http://www.wsj.com/articles/SB118669865619393552

China Tightens Local Oversight
Crackdown Aims to Enforce Safety, Environmental, Labor Rules

By ANDREW BATSON
Updated Aug. 10, 2007 12:01 a.m. ET

BEIJING — President Hu Jintao’s administration, suffering from a string of embarrassing scandals, is moving to take authority away from China’s powerful local governments.

Provincial and city governments in China have for decades had broad freedom to run their own affairs, as long as they delivered economic expansion and kept social conflict in check. They have often proved entrepreneurial, business-friendly and flexible — and especially adept at drawing investment to create jobs and increase the nation’s more-than-10% annual-expansion rates.

Yet too often, critics say, that focus on growth has led local authorities to turn a blind eye to violations of safety, labor and environmental standards. Local governments are blamed for the downsides of China’s rapid economic expansion, such as rising inequality, a disintegrating social safety net and pollution.

Now, the pendulum is starting to swing the other way, as Mr. Hu and Premier Wen Jiabao try to enforce greater uniformity across their vast and often chaotic nation.

The drive to rein in local governments has been given extra impetus this year by scandals that have outraged the Chinese public. Local officials in Henan and Shanxi provinces were found to be in cahoots with the owners of brick kilns and coal mines who kidnapped hundreds of children and adults and forced them to work in harsh conditions.

Lax local enforcement of safety regulations has also been blamed for permitting numerous shoddy and unsafe products to reach Chinese and overseas consumers. Mr. Wen has called ensuring food safety and product quality a top priority of the government, and headed a State Council meeting last month that passed rules making local officials accountable for product-safety failures. Repeated problems will be grounds for demotion or dismissal, the rules say.

The central government is focusing its efforts on a number of areas, including land use, environmental controls, agriculture and social services. Having made sweeping public commitments to China’s 1.3 billion people to improve living standards and equality, the government needs to make sure it can keep its word.

“This is a major test of our strength and credibility,” said Xu Shaoshi, China’s minister of land and resources. “It is imperative that enforcement of land regulations be tougher and stricter.”

Mr. Xu also holds the new post of state land inspector general, in which he runs a network of regional agencies that oversee local governments’ land-use policies. His top priority: reducing seizures of agricultural land for commercial development that have led to a surge in protests by farmers and renewed concerns about food security.

Many cities have disregarded land regulations, and seized land for development of new industrial parks, housing projects and office towers. Such deals increased local government revenue and enriched many well-connected developers, but the sheer magnitude of land seizures has made them a focus of concerns about corruption and social unrest.

Some analysts credit the stronger backing for planning rules, including a requirement that sales be done through public auctions, with curbing the once-rapid pace of land sales.

The shift to stronger central authority is one that many inside and outside China endorse, seeing it as a way to bridge the enormous gap between the prosperous cities and often desperately poor rural areas. “On health, on education, on many other things, the central government has to play a larger role,” Khalid Malik, head of the United Nations Development Program in China, said in a recent speech.

Support for the changes also comes from the widespread public perception that the top leadership is basically honest and well-meaning. Local officials, by contrast, are regularly blamed for forced relocations, deaths in illegal coal mines and other abuses.

The new approach comes as Messrs. Hu and Wen prepare to start their second and likely final five-year terms next year, following a major Communist Party conclave this autumn. In preparation for that gathering, hundreds of provincial and local government officials have been reassigned, promoted or fired — a reshuffling intended in part, analysts say, to ensure the new local leaders will be more attentive to orders from Beijing.

But the central government is also reworking the power structure to ensure its edicts have more force, as it has with the new system for supervising land use. Local authorities have long been lax in enforcing environmental rules because they frequently have close ties to polluting enterprises. So the central government has created new agencies to monitor enforcement. There are now six regional “inspection centers” scattered across the country, and crucially, they answer to the central government rather than to local authorities.

“Enforcement is the chief issue in solving China’s environmental problems, and the local level is the most important,” says Zhang Shaomin, a deputy director general at the State Environmental Protection Administration who helped organize the new system. “There are some local governments who, because of their one-sided pursuit of GDP [gross domestic product], use their administrative power to block strict environmental enforcement.” GDP is the total value of goods and services produced in a nation.

Though most of the centers have been up and running for a year or less, Mr. Zhang credits the inspectors with ferreting out factories that had dumped their waste with impunity, and with speeding up local responses to environmental disasters.

The accumulation of such rules, requirements and supervising agencies leaves local governments less room to maneuver. China’s local authorities have generally had the freedom to do what they see fit to develop their economies, but most of that power is theirs by default, not by right. China isn’t a federal country like the U.S. or Australia, so localities have only as much power as the central government allows them.

“Where there is no legal framework to govern them, local governments have lots of power. In the gray areas they can be the main player. But as things become more formalized, local government authority is reduced,” says Wang Yongjun, a professor at the Central University of Finance and Economics in Beijing.

That is especially true as the central government also starts to take a bigger role in what has been the main job of local governments: running basic social services such as schools and hospitals. The central government is now using its control of tax revenue, which has been increasing rapidly, to create and fund popular new initiatives directly — without relying on local governments as intermediaries.

The central government also abolished an ancient agricultural tax, saving farmers 125 billion yuan, or about $16.50 billion, in 2006 tax payments. That both pleased farmers and yanked away a source of local-government revenue — one that regional officials often abused. And when public-health authorities in Beijing decided they needed to beef up inoculation against infectious diseases, they bypassed the locals and paid for a new system of clinics themselves.

Not everyone thinks greater centralization is the answer to China’s problems. Many scholars argue that local governments need more responsibility and power, not less, if they are to deal with the demands and conflicts of China’s complex and wealthy society. By taking on more responsibility, the central government also has left itself open to more public criticism if it fails to deliver on its promises.

“Right now you have this sense that the central government is good, and it is the local government hooligans who mess things up. Whenever there is a problem, Beijing tries to shift the blame to local leaders,” says Jing Huang, a political scientist at the Brookings Institution. “People will eventually ask the real question, which is ‘Why do we have this kind of system?’ Eventually the blame will go upwards, to the central government.”