Vertical Support, Horizontal Linkages, and Regional Disparities in China: Typology, Incentive Structure, and Operational Logic

Abstract

This article discusses four principal measures of coping with regional disparities in mainland China. They include: (1) Beijing`s provision of fiscal and material resources; (2) Beijing`s granting of special target policies; (3) the formation of vertically-induced interregional networks; and (4) the rise of voluntarily-formed horizontal linkages. During the Maoist era, when plan controls were tightly enforced, vertical resource support was Beijing`s predominant response to the problem. In the reform period, however; with the acceleration of decentralization and marketization, the center`s capacity for fiscal and material resource allocation has continued to dwindle, necessitating the use of vertical policy support and interregional support networks designed to save the scarce resources of the center Due to inherent incentive problems as well as to the system reform, Beijing-induced support networks gradually gave way to horizontal cooperative networks formed voluntarily. Since interregional networks alone cannot suffice to resolve the complex problem, ”bringing the center back in” becomes inevitable although its role will be much more passive in general and limited to the area of establishing information networks.