Transformation of China’s Urban Entrepreneurialism Case Study of the City of Kunshan Shiuh-Shen CHEIN, Department of Geography, National Taiwan University, Taipei, No. 1, Sec. 4, Roosevelt Road, Taipei, 10617 Taiwan(R.O.C), schien@ntu.edu.tw Fulong WU, School of City and Regional Planning, Cardiff University, Cardiff, CF10 3WA, UK. Wuf@cardiff.ac.uk Abstract This paper aims to explain formation and transformation of urban entrepreneurialism in the context of China’s market transition. With the case study of Kunshan, ranked as the top economically strong county-level administration, we argue that there are two phrases of urban entrepreneurialism which can be roughly distinguished in the period of 1990s till 2005 and from 2005 afterward. The earlier phrase of urban entrepreneurialism is more market-driven and locally initiated in the context of territorial competition. However, the second phrase of urban entrepreneurialism involves more the planning mechanism, upper-governments coordination and various territorial collaborations and cooperation. China’s newly transformed urban entrepreneurialism is not a deregulated form, nor is it resulted from the retreat of the state as seen in the first phrase, but rather re-regulated through great state involvement in collaboration and cooperation. 1 1 INTRODUCTION There is no doubt that local authorities over the world play a crucial role in promoting economic development, particularly under the context of globalization because capital flows much easily away from one locality to another both domestically and internationally (Harvey 1989, Brenner 2003, Ward 2003, Jessop and Sum 2000). Local authorities therefore face challenges and opportunities. On the one hand, globalization may cause huge unexpected job loss when capital decides to shut down their companies and move out; on the other hand, globalization also creates opportunities of fierce territorial competition when capital announces that they want to move around or built up new projects. To deal with these challenges and opportunities, local authorities become very entrepreneurial to improve regulatory environments so as to accommodate more inward capital and/or to enhance the quality life of local citizens. Scholars reach certain agreement that local entrepreneurial authorities have transformed two kinds of governance relations. First, it is between governmental organizations, vertically and horizontally. In terms of the formal organization, local authorities seek more decentralized power and gain competence from the weakening central state (Faguet 2006, Strumpf 2002, Keating and McEwen 2006). In terms of the latter, local authorities become very competitive in vying with each other for many development resources, for example, investment, financial grants, and skilled labours and so on (D'Arcy and Keogh 1998, Cheshire and Gordon 1998, Chien and Gordon 2008). Second, the relationship between state and market has bee transformed. The state is likely to (or forced to) be self-deregulated in order to attract more capital, namely, the neoliberal tendency of retreat of the state from the market (Harvey 1989, Peck and Tickell 2002). As the specialists of urban China research in the post-Mao era, we generally consent to the existing literature on the urban entrepreneurialism but argue that Chinese urban entrepreneurialism has been evolving over time. Certainly, many local authorities have been proved very bold, innovative and entrepreneurial in the process of the China’s dramatic economic development over the past three decades (Duckett 1998, Chien 2007, Jin, Qian and Weingast 2005, Chung 2001, Wu 2000). However, recent development of China’s urban entrepreneurialism takes place in different formats in terms of the inter-governmental relationship and the state-market relationship. With the case of Kunshan, the topmost economically globalized and developed county-level administration in the Yangtze River Delta, we witness the formation and transformation of urban entrepreneurialism, which has not been fully researched. The rise of Kunshan (more details below) is attributed to the strong interaction between Kunshan and overseas, especially Taiwanese, investors. The development of local economy was facilitated by economic devolution and aggressive urban entrepreneurialism. Kunshan managed to break out from the institutional constraint under state socialism but also innovatively promoted further devolution formally and informally from the state towards development zone and town governance. However, aggressive urban entrepreneurialism bought about chaotic land development and loss of valuable land resources, creating the constraint of space for 2 further development. Meanwhile, economic growth and the rise of regional governance in the Yangtze River Delta as a whole provides new development opportunities (like the provision of regional transport infrastructure to integrate more counties into a more regionally-based economy). In this period, we begin to witness the transformation of urban entrepreneurialism towards a more coordinated form. The central government has strengthened its control over land resources; the provincial government provided more coordination and encourages the collaboration between local county-level governments. The city of Kunshan prepared a new master plan to coordinate economic development within its jurisdiction and designated different functional zones to guide town-level governments. In other words, the latest development of urban entrepreneurialism in Kunshan brings the role of the state back. The state attempts to re-regulate and strategically lead the market. In addition, urban governance is more cooperative with other neighbouring administrations under certain regional coordination by upper-level governments. As the existing literature on western cases pays little attention to the newly evolved state-led coordinative and collaborative urban entrepreneurialism, this paper is to fill up this gap. The rest of this paper is therefore divided into five sections. First, the debate in the literature on urban entrepreneurialism in the West and China is revisited. Some observation on China’s local governance operations is also discussed in order to offer a general understanding of the formation and transformation of urban entrepreneurialism in post-Mao China development. Second, the development of Kunshan is sketched into three stages - early industrialization, engagement with globalization, and development of high-tech industries and producer services. In the third and fourth sections, we discuss respectively the first phrase and second phrase of urban entrepreneurialism in Kunshan. While the first phrase is more territorially competitive, locally initiated and led-by-the-market; the second phrase starting roughly from 2005 involves more regional cooperation, upper-governments coordination and the leading-the-market practices. And some theoretical and policy implications about the transformative roles of the states behind urban entrepreneurialism are reflected in the conclusion. 2 URBAN ENTREPRENEURIALISM: THE WEST AND CHINA Western urban entrepreneurialism and its debates Urban entrepreneurialism in policy formation and growth strategies has been proven as a version of urban governance in the late capitalism, particularly in the West like the United States and western Europe (Jessop and Sum 2000, Harvey 1989, Ward 2003). Local and city governments started to transform themselves into market-friendly agents whose key goals are to form an alliance with more capitals to promote local economic development. The ways that local and city governments become entrepreneurial can be characterizes into three different but inter-related aspects. First, the focus of the city agenda was shifted from social policies to economic plans (Harvey 1989, Harding 2005). Related to that is the functionality of city governments is also changed from mainly social welfare deliverer to economic development promoter. Second, different formats of public-private partnership working along with the city governments 3 become very popular to boost local economies. Key players include elected politicians, land owners, chambers of commerce, utility developers, local bankers and so on whose self interest can be realized through these collective actions of urban re/development (Harvey 1989, Molotch 1993, Mossberger and Stoker 2001, Harding 1994). Third, practices and discourses initiated by these public-private partnerships (like pro-growth urban machine) were very proactive, innovative and business-friendly. City-marketing, land-use design, image-making and competition with other localities are all cases in point (Jessop and Sum 2000, Ashworth and Woogd 1990). Local and city development under the China’s market transition The transition towards a market economy in post-Mao China is largely driven by active and entrepreneurial city governments. Great policy innovations are made in order to promote local economic development. On the one hand, China follows the global trend of urban entrepreneurialism. For example, under the context of economic and fiscal decentralization, the central government granted much power and competence to urban governments to facilitate them to build up more infrastructure and attract investments (Ma and Norregaard 1998, Qian and Weingast 1996, Zheng 2007). In addition, urban governments competed with each other in economic development for two reasons. Materially, development can be linked to local cadres’ personal pockets in both legal and illegal ways (like local corporatism, see Oi 1998, Oi 1995). Politically, development can be also related to cadres’ career advancement (Chien 2010, Zhao 2006). On the other hand, however, China’s urban entrepreneurialism is quite different from its Western counterparts. First of all, the context is different. In the West, urban entrepreneurialism is regarded as an institutional fix to the crisis of Fordism and the Keynesian welfare state. Entrepreneurial cities were then the nodes of capital accumulation in the context of post-Fordism and post- Keynesian workfare state (Jessop 1994, Goodwin and Painter 1996). In China, urban entrepreneurialism happened under the post-socialist context, in which marketization and commoditization of urban services and local business environments were introduced in order to respond to the crisis of state-led socialist development in general and the Cultural Revolution in particular (Chien 2008, Wu 2003, Wu and Ma 2005). For example, many market-preserved and business-friendly policies in China were part of gradual reforms that the state was requested to be retreated from direct resource allocations, which is very different from the west where the state was retreated because of the global neoliberal pressure(Wu 2010). Second, the operation of the political system is different. The Western urban entrepreneurialism likely takes place in the liberal democracies, where local elections and private property rights are highly institutionalized. However, in China there is a strong party-state leadership in administration of all spatial scales from national, provincial, prefecture, county down to town and township. This difference reflects different motivation of inter-jurisdictional competition in the West and China (Chien 2008, Chien and Gordon 2008). In China the asymmetric transformation of the political and economic spheres is the main cause of aggressive urban entrepreneurialism. Namely, economic decision making has been decentralized to the localities, while the political system remains centralized and cadre promotion is based on the evaluation of the economic performance of their jurisdictions. 4 Related to that is the strong capability of Chinese state as compared with those in the West. Through the centralized political system, local cadres are likely to be under state coordination as their positions are assigned by the upper governments instead of through local elections. In addition, local cadres in careerism are motivated to follow up evaluation indicators assigned by the upper governments. Some indicators are even operated as veto power (yi piao fou jue)- carders would be demoted if they could not accomplish the assigned tasks (Chien 2010). This operation, for example, arable land conversion quota becomes a key institution to guide and constrain entrepreneurial behaviour of local officials. To sum up, we argue that China’s urban entrepreneurialism shares some commonalities and differences with its Western counterparts. This paper uses the city of Kunshan as an empirical case to see how China’s urban entrepreneurialism is formed and transformed in order to enrich our understanding of urban governance in China. We have been involved in the planning of Kunshan as policy researchers and consultants for the city government of Kunshan in 2008 and 2009. The data we use for this research include semi-structure interviews and written materials collected. 3 HISTORY OF KUNSHAN DEVELOPMENT: A SKETCH Kunshan can be regarded as one of the most outstanding county-level governments in China since its economic reform. Administratively, Kunshan is a county-level city under Suzhou prefecture-level city of Jiangsu province. Nowadays, Kunshan is a top economically strong county-level administration (jin ji bai qiang xian) in China. Despite its county-level status, Kunshan generated more than 175 billion Yuan gross domestic products (GDP) in 2009 (Figure 1), which was even higher than some provinces like Hainan, Ningxia, Qinghai and Tibet. [Figure 1 in here] Kunshan’s economic performance is mainly contributed by notebook and related information technology industries, evidenced by the fact that only did Kunshan produce 50% of global notebooks and create 2.5% of China’s national trade and 0.5% of China’s national GDP.1 However, prior to 1978, Kunshan was a poor county with agriculture as its main economic sector. Its underdevelopment at the time was nicknamed the little sixth (xiao liu zi) as its industrial output was ranked as the last among other five counties in Suzhou (Wei 2002, Chien 2007). Kunshan’s development of course is an evolving process with three stages: (1) early industrialization in the 1980s, (2) engagement with globalization in the 1990s, and (3) formation of high tech clusters and planning for producer service centre after the 21st century. Each stage is briefed as fellows. The 1980s: early industrialization under rural collectivenism Kunshan successfully initiated its industrialization process by two major policies. 1 News source: http://www.chinareviewnews.com/doc/1012/8/9/6/101289685.html?coluid=0&kindid=0&docid=10128 9685, accessed by 2011/03/15 5 First, Kunshan ‘secretly’ built up its industrial district (gong ye xiao qu) in 1985 without any permission granted by the central and provincial governments. The district, later changed under the name of Kunshan Economic and Technology Development Zone (KETZ, Kunshan jing ji kai fa qu), provided major modern infrastructure in order to attract investors. Besides, Kunshan also took an advantage of its proximity to Shanghai to attract domestic enterprises in the inner China, like those in the Third Front area (san xian). The strategy, called ‘relying on Shanghai in the east and depending on the Third Front in the west (dongyi Shanghai, xituo san xian), successfully introduced some inland factories which could not afford high land price in Shanghai but would like to seek any investment relocation possibility nearby Shanghai. Those relocated collective factories included Sichuan Hongyan motor factory, Hubei Huangshi textile machine factory, and Guizhou Hongshan ball bearing factory, and so on. Taken together, KETZ attracted about 70 factories to invest in 1985, 38 of which were from Shanghai (Marton 1999, Wei 2002). In 1989, KETZ created 500 million Yuan of industrial outputs, even more than average of 14 state-granted economic and technological development zones (ETDZs) At that time, each ETDZ produced about 400 million Yuan in terms total industrial output. In this stage, Kunshan became one of the most productive development zones despite its low administration (county-level) and secret status (no permits granted by upper governments). Its development was mainly driven by the contribution of domestic rural collectivism. The 1990s: engagement with globalization The astonishing productivity of KETZ was soon discovered by upper governments, whose encouragement and support pushed Kunshan to seek the state endorsement. The seeking for the national-title aimed to cope with then difficulty facing Kunshan in attracting foreign direct investment. For example, by 1989, KETZ attracted only 2 million US dollars of FDI, in sharp contrast to 25 million US dollars of FDI located in each state-level development zone in average. Foreign investors were suspicious about whether or not KETZ could maintain appropriate business environment with its county-level status as well as its secret/illegal process of establishing KETZ (Wei 2002, Chien 2007). In August 1992, the State Council granted KETZ national status. Li Peng, then Prime Minister, further openly encouraged other localities to learn from Kunshan developing its own zone first and looking for the state title after obtaining certain achievement. Partly because of the national title and partly because of Deng’s southern tour, FDI injection in Kunshan grew dramatically after 1992 (K. Choe, A. Laquian and Kim 2008). And most of FDI in Kunshan came from Taiwan, which mainly focused on printed circuit boards, PC connectors, food processing and the rubber industry (Chen, Melachroinos and Chang 2010, Chien 2007, Wei 2002) (Table 1). In addition, Taiwanese transformed Kunshan economically and socially as Taiwanese invested in both manufacturing industries and services. The latter includes restaurants, karaoke bars, hospitals, banks and even elementary and high schools, creating a Taiwanese home atmospheres and making Kunshan called ‘little Taiwan’. [Table 1 in here] 6 The 21st century: the development of high-tech and producer services industries In the late 1990s, Kunshan faced another development difficulty as the then custom service could not meet the demand of fast delivery of global production networks (Yang and Hsia 2007), which for example required the infrastructure to satisfy the 955 principle - 95% of goods have to be produced and exported within 5 days of orders being placed. After many learning-cum-visiting tours to Taiwan (arranged by Taiwanese investors in Kunshan) (Chou and Lin 2007, Chien 2007, Wang and Lee 2007), whose custom service is well-known to satisfy the information technology related production, Kunshan proposed an idea of export processing zone (EPZ). With the help of the centre, Kunshan EPZ was officially in operation in 2001 and soon became a very popular zone in attracting more FDI and creating more exports. Top five of the world’s notebook companies, all from Taiwan, moved to Kunshan EPZ to establish their notebook production lines (Chen et al. 2010, Lai, Chiu and Leu 2005, Chien and Zhao 2008). The importance of Taiwan’s investment to Kunshan in this period can be vividly evidenced by a catchphrase ‘five, six, seven, eight, and nine’, meaning that since the 21st century, 50% of fiscal revenue, 60% of taxation, 70% of employment, 80% of investment and 90% of export have been generated by Taiwanese investment. And in the later first decade of the 21st century, Kunshan decided to develop Huaqiao business zone focusing not only on manufacturing but also on service industries, targeting two kinds of service business - one is back-door office for the financial sector and the other is domestic logistic centre for Taiwanese investment products. The former aims to respond the development of Shanghai’s financial centre, including banking, insurance and alike, in which they do need some office spaces to backup their IT data and store hardcopy documents. Those physical spaces should not be too far away from headquarters of financial sectors as those backup data and stored documents might be needed in hand if necessary. Kunshan again took advantage of being near to Shanghai and built Huaqiao to meet the huge ‘backup’ demand for Shanghai’s financial corporations. The second is to respond the complaints by Taiwan companies which wanted to further develop domestic consumption markets in China but could not make it without appropriate marketing channels. With the improving relationship between Taiwan and China after 2008 when Ma, a pro-China Taiwan president, won the presidential election, Kunshan proposed to build up the first comprehensive business centre for Taiwanese. In other words, the development of high-tech ICT industries and producer services in Huangqiao reflects the transition of the economy of Kunshan towards a more mature stage. 4 EMERGENCE OF URBAN ENTREPRENEURAILSM IN KUNSHAN The early stage of urban entrepreneurialism in Kunshan before 2005 has three features: (1) establishment of locally initiated projects, (2) introducing the market system, and (3) territorial competition as driving forces. These three shared the common characteristics of de-regulation and retreat of the (central) state. First, locally initiated projects mean that those reforms were implemented by local government initially without any permission from the upper-level governments. The action of secretly building up the industrial zone is a case in point. The action needs to be particularly 7 understood as a very risk and bold (i.e. entrepreneurial) policy under the context that there was a political struggle between market-oriented reformers and conservative-minded reformers. In the 1980s, China’s reform was an ‘oscillating’ process between (1) the relaxation and open toward more market mechanisms and (2) the contraction and reliance on more centrally-planned systems (Lichtenstein 1991, Crane 1990, Howell 1993). However, then leaders of Kunshan were scared by such uncertainty of being punished and the fear that conservative-minded reformers might be in power again; instead, they persuaded other local people to support the development of self-financed development zone (Chien 2007, Wei 2002). The process of initiating local projects certainly shows that the local state played a very entrepreneurial role in promoting the local economy. Second, regarding the introduction of the market mechanism, the best example is the land leasing policy in Kunshan in 1989, which was the first county-level administration to charge land-use fees to investors. During the Mao’s time, land was state-owned and land-use right should not be transferred to private investors due to its communist principle. However, in 1988, by declaring that land should be recognized as a special commodity, China amended its constitution to separate the land use right and its ownership (Yeh 2005, Wu and Yeh 1997). The centre took a very cautious step to allow only very few cities to try this policy, which still made some conservatives angry as they viewed the land leasing policy as a forfeiture of sovereignty and an insult of the state. Kunshan officials dared to push this market-friendly land policy because they were requested by a then foreign investor, who considered factory expansion in Kunshan but felt uncomfortable to build his new factory on the land that were not leased to or owned by him. The business-friendly environment in Kunshan was extremely successful as it became a key tool in attracting foreign investment. For example, about 400 land leasing projects until 1995, accounting for the two thirds of total 600 projects, were not with domestic companies but with foreign counterparts. In addition, land leasing policy became another important finance resource as a main supplement to the gap between budgetary revenue and cost of building infrastructure. Finally, competition among localities pushes Kunshan to be more entrepreneurial. By 2002, around 1,400 zones were established by various levels of governments in Jiangsu, Shanghai and Zhejiang.2 Therefore, there was inevitably serious territorial competition between zones. Competition can be either in a direct way of vying in capital or in an indirect way of upgrading the business environment. In terms of the former, Kunshan and Shanghai used to be competitors when some industrial investors, like Taiwan Semiconductor Manufacturing Company, the top leading semiconductor play foundry, came to the Yangtze Delta to look for factory locations. Rumour suggested that this is a reason why Shanghai had a project named “173” in the 1990sto build 173 km2 of industrial land to compete with other counties nearby Shanghai. A local catchphrase ‘yao qi san gan kunshan’ that ‘173’ (pronouncing in Chinese as yao qi san) is for catching up Kunshan becomes very evident to the competition between Kunshan and Shanghai. In terms of the latter, at the beginning, KETZ offered basic standards of infrastructure with five kinds of utilities and land refilling (wutong yiping). The five utilities 2 News source: lingdao juece xinxi (based in Beijing), 2004/ April No. 15 8 included access to: electricity, roads, communications, water and sewerage. By 1989, KETZ raised its standard to seven utilities plus one land refilling (qitong yiping) by additionally offering access to steam and gas. Nowadays, nine utilities including optical fiber and internet are provided along with land-refilling. Similarly, in 1996, Kunshan established a ‘foreign investor service centre’, coordinating different departments to provide a one-stop-shop service. In 1997 Kunshan cancelled 73 items of fee and lowered the prices for another 44 items. In addition, in 1997 Kunshan launched a campaign ‘Never Say “No” to Foreign Investors’, showing again the feature of market-driven deregulation of urban entrepreneurialism.3 5 TRANSFORMATION OF KUNSHAN’S URBAN ENTREPRENEURAILSM We argue that urban entrepreneurialism in Kunshan has been transformed since 2005. It does not mean that the features we identified in the earlier stage of urban entrepreneurialism, namely, initiation by the local, the market mechanism, and territorial competition, were completely disappeared at time being. Instead, while the above features still exist, different features are found: (1) the planning mechanism to govern the market; (2) coordination by upper-governments; and (3) the territorial cooperation. These new aspects show that the Chinese local state after the 21st century, certainly still very entrepreneurial, has changed in terms of state-market relationship, vertical inter-governmental relation, and horizontal interregional relation. The development of planning mechanism: the new master plan Along with the growth of its economic strength, business-friendly Kunshan has become more selective towards new investment projects. In the 1980s and 1990s, Kunshan welcomed every possible investment project. However, in 2005, for the first time, the city of Kunshan announced that new investment must fulfil two criteria: minimum investment intensity of 100,000 Yuan per square metre and completion of the project within two years. The projects that failed to reach this minimum investment intensity and completed construction within two years are asked to return the land to the city government. The purpose of this regulation was to prevent land speculation by occupying land without substantial investment and production. Moreover, investors are encouraged to increase their land use intensities. Office and factory buildings that exceed three floors are waived from some local infrastructure construction fee (chengshi jianshe fei). This change shows that urban entrepreneurialism began to change from attracting investment to selecting investment. Increasingly, the city of Kunshan began to think a more strategic approach to enhancing its economic competitiveness. In 2008, the city of Kunshan initiated a strategic vision study and subsequently started the preparation of its new master plan (2009-2030). This new master plan is a revision of its earlier one (2002-2020). The new master plan recognizes the problems of uncoordinated growth and rapid conversion of rural land into industrial uses under rapid urbanization. The new master plan aims to provide an overall development 3 See: Suzhou Almanac (1987), page 68-71; Suzhou Almanac (1990), page 655-659; Kunshan Almanac (1994-1997), page202-203; (1999), page115 9 framework for the whole jurisdiction of Kunshan rather than leaving individual town governments to develop their land. Under land-centred urban entrepreneurialism, the speed of land conversion is astonishing: from 2002 the city of Kunshan grew 24 km2 every year, a growth rate of 16% of its built-up areas. In 2009, the built-up area of Kunshan reaches around 400 km2, almost half of its vast territory of 927 km2 (Song, 2010). More problematically, industrial land development spread over small towns and various development zones set up by town governments. Some ancient towns such as Qiandeng, Zhouzhuang, Jinxi are known for their southern Jiangsu water and town landscapes. But, they are now encroached by industrial development and scattered development areas. Although the previous master plan requires that industrial development should concentrate in designated industrial zones, in reality the growth of industrial land was out of control. Industrial development scattered all over the whole area of Kunshan. The lack of land resource began to constrain the future development of Kunshan. Under the national system of basic agricultural protection, 280 km2 agricultural land in Kunshan is reserved for protection. The development of basic agricultural land is strictly forbidden. Kunshan is a place of water landscapes. The water surface accounts for 176 km2. The developable land in Kunshan is estimated to be 129 km2. At the current pace of land conversion, this could only provide land for development for the next five to six years. The constraint of land resource means that Kunshan must adopt a more compact and smart growth approach. Despite the land constraint, Kunshan enjoys new development opportunities resulted from regional transport infrastructure development. The new inter-city train from Shanghai reaches the Kunshan station within 20 minutes. There are three inter-city train stations built within Kunshan. The new high-speed train from Shanghai to Beijing has the first stop in the station of Kunshan. The extension of Shanghai No. 11 metro line to Kunshan connects the city of Kunshan with Shanghai. There are three new stations in Kunshan. The development of Shanghai Hongqiao hub combined with Hongqiao international airport, high-speed train, and metro lines provide new accessibility to Kunshan. Faced with the land constraint and transport opportunities, the new master plan proposes a pattern of transit-oriented development and requires that new development should concentrate in the areas around the new stations in Kunshan. The new master plan thus designates three new functional zones: the central development zone of 470 km2, the zone of recreational and holiday resort of 136 km2, and the zone of water landscape and ancient town tourism of 321 km2. The plan requires that major future development should be located within the central development zone where the three stations are based. The other two zones should be protected from industrial and land development. The new master plan also suggests that, in order to implement the plan of functional zones, the performance of officials should be evaluated differently in these zones. Under urban entrepreneurialism in the past, officials were mainly evaluated by their achievement of GDP growth rates. Now, for the town governments within the designated zone of recreation and tourism, the key performance indicator should emphasize less on economic growth rates and more on environmental protection and greening. 10 The preparation of new Kunshan master plan and promulgation of the development framework show that the city of Kunshan is trying to move away from its earlier development approach, namely using cheaper land to attract investment so as to speed up local economic growth. The new development approach begins to emphasize that some areas of the city-region should be protected and used for post-industrial functions such as recreation and tourism. Different from previous master plans, the new master plan proposes a series of key performance indicators (KPIs), including some new indicators such as R&D expenditure in GDP, Gini coefficient to measure household social inequalities, unemployment rates, per GDP energy consumption, and the coverage of forest and green spaces. While it is not clear how these KPIs would be actually enforced, they do reflect the effort of the city of Kunshan to transform its earlier single emphasis on GDP growth rates. The new master plan reflects the transition of Kunshan from dominant industrial development to a more comprehensive approach to development. The new master plan was awarded as the national best urban and rural plan in 2009. Territorial cooperation Territorial cooperation between neighbouring or trans-border administrations is another important characteristic of the second phrase of entrepreneurial governance, which reflects the changing attitude of local governments who began to understand weakness of race to the bottom in territorial competition. In the case of Kunshan, two examples in territorial cooperation are particularly illustrative. One is cooperation between Kunshan and Taicang, both of which are located in the Suzhou administration, and the other is cooperation between Kunshan of southern Jiangsu and Suyang of northern Jiangsu. We brief in details below. First, geographically Kunshan does not sit beside coastline or riverbank and therefore has not any seaport or river port. The location disadvantage is crucial for development export-oriented industries. Over years Kunshan used to rely on both the Shanghai seaport and the Suzhou river port to proceed with necessary custom documentation in order to transport trade goods in and out of Kunshan. However, with development of Shanghai and Suzhou, the workload of both customs services has been close to the maximum of institutional design. Kunshan no longer satisfied the slowness and inconvenience offered by Shanghai and Suzhou ports and was eager to seek for an alternative. Taicang, another county-level administration under Suzhou, is situated close to the Yangtze River with the only one river port in Suzhou (Map 1 below). The Taicang river port became Kunshan’s favourite not only because its location was just nearby Kunshan but also because of its unique status in the cross-strait relationship. Although there had been some economic interaction between Taiwan and mainland China in the 1980s, it is not until 2008 that the first direct ocean shipping service was established between Taiwan and China. Prior to 2008 Taiwan’s goods were forced to ship to China via the third points like Isigaki (of Japan) and Hong Kong. In November 2008, few months after a pro-unification president seated in the President Hall, the first four ports in China were opened up for the direct shipping lines to Taiwan. These four include Shanghai, Fuzhou, Tianjin and Taicang - the former three are seaports facing the Pacific and Taicang is the only one river point along the Yangtze River. Further, the Taicang Custom was empowered with the establishment of Taicang-Taiwan Free Trade Zone. 11 [Map 1 in here] The direct shipping line between Taicang and Taiwan certainly provides cheaper and quicker transportation to benefit many Taiwanese companies investing in China,4 including those in Kunshan. Recognizing this advantage, Kunshan further cooperated with Taicang under a concept of ‘Kun-Tai Links (kun tai lian dong)’. In 2009, KETZ and the Taicang river port also built up a ‘Zone- Port joint meeting (qu gang shuang bian hui yi), which is a more institutionalized way for cooperation between Kunshan and Taicang. Though the cooperation, Kunshan can offer more convenient trade and transport environment to its Taiwanese investors, and Taicang also can promote its economy with more Taiwanese investors using the river port service.5 Such territorial cooperation, which creates win-win situation to both sides without any formal restructuring process of administration behind, is in sharp contrast to previous territorial competition. The second example is Kunshan cooperated with Suyang under the context of so-called pairing assistance between south Jiangsu and north Jiangsu (sunan subei duikou zhiyuan). Suyang is a county under Suqian, a prefecture-level city in northern Jiangsu. Jiangsu province is divided by the Yangtze River into two parts- the southern one and the northern one. Historically, southern Jiangsu was more developed than northern Jiangsu. And with its location advantage close to Shanghai and the rise of township and village enterprises, southern Jiangsu cities were able to develop faster than their northern counterparts. The gap between the north and south was even widened over the past two decades. In order to solve the problem of increasing disparity within the province, Jiangsu provincial government initiated a south-north pairing assistance system in 2001- one southern prefecture-level city is assigned to be in charge of assistance to one northern prefecture-level city. Under such pairing system, Suzhou is arranged to pair with Suqian. The pairing system was further downscale to the county-level administration. Kunshan of Suzhou is therefore responsible for the developmental assistance of Suyang of Suqian. Interestingly, the Kunshan-Suyang pairing system actually is not a pure one-way development aid from developed areas to underdeveloped regions but a mutually benefit program for both sides. In the Cooperation Memorandum between KunshanSuyang Pairing Assistance (kunshan shi yu Suyang xian duikou bangfu guagou hezuo yixiangshu), Kunshan agreed to financially and materially offer aid to Suyang, such as providing cadre training programs, organizing certain business marketing activities, purchasing more agriculture products, and creating more employment opportunities. In return, Suyang agrees to help Kunshan to ‘lend for free’ the ‘land conversion’ quota if necessary. 6 Such quota transfer is very crucial for Kunshan, which currently faces a challenge of lack of development lands. 4 It is reported that companies in great Suzhou area can save about 1 to 3 days in the direct shipping trip as compared to their previous round trip via Shanghai or somewhere else. 5 News source: China Central Television, 2010/12/14, accessed by 2011/03/01; also Taicang ribao (based in Taicang), 2009/12/29; 6 The full text of the Memorandum, see subei fazhangwang, 2002/01/16, http://www.sbfz.gov.cn/nbgg/jhrw7.htm, accessed by 2011/03/15 12 Land conversion quota is a ‘hard’ performance indicator assigned from the Ministry of Land and Resource in Beijing to ensure the absolute quantity of farming lands should not fall below the set limit. The land is not allowed to be transformed to construction sites for any kind of non-agricultural development. Every administration has its minimum quantity of preserving farmlands. As a top economically strong county-level administration, Kunshan obviously has converted much agricultural lands for various industries and therefore encountered the crisis of no more land to be offered for further investment if there is no other quota to be found (Long et al. 2007).7 On the contrary, Suyang, like many relatively less developed cities, has a surplus of agriculture land use quota as current construction areas are still ample for the demand of development. Suyang uses the surplus as an advantage to ask Kunshan to do more development assistance. In order to use the quota ‘virtually’ released from Suyang, Kunshan promises to move at least two investment projects to Suyang. Kunshan’s aid becomes the most direct way to create jobs and promote development in Suyang. Our interview with an official in Kunshan’s Bureau of Land Management also confirms that Kunshan’s development would be much constrained without ‘borrowing’ the land quota from Suqian. Coordination by upper governments It is noted that Kunshan’s transformation is not facilitated by itself alone. Without institutional assistance from the upper-level governments, Kunshan was unable to overcome those institutional constrains due to its low administrative status at the county level. Above the county level and below the central government, there are prefecture and provincial authorities at sub-national levels. The metro system between Kunshan and Shanghai is a case in point. It is widely known that Kunshan suffered terrific public transportation linking with Shanghai. In terms of distance, it only takes 30 minutes from Shanghai to Kunshan by train. However, train tickets are precious due to limited frequency of train services. It is commonly seen that people who do not make any ticket reservation in advance need to wait 2 to 3 hours in the Shanghai station to get a latest available seat to Kunshan. In order to resolve the problem, Kunshan proposed to extend the Shanghai mass transit railway (MTR) system to Kunshan. However, the municipal government of Shanghai gave a very lukewarm response to the Kunshan’s proposal. Fortunately, with the coordination provided by the then Jiangsu governor, Kunshan was able to self-finance the extension Shanghai MTR system from Anting, the closest station of Shanghai MTR to Kunshan, to Huaqiao, the township of Kunshan just beside Shanghai. It is believed that the reason why Shanghai could agree with the Kunshan’s proposal is because LI Yuanchao, the then Jiangsu governor and the incumbent Minister of Organization in CCP, on behalf of Kunshan negotiated with the Shanghai mayor. In addition, implementation of regional cooperation between Kunshan and Taicang for the industrial zone and river port link as well as between Kunshan and Suyang for mutual benefits for the system of pairing assistance discussed earlier is coordinated by the provincial government of Jiangsu. 7 The lack of agriculture lands available to convert to construction lands is a general problem facing the so-called economically strong countries, said Liu, a then vice director of National Bureau of Statistics in a conference on Forum of China’s the Most Developed County-Level Administration. See http://finance.sina.com.cn/g/20050920/12021983475.shtml, accessed by 2011/03/15 13 [Map 2 is about here] It is noted that given that Kunshan is at the very low administrative status, facilitation of upper-level governments for local development has been started even earlier before the 21st century. The most obvious example is the establishment of the Kunshan EPZ, a special enclosed area enjoying many extra preferential treatments like more tax rebate, less tariffs and convenient bank deposit and semi-finished products transported to outside zones.8 From this perspective, the EPZ system is undoubtedly regarded as special zones to provide the quickest custom service, the most favourable tax policy, the most convenient arrangement, the most integrated facilities, and the simplest procedures in reporting and documenting exported and imported goods. The process of building Kunshan EPZ, which is the first administration of such kind, involved negotiation and coordination between many high-level government organizations, including the Ministry of Financial Affairs, the General Custom, the Ministry of Civil Affairs, the Ministry of Construction, the Ministry of Commerce and so on. Without the help from provincial and central officials, for example, WU yi, then senior vice prime minister of China, Kunshan certainly could not be able to deal with so many high-level relevant authorities (Almanac Office of KETZ 2000).9 6 DISCUSSION AND CONCLUSION This paper examines the emergence of urban entrepreneurialism in the 1990s and the subsequent change from de-regulation to re-regulation since 2005 in Chinese cities. The city of Kushan uses a business-friendly approach and has managed to attract a significant quantity of overseas investment, especially from Taiwan, and developed a cluster of ICT industries. Converted from a former rural county, the city of Kunshan has successfully inserted itself into the global production network (GPN), like many other cities in the Yangtze River Delta (Wei et al 2009, Yeung 2009). Economic growth is driven by land development. The conversion of agricultural to industrial land provides cheaper production space to overseas investors (Yang and Wang, 2008 Hsing 2010). In the early 1990s, to promote land development, the city of Kunshan tried to circumvent the regulation of its upper government and set up a self-funded industrial zone which has later been recognized by the central government to become one of the national-level ETDZs. Urban entrepreneurialism has led to fierce inter-city competition, especially between Kunshan and Shanghai, in the process of competing for manufacturing foreign direct investment (FDI). However, since 2005 locally-based entrepreneurialism has been experiencing subtle yet important changes. After tightening up land leasing in 2003 and 2004, the central government further adopted land quotas to control the pace of land development in 2005. 8 Four special favours to companies investing in EPZ can be identified: (1) companies investing in EPZ could enjoy more tax rebate; (2) companies in an EPZ could freely transfer goods to other companies within the EPZ; (3) companies in an EPZ were not required for the bank deposit system, custom registration system, value-added tax or consumption tax on processed products; (4) imported cargo through an EPZ could be exempt from tariffs and other complicated local duties before being exported. See Chien (2007); Wang and Lee (2007) 9 Kunshan Almanac (2000), page 118. 14 There are three major changes in the city of Kunshan. First, the role of upper governments (the central and provincial governments) is strengthened. The central government also plays a significant role in coordinating large infrastructure projects, for example, the high-speed and inter-city train and metro and functional production zones like the Kunshan EPZ and Huaqiao Business Park. All these examples indicate that urban entrepreneurialism has been transformed and up-scaled. Second, the role of city plan is reinforced in order to provide guidance to land development in its jurisdiction and prevented town governments from over competing in land development. The new master plan tries to prevent scattered land development initiated by urban entrepreneurialism in the 1990s when town governments and the development zone competed with each other to convert agricultural land into industrial uses. Third, the city of Kunshan has begun to seek cooperation with neighbouring cities. Instead of emphasizing competition, the city realizes the importance of inter-city collaboration. For example, Kunshan negotiates with neighbouring Taicang so as to use the port facilities in Taicang. In addition, directed by the Jiangsu provincial government, Kunshan and Suyang became a pair of local governments. Kunshan provides economic and financial support to Suyang, while Suyang transfers some land quotas to Kunshan. They are both benefited from collaboration rather than competition. The case of Kunshan examined in this paper shows some new characteristics of local development in China. While much of new development still relies on foreign investment and land development, the model differs from urban entrepreneurialism in the earlier stage which is characterized by local initiatives, aggressive market de-regulation and race to the bottom territorial competition. To some extent, new governance reflects more mature stage of economic development and emerging constraint of resources. For example, Kunshan, like many other cities, began to require that industrial projects should exceed the minimum intensity of investment per square kilometre. The salient feature of new urban governance is the involvement of the state across different scales in local development. The function of coordination is strengthened by the upper levels of government, while lower levels of governments begin to seek collaboration based on their own interests. The new mechanisms such as land quotas and functional zones used in the mater plan are developed to achieve more orderly development. The case of Kunshan also suggests that China’s urban entrepreneurialism is evolving along the development of market. The market development does not lead to the demise of the planning mechanism and state regulation. Rather, excessive competition and chaotic development require more coordination between local governments. In addition, economic restructuring and the development of producer services raises new demand for governance of infrastructural development. The transformation of local governance in China is a response to the demand at a more mature stage of economic growth. The transformation of local governance in China provides a chance to understand the relation of state and market in the new phase of development. While the concept of the developmental state has been widely applied to East Asian economies (Wade 1990; Woo-Cumings, 1999), such a nation-state level analysis is inadequate to understand the forceful driver of local economic development in China, resulted from de-regulation and entrepreneurialism centred on land and industrial development. On 15 the other hand, Chinese urban entrepreneurialism is different from the widely documented urban entrepreneurialism under western advanced capitalism (Harvey, 1989). Rather than based on the business association such as the chamber of commerce or the coalition with the private sector and civic boosterism, the local state continues to play a significant role in the process of development and regulation. Chinese urban entrepreneurialism thus presents a hybrid nature of the developmental state and urban entrepreneurialism. In terms of instruments, similar to the developmental state, the local state can use a wide range of policies including land incentives to foster economic development as well as making a strategic plan to coordinate growth. But this urban entrepreneurialism does not operate through national macro-economic management but rather relied on the consideration of locally-based economic competitiveness. Further, this study reveals a new process of emerging complex multi-scalar governance in China, which departs from the prototype of neo-liberal entrepreneurialism described in the literature. To some extent, China’s urban entrepreneurialism disapproves rather than supporting the common wisdom that Chinese rapid local growth is centred on market de-regulation. 16 Table 1: comparison of key selected Taiwan-invested industry in Kunshan: 1991-1995 and 2001- 2005 Key industries and representative companies 1990-1995 - PCB (WUS (Kunshan)), - motor vehicle parts and accessories (Liufeng Machinery), - bicycle industry (Giant China), - rubber (Cheng Shin Rubber China), - food processing (Uni-President (Kunshan)) - houseware products (Sakura Bath and Kitchen Products) - glass fibre (TG Changjiang Glass) - IT components (Foxconn (Kunshan)) 2001-2005 - Notebook PC (Getac Kunshan Computer, Vimax InfoComm Kunshan, Compal Opt. Kunshan; Compal Info Kunshan, Compal Info Tech Kunshan; WJ Info Comm Kunshan; Wistron Info Commom Kunshan; Kunshan Kapol; Twinhead Kunshan) - Glass fabre (Taichia Glass Fiber; PFG Fibre Glass Kunshan) - projectors and optical components (Vimax Kunshan) - motherboard and display card (Micro Unite Kunshan), - exposy resin and copper clad laminates (Nan Ya Epoxy Resin Kunshan; Nan Ya Electronic Material Kunshan) Source: authored compiled from Chen et al. (2010) 17 Figure 1: GDP and export performance of Kunshan since 1987 Note: right axis as export (US$ 1 million) and left axis as GDP (billion Yuan) Source: Author compiled from Kunshan Statistics Yearbook (different year) 18 Map 1: the location of Kunshan in the wider context of the Yangtze River Delta Source: compiled by the author 19 Map 2: the metro extension from Shanghai to Kunshan Source: compiled by the author 20 7. REFERENCES Almanac Office of KETZ. 2000. 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