (interviewee). Th is is what many scho lars cal l a "rational" percept ion. 61 (4) 2003.8-2003.9 Publ ic Ref lect ion After f inishing the physical plan portion of the Statutory P lan , planners organized a public show (gongshi) in order to obtain public feedback on the physical layout and implementation regulations. In the lead up, the event was advert ised in Wuhan ' s most popular newspaper, the C h a n g J iang Daily. The physical plan was on display for two weeks , during which the concept plan was shown to the public. Unfortunately, public feedback w a s not col lected in this phase , i.e. the public was given a phone number to cal l if they had any concerns , yet in reality few took advantage of this serv ice (interviewee). In order to further gather public opin ions on zon ing, the working team a lso posted physical documents for zon ing on line, which could be seen on the PDI websi te. (5) 2003.9-2003.10 Rev is ion of the P lan Th is step was dev ised to al low for any revision of the plan following the public reflection stage. Accord ing to an interviewee, not a lot of changes required s ince not a lot of feedback was actually provided (interviewee). In addit ion, p lanners do not perceive the public being smarter than they are. The reasoning behind this is that p lanners still have the idea that they are the technic ians. Se ldom do planners v iew themselves as real facilitators; instead they s e e themselves as experts and do not really give much considerat ion to public input. Publ ic participation is only a requirement by government and planners did not ser iously commit to it. 62 (6) 2003.10-2003.11 Acqui rement of Authorizat ion The Statutory P lan (zoning), a s dev ised by the planners, is to be authorized by the W u h a n Peop le 's Cong ress , giving it legal status. From the end of 2003 until the end of 2004, there w a s no tangible progress for this because the Planning and Land Management Bureau was focused on trying to finish the zoning for the whole city. In the years 2004, 2005 and early 2006, other streets (jie dad) went through a similar zoning implementation p rocess . Currently, the working team has f inished 11 zoning documents for se lected streets (jie dad) and all the zon ing documents have been posted online in order to col lect more public reflection. There are a number of streets (jie dad) on the working team's schedu le to be brought into the p rocess in the coming year (interviewee). A l though zoning documents have not yet been legislated by municipal Peop le ' s C o n g r e s s , planning officials have already begun to strictly follow it (interviewee). In the summer trip of 2006, my research was specif ical ly focused on the current effects of the zoning pract ice. In other words, the research focused on determining whether or not zoning helps to control abuse of officials' administrative powers thereby decreas ing guanxi practice in land development. Many planners reported that, a s of right now, it is more like the D D C P . There are still problems relating to how to control the details of des ign codes and 63 discret ionary powers. Furthermore, they raised many quest ions, for instance, will public opinions in community planning process dominate the physical p lans if the bottom up methods used are too broad? For this reason, p lanners are hesitant to further increase public participation. O n the contrary, one developer sa id the zoning practice was effective in regulating officials' behaviors to a certain degree. Currently, officials strictly follow the development codes in zoning documents in their administrative work. For instance, a planning official will not change the "height limitation" required by zoning therefore officials administrative power is bound to a certain degree. Th is s a m e developer a lso agrees guanxi still inf luences the land development p rocess and officials still have discret ionary powers to influence a project. 5.4 Findings C h i n e s e government and planners are trying to limit guanxi in the planning system by using legal planning reform. Zon ing practice is a method W u h a n planners are using to try to dec rease officials' abuse of administrative powers. It limits abuse of administrative powers only to certain degree however s ince no law can remove all officials' discret ionary powers and so , in reality, zoning still cannot remove guanxi entirely from the land development process . Put another way, a s long as officials' discret ions exist, there will a lways be the potential for guanxi and 64 corruption. Therefore it is not appropriate that focus only on legal planning reform. Other ways of supervis ing officials' discret ionary power must be dev ised , for instance, we could cons ider how to improve t ransparency of officials' dec is ion-making process . In the North Amer ican planning sys tem, one method which has been used to superv ise officials' dec is ion-making process is using a bottom-up planning process . In this p rocess , many planning methods such a s public hearings, open houses , des ign charrettes, etc are integrated in order to improve transparency. T h e s e methods could be introduced to Ch inese planning system in the future. In the next chapter, a s a conc lus ion, two planning methods - the des ign charrette and the open house are expla ined as future potential research direct ions. 65 Chapter 6 Conclusion 6.1 What is the purpose? A s noted earlier, the lack of effective supervis ion on officials' administrative powers is what al lows the practice of guanxi to persist. In C h i n e s e land development p rocesses , planning officials use their administrative powers in order to obtain benefits and profits from developers. The C h i n e s e government has created numerous methods, such a s the cadre rotation system and administrative legal reform to formalize and superv ise officials' behavior. However, the effect iveness of these methods is not d iscernable at the current stage. Through c a s e studies, readers can s e e that although many administrative planning regulations have been introduced into the planning sys tem, officials are still to use their discretionary powers to accrue benefits. Th is phenomenon will likely continue to occur for a certain amount of time because the "rule of law" cannot remove discret ionary powers entirely from any sys tem. With this sa id , it is my opinion that in order to superv ise officials' behaviour, we must increase the t ransparency of officials' dec is ion-making through public superv is ion. The rationale behind this idea is that officials have to be responsible for their own behaviours which are evident to public. Officials must maintain their reputations in order to keep their posit ions or be promoted in the future. Officials are 66 disadvantaged by public complaints regarding their work and so public superv is ion on officials' dec is ion-making process could enhance the governments ' administrative accountabil i ty as well . W h e n people are involved in the process of dec is ion-making, officials' behaviours will become more rational. Therefore the abuse of officials' discret ions may dec rease and, as a result, guanxi pract ices may dec rease as well . Publ ic supervis ion is not limited to public observat ion, with the public having opportunit ies to provide input and being informed, s ince this a l ready exists in s o m e C h i n e s e cit ies. Publ ic supervis ion means that ci t izens are not only able to express themselves but a lso have opportunit ies to be involved in the actual dec is ion-making process . Methods originating in Western countr ies such a s the open house, the design charrette, should be cons idered by C h i n e s e planners as useful tools to gather public opinion. T h e s e are public participation methods which help dec is ion makers understand public opinion, while s imultaneously indicating to the public what dec is ions are being undertaken by officials. Therefore the t ransparency of the dec is ion-making process is improved. Design Charrette A des ign charrette is a method often used to create a physical des ign dr plan by public and professionals together. It provides an opportunity for s takeholders, such 67 as dec is ion makers , architects, des igners , consultants, developers , and public to work c losely in a particular time period in order to develop planning and des ign ideas. In this col laborative process , participants are encouraged to express their ideas on different design topics. Through a des ign charrette, many different opinions on development can be visual ly represented. Th is is an effective way to col lect public opinions on a dec is ion and a lso provide an opportunity for dec is ion makers to express the rationale behind their dec is ions to the public. A charrette will normally be held over a weekend or holiday and includes public d iscuss ion and smal l group des ign sess ions . A public d iscuss ion provides an opportunity to openly address des ign topic, problems, and f indings and collect public opinions on these issues. Fol lowing the public d iscuss ion , participants are divided to different smal l groups, each group having one or severa l des igners who will facilitate a v isual express ion of group d iscuss ions in addit ion to a facilitator and note takers as needed. Peop le in a group can a lso be encouraged to draw based on their own interpretations. At the end of a des ign charrette, the drawings of different smal l groups are shown to the entire public. Open House A n open house is a participatory method that is used to col lect public opinions on proposed dec is ions by dec is ion makers. Through an open house, the public has 68 an opportunity to understand officials' dec is ions and to express their opinions on these dec is ions. The open house is a good method for the public to better understand the rationale behind officials' dec is ions, and provides a means for the public to superv ise officials' work. A n open house can be held in local communi ty centre. W h e n the government implements a project, neighbors can be invited to drop-in and view government p lans. In this way, local people can a lso better understand government 's efforts. A n open house could be used at any stage of a project, it should be well advert ised and the time should be limited to four hours and it can be repeated over two or more weeks . T h e s e planning methods, used in Western planning sys tems, help the public superv ise officials' dec is ions. If they could be used in C h i n e s e planning pract ice, I bel ieve the t ransparency of officials' dec is ion-making p rocess would be improved. Guanxi practice could be reduced through the use of these methods s ince they expose officials' discretion to the public. 6.2 Implications Guthrie and Yang are both correct to a certain degree. A s Guthrie argues, procedural law is absent to a degree in Ch ina , consequent ly, officials' behaviours have no legal constraints to a certain level. I agree with his point on procedural 69 law regulating guanxi practice. Yang argues that guanxi has strong cultural roots. I believe this argument is solid as well. However, one needs to understand the reasons behind guanxi practice in a comprehensive way. Discretionary power and benefit seeking are the forces behind guanxi practice. Therefore it is clear to see why discretionary power will not disappear since benefit seeking is human nature. We can only try to increase the transparency of the decision-making process and involve the public in decision-making processes in order to decrease the possibility of corruption. Chinese planners can learn from and adapt methods from the West in order to realize these aims. Therefore, how to incorporate Western methods into Chinese contexts should be a meaningful direction for future research. 70 Bibliography Carr, J . L , and J . T. Landa. "The Economics of Symbols, Clan Names, and Religion." The Journal of Legal Studies 12 (1983): 135-56. Chang, Tieh-chih. 2004. "Growth, Corruption and State Capacity? China in Comparative Perspective." Mini-APSA Conference, Department of Political Science. Columbia University, April. 30. Chen, Jinfu. "Approach to the Institution of Public Participation in Urban Planning." City Planning Review 24.7 (2000): 54-6. (in Chinese) Chen, Lixing. Dynamics of Social Networks: The Case of Private Business Owners in China. Matsuyama Ehime University, 2000. Chen, X. P., and C. C. Chen. "On the Intricacies of the Chinese Guanxi: A Process Model of Guanxi Development." Asia Pacific Journal of Management 21 (2004): 305-24. China Daily. "Focus: China Embarks on Civil Service Reforms." China Daily Sep.23 2003 < 266501 .htm>. Davis, Kenneth Culp. Discretionary Justice: A Preliminary Inouirv. Baton Rouge: Louisiana State University Press, 1969. Edin, Maria. "State Capacity and Local Agent Control in China: C C P Cadre Management from a Township Perspective." The China Quarterly 173 (March 2003): 35-52. Gold, Thomas, Doug Guthrie, and David Wank, eds. An Introduction to the Study of Guanxi. in Social Connections in China: Institutions. Culture, and the Changing Nature of Guanxi. Cambridge: Cambridge University Press, 2002. Guthrie, Doug. "The Declining Significance of Guanxi in China's Economic Transition." The China Quarterlv.154 ,1998): 254-82. —. "Information Asymmetries and the Problem of Perception: The Significance of Structural Position in Assessing the Importance of Guanxi in China." Social Connections in China: 71 Institutions. Culture, and the Changing Nature of Guanxi. Ed. Gold Thomas, Doug Guthrie, and David Wank. Cambridge: Cambridge University Press, 2002. Horsley, Jamie P. "The Rule of Law in China: Incremental Progress." China Balance Sheet. 2006. < Rule of Law.PDF>. Huang, Yasheng. "Managing Chinese Bureaucrats: An Institutional Economics Perspective." Political Studies 50 (2002): 61 -79. Jacobs, Bruce J . "A Preliminary Model of Particularistic Ties in Chinese Political Alliances: KanCh'ing and Kuanhsi in a Rural Taiwanese Township." The China Quarterlv.78 (1979): 237-73. Khakee, A. "Urban Planning in China and Sweden in a Comprehensive Perspective." Progress in Planning 46.2 (1996): 91 -140. Leung, Hok-Lin. "Politics of Planning in China." Plan Canada 43.3 (2003): 27-30. Lin, Feng. Administrative Law Procedures and Remedies in China. Hong Kong ed. Sweet & Maxwell Ltd, 1996. Lu, Xiaobo. "From Rank-Seeking to Rent-Seeking: Changing Administrative Ethos and Corruption in Reform China." Crime. Law & Social Chanoe.32 (1999): 347-70. Peerenboom, Randall P. China's Long March Toward Rule of Law. NY: Cambridge University Press, 2002. Ting, Gong. "Corruption and Local Governance: The Double Identity of Chinese Local Governments in Market Reform." The Pacific Review 19.1 (March 2006): 85-102. Wang, Yi. "Questions on <Housing Redevelopment Regulations:*" Southern Weekend. Sep. 2. 2003 (in Chinese) disblav.asp?ArticlelD=24176 Wong, Y. H., and Thomas K. P. Leung. Guanxi: Relationship Marketing in a Chinese Context. NY: International Business Press, 2001. 72 Wuhan Planning and Land Management Bureau. "Zoning of Wuhan.". 2006. < 09.jsp>. Xiong, Guoping. "The Legislation Study of Regulatory Detail Led Planning." City Planning Review 26.3 (2002): 27-31. (in Chinese) Yang, Mayfair Mei-hui. Gifts. Favors and Banouets: The Art of Social Relationships in China. Ithaca: Cornell University Press, 1994. —. "Rebuttal: The Resilience of Guanxi and its New Developments: A Critique of some New Guanxi Scholarship." The China Quarterlv.170 (2002): 459-76. Yeh, Anthony Gar-On, and Fulong Wu. "The Transformation of Urban Planning System in Midst of Economic Reform in PRC." Progress in Planning 51.3 (1998): 167-252. 73 Appendix: Selection of Interviews The quest ions in this part are highly se lected because of the number of interviews. Quest ions were asked focusing on different topics from planning to politics. Interviews with planning officials (2003, 2006) Interviewer, nice to meet you, I heard about many people compla in that Guanx i is important in land exchange, is it t rue? Cou ld you explain the major problem of current sys tem? Interviewee: nice to meet you . Wel l , your quest ion is hard. I have to say in 1990s, it was true Guanx i p layed a very important role in land exchange, even in the whole p rocess of land development. The reason for that was we didn't have a legal document or policy that could provide instruction for our work at that time. A s officials, we had to superv ise development accord ing to our own knowledge, therefore there w a s a potential for Guanx i pract ice. However, with the enhancement of pol ic ies, it dec reased dramatically. Currently I don't think Guanx i is very important in terms of land development p rocess , but I won't deny there is no Guanx i work. A s a government agency, we issued many pol ic ies, for instance, Zon ing pract ice, D D C P , and the planning manuals to legal ize the development p rocess . W e have many problems in terms of planning, I don't know which one is major, but I know in our office, corruption is very little because W u h a n is a big city, many people are putting their eyes on our work. Interviewer, could you explain more about planning manua l? What is that for? Interviewee: In 2002, our bureau issued planning manual . It has two books, one is for our own work, and the other is for developers. It sets up a p rocess that tells people how to deve lop a land. You can see that it is a formal document that everybody has to follow. Therefore it can enhance our work. Interviewer, how about land exchange center? Interviewee: that is another try of ours to dec rease corruption of land exchange. Actual ly it w a s required by central government. It was initiated in 2002 at W u h a n . Before 2002, land distribution major depended on developers ' reputations. After the establ ishment of land exchange center, every deve loper has to go through a bidding p rocess in order to get a piece of land. 74 Interviewer, do you think there will be corruption in the future in terms of land distribution? Interviewee A: I think it is impossib le, because after 2002, all of the potential development land is sold through a land market in which every company can bid for it. Even if the company has a good relationship with government, the government dares not do that because of the transparent p rocess and public superv is ion. In addit ion, the decis ion makers are now Danwei or the vi l lage, so government cannot do the intervention. Actual ly I think it works well right now, more transparency. Interviewee B: I won't predict that. But I think there will be. Al though land market works, there are s o m e exchanges among Dan We i and developers, which I don't know exactly how it happened . But corruption happens I know. Interviewee O. actually just before you c a m e back (summer of 2006), many officials in land distribution center were arrested, I think they might corrupt, that is the only reason. Interviews with developer (2003 summer; 2006 summer): Interviewer. Do you think guanxi is important in land development p rocess? Interviewee: I think so . It worked as a major factor to get lands. A l so we need to practice guanxi with planning officials in order to get the planning p rocess faster. T h e s e officials are hard to communicate. They are a lways crit icizing. Interviewer, could you explain why your company c a m e you W u h a n ? Interviewee: Our company is from S h e n z h e n a s you know. W e had no interests to c o m e here before 1998 because we did not know anything about W u h a n market. It w a s W u h a n government that invited us to come here. W e had a good relationship with it because we did a favor to them in 1997. W e helped them to pay debts in Hongkong. Therefore as reciprocal benefits, W u h a n government gave us lands. W e got 200 hectares land in 1999. At that time we have no idea how to develop such a big land therefore we divided it to four phases . Currently we are only working on phase 1 and 2. W e a lso sold out a p iece of land in phase 4. P lease don't tell others. 75 Interviewer. Could you explain the problems of development? Interviewee: I don't like the negotiation with farmers; you know they always ask money. Government helped us negotiate with them in terms of land exchange fees, therefore it was not that difficult and we helped the village to provide them some jobs as reciprocal benefits. Interviewer. Do you need Guanxi in the planning process? Did you get some benefits from city government? Interviewee: Although we have a good relationship with city government, we still need to create Guanxi with planning officials because they are the people who deal with the day-to-day planning practice. They control many details for development, such as building styles, height, etc. We cannot always ask officials at city government to help up in the whole planning process. Therefore relationship creation with these guys is necessary. I treated meals for them. This is not bribery because we are friends; meals do not mean corruption I think. City governments helped us in many ways, such as negotiation with farmers, and our project was deemed social housing, therefore we saved some taxes. Interviewer. Do you think the Guanxi will decrease or disappear in the future? Interviewee: Impossible, in China everything is about Guanxi. If you don't have Guanxi, you can't do anything. For instance, if you don't have a good relationship with these guys (planning officials), your projects might be carefully taken care of. It is too hard, I cannot imagine. Interviewer, how about land distribution center? Interviewee: it works in a certain level. I think it is a good thing. Before it was enacted, government had the absolute power to allocate lands, we were pretty hard to get lands, right now if we select a land, we could ask for bidding process. So I think it is useful. But as I said, it works in a certain level. Corruption happens there. Interviewer, as friend, please give me some advice for my career. Interviewee: to be honest, if you don't have Guanxi, stay abroad. But if you had, come back as soon as possible. 76 Interviews with professor (2003, 2006) Interviewer, what is your opinion on planning manua l? Interviewee: after the planning manual i ssued, the formal p rocess was establ ished in a certain level. But I don't think Guanx i practice will d isappear s ince the planning manual is not that detai led. There are still a lot of room for official's discret ion. Interviewer. Do you think land distribution center could solve corruption? Interviewee: No , early this year (2006) many officials in that center were arrested, that means they were corrupted probably. O n e way to do that is they can do the exchange with Danwei and developers. Everybody knows that. Interviews with planners (2003, 2006): Interviewer. Cou ld you explain to me why did u like to do zoning pract ice? Wu: Firstly I like to correct your words, it is our bureau director who l ikes this idea and I think it is a good proposal . You know S h e n z h e n did a practice in 1999, but there are s o m e problems. A s the fifth biggest city, we think it is good if zoning can s u c c e s s here. Furthermore we could get help from S h e n z h e n . Therefore we all think this is a good proposal after director Zhang suggested on a meeting in Sep tember 2002. W e therefore went to S h e n z h e n to learn in October 2002. Interviewer. Do you think there are problems in terms of planning tools? Wu: Yeah I think so , one problem we met in practice is the changes of D D C P . W e des igned it and the officials have to power to change. That is a problem. It makes our work stupid. Interviewer. W h y D D C P does not work wel l? Kuang: D D C P is a government tool des igned by professional p lanners; planners thought that officials who dea l with planning practice should strictly follow the implementing codes in D D C P to evaluate the project appl icat ion. But in reality, officials often can find s o m e reasons to change them if they really want, such as inadaptability, etc. S o the officials' discretionary power is very important for developers . It dec ides whether or not a project can be implemented easi ly and how much a developer could get. The lack of appropriate legal status is a s s u m e d 77 a s the major problem of D D C P by planners. S o we think if D D C P has legal status, it will constraint abuse of power. Interviewer, what do you think the problem of planning? Interviewee: we need legal document to regulate all codes of D D C P , otherwise it is too easy to change it and it might raise corruption. Legal rationality, big term, we need. Interviewer. How did you research the zoning practice and avoid problems of S h e n z h e n pract ice? Interviewee: W e used internet to check planning sys tems in Western countr ies. A n d we a lso learned from S h e n z h e n . In order to avoid the problem of re-zoing, we did a great dea l of ground research for the land use types. W e visited every landowner and asked their opinions for future development on their lands and after that we v isual ized those opinions on maps. Through this work we can make sure the re-zoning requirements will be dec reased tremendously. Interviewer, what is your opinion in terms of public participation? Wang: In the site visit, I found public is very posit ive to express their opinions. But I found their opinions are a little bit r idiculous and I don't think they are right. If they have planning educat ion, their adv ices might be useful. The feedbacks for the quest ionnaire were not posit ive. Therefore the plan actually was made by our opinions mostly. Currently we are working on another 3 parts and will work on the others in H a n K o u in 2006. Interviews with Public (2003,2006): Interviewer, what is planning problem you think? Interviewee: (the problem lies in un-transparent dec is ion making process) , I don't really know when our houses will be torn down (when government initiates re-development project of inner city). Government should tell us what is their plan (in order to let us know the whole planning process) . 78 


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