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Three essays on the causes and consequences of China’s governance reforms

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Three essays on the causes and consequences of China’s governance reforms

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i

THREE ESSAYS ON THE CAUSES AND CONSEQUENCES OF CHINA’S
GOVERNANCE REFORMS

By

Bo Wen

A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(PUBLIC POLICY AND MANAGEMENT)

August 2018

Copyright 2018 Bo Wen

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DEDICATION

To my family

I hope that luck can be my companion and friend
If not, I hope I can remain optimistic when mishaps strike
I hope that love can be my companion and friend
If not, I hope I can learn to be forgiving in those lonely moments
I hope that success can be my companion and friend
If not, I hope I still possess the luxury of waking up naturally every uneventful day
At the end of the day, ALL I have to master is making peace with my inner self

**Adapted from Yu Liu’s book, titled “I wish you could grow up slower” (2014)

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ACKNOWLEDGMENTS
Innumerable people have helped and inspired me during the work on my thesis. My
dissertation chair, Prof. Shui-Yan Tang, deserves endless thanks not only for the depth and
breadth of his advice, but for his unparalleled patience in looking at multiple rudimentary drafts
of mine. From the bottom of my heart, I consider Prof. Tang one of the most intelligent
academics in the field of public administration, and his intelligence can only be surpassed by his
generosity towards me. In all honesty, even the thought of not having him as the chair of my
committee is unimaginable. His witty spirit pervades every following page you are about to read.
It has truly been a delight to work with him.
My sincerest thanks also go to Professors Terry L. Cooper and William G. Resh. It is
Prof. Cooper’s unwavering support and boundless encouragement that enabled me to survive the
very beginning of my tenure at USC. His kindness, in welcoming me in all of his research
projects from day one, extended the scope of my research agenda and offered me a sense of
security and belonging. I began to work with Prof. Resh only two and half years ago, but the
insights he has provided since then, on my dissertation and in the shaping of my professional
trajectory, have been above and beyond what I initially expected to gain from him.
I would also like to express my sincere gratitude to Professors Peter J. Robertson, Dowell
Myers, and Daniel A. Mazmanian. Serving as instructors of my theoretical core courses as well
as members of my qualifying exam committee, they have collectively helped boost my self-
confidence to a considerable extent and spur me to achieve a greater measure of success. I can
still recall the days when I dropped by Prof. Robertson’s office and chatted with him on various
topics for over an hour; I can still recite the note, written by Prof. Myers on my exam scoresheet,
which reads “very logical grasp of a complex structure to the problem”; and I can still firmly

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remember Prof. Mazmanian’s outspoken belief that I am an unquestionably smart person who
ought to set the bar high.
I am deeply indebted to Professor James J. Polk, my writing professor at USC. He taught
me how to write English in a concise and less flamboyant manner (no doubt that I have not yet
lived up to his mark). When we were working together, he often sent me emails, complimenting
the wonderfulness of my writing. As a non-native speaker/writer, I was constantly beside myself
with joy when reading his praise.
I should also give credit to my graduate student colleagues, friends, and confidantes,
including Arthur Acolin, Soledad De Gregorio, Julia Harten, Robert Jackman, Huê-Tâm Jamme,
Zeewan Lee, Hui Li, Carmen Mooradian, Eun-Jin Shin, Bingbing Wang, Weijie Wang, Xize
Wang, Frank Xu, Jack Yuan, Linna Zhu, and Yolanda Zhu, for their constructive comments and
merciless criticism. These like-minded souls bring to mind the sleepless nights we spent together
in our Gateway office.
Many thanks to Ann Abrahamyan, Suzanne Alexander, Evangeline Dupas, Julie Kim,
Maria Lam, Ginger Li, Kimberly Perry, Erin Sigman, and Christine Wilson, who have worked in
either the business division or the student affairs office at USC. None of them ever jumped down
my throat for my sheer inability to understand how conference reimbursement requests should be
processed, how the time-tracking system should be managed for my summer positions, or how
ALship opportunities should be secured. Instead, they patiently responded to my voluminous
emails filled with questions and queries and tackled mountains of my paperwork and application
materials accordingly. I sincere applaud their all but immutable competence and professionalism.
The success of any empirical studies on China hinges heavily on the unreserved
assistance lent by many other Chinese scholars in the field. On this note, my heartfelt

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appreciation goes to Professors Carlos Wing-Hung Lo and Xueyong Zhan. My field research
would not be feasible without utilizing the personal connections they have established with key
figures working in China’s environmental protection system.
Last but definitely not least, I owe a huge debt to my parents, who never stop telling me
to persist. Anything I could write would pale in comparison with their contributions to my life
and work. They chose to believe in me even when there were moments when I lost faith in
myself. Their unconditional love and indefatigable cheerleading are the only reason that I did not
give up when I encountered difficulties and challenges of various kinds. Particularly my Dad, Dr.
Shanen Wen, possesses sharp intuitions and the much-needed sanity about my work. I profited
immensely from his “layperson” input/insights.
It is often said that the business of life is the acquisition of memories. During my stay at
the Sol Price School of Public Policy at USC over the past five years, I’ve acquired countless,
unforgettable memories. I genuinely want to thank all the individuals, whose names are
mentioned above, for being an irreplaceable part of my journey. It is unlikely that the new
chapter in my life will be plain sailing. Nonetheless, having these priceless memories under my
belt, I shall be fearless.

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Table of Contents
DEDICATION ................................................................................................................................ ii
ACKNOWLEDGMENTS ............................................................................................................. iii
Table of Contents ........................................................................................................................... vi
List of Tables ............................................................................................................................... viii
List of Figures ................................................................................................................................ ix
Abstract ........................................................................................................................................... x
Chapter 1 Introduction .................................................................................................................... 1
Chapter Plan ............................................................................................................................. 4
Chapter 2 Beyond Governance for Economic Growth: Fiscal and Personnel Incentive Distortions
in China ........................................................................................................................................... 6
Theoretical and Historical Backgrounds ................................................................................. 9
Fiscal Incentive Distortions ................................................................................................... 14
Personnel Incentive Distortions ............................................................................................. 21
Broader Institutional Context ................................................................................................ 28
Conclusion and Discussion .................................................................................................... 35
Appendices ............................................................................................................................ 39
Chapter 3 Reforming Civil Service While Employees Are Unhappy .......................................... 42
Environmental Governance in China ..................................................................................... 45
Theory Building: Exploring Antecedents to Job Satisfaction ............................................... 46
Hypothesis Development ....................................................................................................... 50
Survey Data and Research Design ......................................................................................... 55
Empirical Findings ................................................................................................................. 59

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Discussion and Conclusion .................................................................................................... 62
Appendices ............................................................................................................................ 66
Chapter 4 Old Problems and New Dilemmas: The Conundrum of Environmental Management
Reform in China ............................................................................................................................ 75
Data and Method .................................................................................................................... 78
Long-Standing Hurdles to Local Environmental Enforcement ............................................. 80
Institutional Dilemmas Stemming from Recent Environmental Management Reforms ....... 84
Discussion and Conclusion .................................................................................................... 94
Appendices .......................................................................................................................... 101
Chapter 5 Concluding Remarks .................................................................................................. 106
References ................................................................................................................................... 111

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List of Tables
Table 2-1 Profiles of the Four Cases............................................................................................. 39
Table 2-2 Examples of Officials’ Behavioral Responses to Fiscal and Personnel Incentive
Distortions ..................................................................................................................................... 40
Table 2-3 Mismatching Necessary Conditions of Market-Preserving Federalism ....................... 41
Table 3-1 Variable Measurements ................................................................................................ 66
Table 3-2 Independent Explanatory Power of Different Types of Variables in the Context of
Cross-sectional Analysis ............................................................................................................... 67
Table 3-3 Structural Equation Model Estimation ......................................................................... 68
Table 3-4 Parallel Factor Analysis ................................................................................................ 69
Table 3-5 Correlation Matrix (2 Time Points, N = 355) ............................................................... 70
Table 3-6 Descriptive Analysis: Decreased Job Satisfaction among GEPB Officials ................. 71
Table 3-7 OLS Regression Results: Job Satisfaction on Antecedent and Control Variables ....... 72
Table 3-8 Differential Effects of Mission Match on Job Satisfaction across Time ...................... 73
Table 4-1 Basic Geographic and Socioeconomic Information of Guangzhou Administrative
Districts ....................................................................................................................................... 101
Table 4-2 Summary of Interviews on Major Difficulties/Challenges Faced by Local
Environmental Enforcement Teams ........................................................................................... 102
Table 4-3 Correlation between Interviewees’ Interpretation of the Received Government support
and Their Respective Teams’ Precise Staffing Situation ............................................................ 104

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List of Figures
Figure 3-1 Interaction Effect ......................................................................................................... 74
Figure 4-1 The Hierarchical Structure of China’s Environmental Management Regime .......... 105

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Abstract
This dissertation dissects the causes and consequences of China’s governance reforms
subsequent to the 1990s. Its three core chapters describe and reflect on the paradigmatic shift in
China’s fiscal, civil service, and environmental management regimes, respectively.
The first study reviews the fiscal and personnel incentive setups used in China’s current
governance system. While successfully spurring local administrations and officials to comply
with central directives and to improve the economic development level of their respective
jurisdictions, these incentive-oriented arrangements are found to elicit distorted behavior patterns
among local cadres, including bureaucratic entrepreneurship, reliance on extra-budgetary
revenues, excessive borrowing, high performance numbers regardless of outcomes, and short-
sightedness. In the absence of fully institutionalized intergovernmental relationships and the
addition of horizontal accountability mechanisms, many of the incentive-driven features that
once favored economic growth are becoming the very factors that hamper the central authority’s
ability to tackle finer governance issues in the long term.
Based on interviews and questionnaire surveys with Guangzhou environmental
enforcement officials, the second study not only traces the changes in job satisfaction levels of
Chinese street-level bureaucrats over the past fifteen years (2000-2014), but also examines the
contextual changes that accompanied the variation in job satisfaction over this period. The
empirical results demonstrate that the overall job satisfaction, particularly the satisfaction
associated with the extrinsic rewards, noticeably declined within this population. In addition, as
the officials became more highly educated and professionalized, mission match concomitantly
served as a stronger antecedent to their job satisfaction. This finding highlights the paramount

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importance for administrative agencies to take appropriate action to meet the motivational needs
of an increasingly professionalized workforce.
The third study offers a textured description of factors contributing to the compromised
effectiveness of China’s environmental enforcement at the local level. Drawing on semi-
structured interviews with leaders of environmental enforcement teams from all administrative
districts in Guangzhou, this study unfolds three dilemmas created by the ongoing environmental
management reforms initially designed to address the predicaments and the challenges routinely
faced by grassroots enforcers. These dilemmas can be encapsulated as: 1) envisioned difficulties
in mobilizing local resources brought about by vertical integration, 2) the low employee morale
as an outcome of the tightened accountability requirements, and 3) the weakened ability to
credibly enforce regulations resulting from the complete separation of the investigation and
decision-making units.
In summary, this dissertation applauds the resolve of the Chinese top leadership in
breaking the dogged status quo in governance. At the same time, it unveils the multifaceted,
personnel-based ramifications that various top-down government measures might trigger. Laying
bare these reform-related conundrums, in theory, could keep central policymakers informed,
engender their greater responsiveness to the wellness of public employees at the bottom of the
party-state power structure, and ultimately help sustain China’s political and economic stability.

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Chapter 1
Introduction
Ever since the 1980s, the central tenets of China’s guiding philosophy in governance
have been defined by two much-touted punchlines: “development is the hard truth,” and
“stability overrides everything else.” The former emphasizes the paramount importance of
promoting the nation’s economic growth, the accomplishment of which depends on the latter –
namely, whether a stable domestic environment is attainable. As China has miraculously risen
from a somehow “backward and largely autarkic economy into the world’s second largest”
(Yang 2016, p. 45) over the past thirty years, the pragmatic usefulness of these two beliefs is
widely acknowledged and extolled. Indeed, many political scientists contend that the rapid
economic progress and the resultant rising living standards of the Chinese populace serve as the
primary reason that China’s party-state system, in which the Chinese Communist Party (CCP)
enjoys its sole reigning status, was legitimized and henceforth sustained.
While the existing literature has dissected the approaches adopted by the Chinese top
leadership to forging development-conducive conditions for every sector of society, scant
attention has been paid to the glaring side effects triggered by these very approaches and
institutional setups (e.g., Lee 2007; Solinger 2002). As argued by Osburg (2013), being able to
play “catch-up” so successfully, China must have resorted to atypical, if not dubious, paths of
wealth accumulation and economic revitalization. By comparing four in-depth case studies, my
first dissertation essay (i.e., chapter 2) thus examines how China's relatively decentralized fiscal
system, coupled with its highly centralized cadre management system, elicit distorted behavior
patterns among local officials. Although many of these fiscal and personnel incentives have
functioned as indelible drivers of the country's speedy economic growth, they nevertheless

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magnetize strategic and often opportunistic behaviors in all levels of government. Viewing the
absence of fully institutionalized intergovernmental relationships and the addition of horizontal
accountability mechanisms as essential factors contributing to the inability of the Chinese
government system to tackle finer governance issues, this paper further questions the arguments
put forward by Weingast that (1) China is a case of market-preserving federalism, and that (2)
market-preserving federalism can be developed without constitutional guarantees of political
freedom and democratic representation.
The kernel idea of my first essay resonates with and is shared by other mainstream
academics, including Yang (2016). He holds that many governance conundrums currently facing
the Chinese government can be attributed to its excessive reliance on the paradigm of
“developmental authoritarianism.” Notwithstanding its unparalleled efficiency in mobilizing and
pooling resources to deal with major governance tasks, development-oriented authoritarianism is
doomed to be short-lived in effectiveness for the following two major reasons: 1) as time goes
by, China’s economic growth will decelerate and eventually plateau, given the gradual depletion
of the demographic dividend, and 2) both the widened access to higher education and the
increasing availability of digital information have helped the Chinese young generation evolve
into “critical citizens,” as described by Norris (2011), who “are strongly inclined toward political
reform, attach greater importance to political rights than to economic rights, and are profoundly
discontented with the political status quo” (Michelson and Liu 2010, p. 311). What the Chinese
government ought to be truly concerned about, according to these scholars, is the national mood
being dominated by negative sentiments. Emboldened by the result of a national survey that
captures a dramatically decreased percentage of the “happy” Chinese people from 2000 to 2012
(Chen and Yang 2012) and various media outlets that report on unprecedentedly high turnover

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rates in government bureaucracies (particularly those in top-tier cities), my second essay (i.e.,
chapter 3) provides the first empirical evidence to disentangle puzzles as to whether job
satisfaction has noticeably declined among public employees in China. If so, have the
antecedents of job satisfaction changed over time? Owing to two rounds of questionnaire surveys
of enforcement team officials of the Guangzhou Environmental Protection Bureau (GEPB) in the
years 2000 and 2014 respectively, my analysis not only quantitatively affirms the media
portrayal of an increasingly unhappy Chinese government workforce, but also discovers a
substantially positive, albeit time-varying, effect of mission match on job satisfaction.
Admittedly, realizing that un-adapted developmental authoritarian regimes, in which
efficiency, economic growth, and stability maintenance take precedence over equity,
environmental preservation, and civil rights protection, are hardly a stable equilibrium in the
long term, the Chinese government leaders are undertaking a spectrum of reform measures.
These include the professionalization and downsizing of the civil service system, the high-profile
crackdowns on corruption, and the ever-increasing resolve for environmental betterment. While
upholding laudable objectives, these reforms are often carried out in a hasty manner –without the
aid of supporting institutions and sufficient human resources allocated to the revenue-hungry and
talent-drained localities –and are therefore ironically “riddled with incongruities and sometimes
beset by contradictions” (Yang 2016, p. 70). My third essay (i.e., chapter 4) is a prominent case
in point. In light of semi-structured, in-depth interviews with leaders of environmental
enforcement teams in all administrative districts of Guangzhou, this paper begins with a succinct
summary of long-standing reasons – limited enforcement capacity available for environmental
teams and poorly motivated individual officials – that negatively impact the current effectiveness
of environmental regulatory efforts. By describing three recently, or soon to be, adopted

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enforcement-enhancing approaches utilized by the central government in the ongoing
environmental management reforms (i.e., a thorough separation of investigation and decision-
making, a strengthened political accountability system, and a vertically integrated management
structure), this article subsequently lays bare the respective dilemmas unintendedly created for
grassroots environmental officials and asks if theoretical or practical accounts can be found for
their occurrence. These newly-derived enforcement dilemmas, as I ultimately conclude,
collectively evidence the top leadership’s desperation to improve environmental outcomes in a
short time and showcase the inherent vulnerability of the overarching governance logic that
equates visible performance with ruling legitimacy.
Taken together, the findings gathered from my three core essays suggest that China’s
governance ethos, which once supported the country’s economic goals, will be increasingly
contested and challenged in the foreseeable future. While myriad governance challenges and
pitfalls might be temporarily kept in check by the central authority with formidably abundant
resources, they will eventually come to light. The cumulative consequences of the problems, at
least those identified in this dissertation, will likely ignite an outburst of legitimacy-threatening
event(s), hence becoming a tipping point for the rewrite of “the major rules of the political
[governance] game in China” (Yang 2016, p. 70).
Chapter Plan
This dissertation consists of five chapters. The first chapter explains my impetus for
focusing on the origins and consequences of China’s noteworthy governance reforms in recent
years. Following this overarching logic, chapters 2, 3, and 4 are respectively made up of three
independent studies peering into the sobering effects of various reform measures implemented to
further developmental, professionalized, and accountable local governance. The final chapter

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concludes by reiterating the interconnectedness of the middle chapters and highlighting their
usefulness in yielding a fine-tuned understanding of the tip of China’s governance iceberg.

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Chapter 2
Beyond Governance for Economic Growth:
Fiscal and Personnel Incentive Distortions in China
1

It has been commonly argued that an important institutional setup driving the rapid
economic growth in China over the past three decades has been the alignment of local
government incentives to promote markets and productive enterprises (Xu 2011). There are two
dimensions to these local government incentives. One dimension relates to the fiscal (budgetary)
system in which local governments are given both considerable freedoms to develop business-
friendly policies and the rights to retain considerable portions of the fiscal revenues. There have
been changes in the past two decades in terms of the relative freedom and the shares allotted to
local governments from total tax revenues. Yet in the main, local governments have been fiscally
rewarded by increasing their local tax revenue base. The other dimension relates to the personnel
system in which the career advancement of local officials depends on meeting performance
targets (mostly in the form of tangible GDP growth figures) set by higher-level governments.
Working within a highly centralized personnel system, local officials are strongly motivated to
meet or exceed economic growth targets so that they can advance rapidly through the party-state
personnel hierarchy.
More recently, as scholars and policy makers began to ponder prospects for the next stage
of development in China, many have begun to pinpoint inherent weaknesses in the current fiscal
and personnel systems in China. Many of the selfsame features that have favored economic
growth have commenced showing their negative impacts on other finer governance issues—

1
This chapter is a modified version of a paper I co-authored with Dr. Shui-Yan Tang.

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environmental protection, the struggle against corruption, widening income gaps, and
widespread social unrest (Liu and Tang 2011; Wang, Zheng, and Zhao 2011). In their relentless
effort to finance infrastructure projects, for example, local governments in China have
accumulated enormous debts, many of which are likely to face eventual default, threatening the
overall fiscal stability of the country. Relying on revenues generated from converting agricultural
lands to commercial and residential uses, local officials have helped fuel real estate bubbles
nationwide, resulting in an over-supply of housing stocks in many cities. While cross-
jurisdictional competition has promoted innovation and economic efficiency, it has also led to
highly uneven patterns of social and economic development, widening the gaps between the
prosperous coastal regions and the inner provinces. When arising simultaneously, these
worrisome phenomena have undoubtedly created tremendous challenges to the governing regime
in China. With the current leadership attempting to directly confront these emerging governance
conundrums (Miao et al. 2014), a key research and policy question is how to systematically
identify the types of incentive distortions created by the current fiscal and personnel systems, and
more importantly, what strategies can be developed to alleviate these distortions.
To address this question, this paper draws on four in-depth case studies, including three
counties and one township, to highlight the dominant incentive distortions in the fiscal and
personnel systems of the Chinese government in the post-1994 era and their variations across
socio-economic contexts. Although these four case studies were originally written for different
scholarly purposes, they all provide extensive details about the operations of their respective
local governments, the patterns of interactions among local officials, and their interactions with
higher-level governments. Specifically, W County is located in the Inner Mongolia Autonomous
Region in northern China. Recognized as one of the “national-level poverty-stricken counties” in

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China, W County is 1182 square kilometers in size, with a population of 0.47 million. Mo
County and Central County are both located in Henan Province. Mo County’s economy was
based primarily on agriculturally related businesses, akin to other inland counties in the central
region of China; Central County’s economy relied mainly on animal husbandry and cotton
production due to its mild, warm-temperate climate, and peripherally supplemented by emerging
industrial development. Geographically, Mo County is fairly large and multicultural; it consists
of 5 towns and 11 townships, typical of China’s less developed region. Central County is
relatively small compared with other counties in Henan Province. It covers an area of 1,000
square kilometers and has a population of 0.8 million, mirroring the majority of China’s
subnational governments at the county level with a medium level of economic development.
Finally, J Town is situated in Zhejiang Province on the southeastern coast of China, which is a
prosperous region with a relatively high level of economic development and ample financial
resources. In 2008, J Town collected an annual fiscal revenue of 1.4 hundred million, which was
almost equivalent to the total revenues that Mo County generated in the same year. Table 2-1
provides a summary of the four jurisdictions’ key socio-economic features.
Based on a comparison of these four cases, we identified not only the key incentive
distortions rooted in the current fiscal and personnel systems but also their variations across
regions at different levels of economic development. In the rest this article, we first outline the
theoretical and historical backgrounds of the study, which is followed by patterns identified in
the four cases. We conclude by examining the theoretical lessons and practical implications of
the study.

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Theoretical and Historical Backgrounds
Many scholars contend that a relatively decentralized fiscal arrangement has been
conducive to China’s economic growth at a record-setting rate since 1978 (e.g., Lin and Liu
2000; Wen 2006). Among existing theories on China’s intergovernmental fiscal system, the one
on market-preserving federalism (or what is more generally called the second generation of fiscal
federalism) advocated by Barry Weingast (1995; 2009) is perhaps the most influential to date
2
.
Since the early 1990s, Weingast and his colleagues have argued that China in the reform era
represents an exemplary case of market-preserving federalism, which is characterized by (F1) a
delineated scope of authority between different levels of governments; (F2) subnational
autonomy; (F3) common market; (F4) hard budget constraints; and (F5) institutionalized
authority allocations (Qian and Weingast 1997; Weingast 1995).
In theory, this set of characteristics matters as a whole because they mutually support
each other in promoting economic development and the general welfare of the entire country.
By supporting inter-jurisdictional competition, market-preserving federalism motivates local
officials to maintain a healthy local economy and efficient provision of public goods in order to
ensure stable revenues for their respective local governments. Likewise, when facing hard
budgetary constraints, local officials are expected to act prudently since they bear the negative
fiscal consequences for failing to properly manage the local economy. Additionally, institutional
safeguards must be in place against the national government from unilaterally and arbitrarily
intruding on pre-designated local autonomy, which in turn provide credible incentives for
“government officials at all levels to encourage market growth” (Xu 2011, p. 1105). As each

2
On April 26, 2015, three of Weingast’s many articles on China as a system of market-preserving federalism
received more than 1,000 citations on Google Scholar: Weingast (1995); Qian and Weingast (1997); and
Montionola, Qian, and Weingast (1995). Weingast (1995) had over 2,100 citations and has been regularly cited in
the past ten years with around 150 citations per year.

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level of government is also subject to budgetary constraints and competitive pressure, market-
preserving federalism limits “the exercise of corruption, predation, and rent-seeking” (Weingast
2009, p. 282), making it difficult for officials to dole out favors to cronies. Lastly, market-
preserving federalism supports a common market that facilitates efficient economic transactions.
A key weakness in Weingast and his colleagues’ arguments about China, however, was
that they were mostly based on the institutional setting and data from the early 1980s through
1994. During that period, the Chinese central government set in place a decentralized tax-
sharing system with local governments. This began with the central government signing
“intergovernmental fiscal revenue-sharing contracts” with subordinate governments (Oi 1992),
by which the central, provincial, and sub-provincial governments agreed to share annual fiscal
revenues based on specific formulae stipulated in the contracts. These contracts helped motivate
provincial and local governments to promote economic development and infrastructure
investment, which in turn, attracted businesses and provided taxable revenues to the local
government. Between 1981 and 1992, the first ten years of China’s economic bloom, “Chinese
provinces on average retained 89 percent of additional tax revenue generated within the province
and that 68 percent of all provinces faced a marginal retention rate of 100 percent” (Weingast
2009, p. 284).
Since the early 1990s, however, the central government started to realize the need to
overhaul the fiscal contract system. Although the system doubtlessly yielded sufficient incentives
for local governments to foster economic growth in their respective jurisdictions (Ong 2012), the
central government itself ironically faced a severe tax revenue reduction. Many local authorities,
for example, adopted a variety of quasi tax-exemption programs in order to attract outside
businesses and investment, resulting in an erosion of tax revenues to the national government.

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Statistics showed that the central government’s fiscal revenue as a percentage of GNP
plummeted dramatically from 31.6% in 1978 to 14.1% in 1993 (Tsang and Cheng 1994). Faced
with these issues, the central government launched a revised version of the tax-sharing system in
1994, titled “tax assignment system” (fenshuizhi). Premised on maintaining local authorities’
incentives to promote economic growth, the system helped restore the central government’s
fiscal power, as indicated by the statistics that the aggregate share of subnational governments’
tax revenues accounted for merely 40%, as compared to 70% in previous years, of national tax
revenues (World Bank 2002). According to this system, taxes collected by local governments fall
into three categories: central taxes, local taxes, and shared taxes. In addition to the central taxes,
which are fixed categories partitioned exclusively for the central government, shared tax
revenues also go disproportionately to the central government. The value-added tax, for example,
is shared roughly under the adjusted scheme of a three to one split between the central and the
local government (Zhang 2006).
While strengthening the revenue sources of the central government, this revised system
has also created its own problems. First, the new system lacks legal stability, meaning that no
legal document explicitly stipulates the specific amounts (proportions) of local tax revenues that
go to the central government. This leaves room for higher-level authorities, especially the central
government, to modify and adjust the shared amounts decidedly in their favor (Yao and Yang
2003). Assuming the dual roles of being both “principal” for their subordinates and “agent” for
their superior entities, in addition, governments at each sub-national levels are inclined to act
strategically and often opportunistically (Williamson 1985). A higher-level government, for
instance, may funnel most of its own spending targets down the administrative hierarchy while
intercepting the subordinate governments' revenue sources by adjusting the retention rate of the

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local tax revenues (Gao 2010). As a result, “the cascade of bureaucratic pressure falls most
heavily on the lowest rank in the state hierarchy” (Lee and Zhang 2013, p.1484), meaning that
lowest-level officials, who are unable to push responsibilities any further down, are put in charge
of many underfunded mandates.
In addition to various forms of fiscal pressure, local government officials also face
overwhelming pressure from the hierarchical personnel system, which serves as the central
government’s “trump cards” to help ensure political loyalty and policy compliance from local
cadres (Li and Walder 2001). The Chinese personnel system is based on the principle of
personnel subcontracting, i.e., a “one-level-down management system”, in which the promotion,
transfer, and turnover of subordinate officials are completely decided by those at a higher level
of authority. This system is designed to guarantee that higher-level officials have strong
leverage over lower-level officials by assigning them specific performance targets. A common
practice is for lower-level leaders to sign annual performance contracts with the government
immediately above them. Accordingly, they are “held accountable for the accomplishment of
the established targets. At the year-end evaluation, all organizations that have signed
performance contracts are ranked by their actual performance achievements. Reward and penalty
decisions are then made based on the results of the ranking” (Gao 2010, p.58). Using clearly
defined targets for evaluation purposes, the performance-based contract not only encourages
local officials to meet demands from higher authorities, it also creates a competitive
environment, often referred to as a “promotion tournament,” which instills a sense of urgency for
them to accomplish their stated goals (Zhou 2007). The underlying rationale is that the earlier a
local official gets promoted, the more opportunities he or she will have to climb the
administrative ladder.

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Since Weingast‘s original study was unable to foresee at the time that (1) China would
fiscally deviate from several of the key characteristics of market-preserving federalism in
subsequent years, and (2) China’s personnel management system plays a pivotal role in shaping
incentives for local administrations/officials, some scholars have pointed out the necessity to
examine the joint effects of the current fiscal and personnel systems to fully understand the
drivers of China’s economic growth and to account for their related problems. Tsui and Wang
(2004), for instance, credited the success of China’s fiscal decentralization to its “vertical-control
paradigm,” by which higher-level administrations maintain tight control on “the appointment,
evaluation, promotion, and dismissal of local cadres” (p. 75). Working under the target
responsibility system (TRS), local officials are incentivized to act in alignment with the key
priorities of the central government. Similarly, Cai and Treisman (2006) suggested that career
concerns are the major driving force for local (especially provincial-level) officials to both
implement nationwide market reforms and pursue regional economic growth. By itself, a
fiscally decentralized system would be insufficient to motivate local officials to focus on
economic growth given that 1) tax bases between the central and local governments often
overlapped, and 2) “a complicated system of compensatory transfers made it hard to tell what the
net retention rates actually were” (p. 525).
Notwithstanding these scholarly efforts, several limitations of the current literature can be
identified. First of all, most of the quantitative studies on fiscal and personnel incentives in China
have focused on the relationships between the central and provincial governments prior to 1994.
There are case studies at the sub-provincial level, but they 1) are mostly single-case studies (e.g.,
Göbel 2011), or 2) examine behavioral responses of local officials who reside in villages that are
geographically and economically similar to each other (O’Brien and Li 1999), making it difficult

- 14 -

to generalize the findings. Moreover, some recent articles published in English (e.g., Heberer and
Trappel 2013) implicitly attribute the behaviors of local officials exclusively to personnel
incentives, treating fiscal factors merely as a backdrop. In the Chinese literature, admittedly,
there are discussions about general features of both fiscal and personnel systems, but they
normally lack any systematic scrutiny of the impacts of socioeconomic differences across
regions. Our study, therefore, helps to fill a gap in both the Chinese and English literatures by
undertaking a small-N comparative case study of the key patterns of fiscal and personnel
distortions in post-1994 China across diverse contexts. Overall, the experiences of these four
cases show that China in the post-1994 era has not even remotely begun to match most of the
necessary conditions for market-preserving federalism as suggested by Weingast. To further
China’s development, one must consider feasible ways to adjust its fiscal and personnel systems
so that intergovernmental relations can resemble more closely the ideal conditions of market-
preserving federalism and that local officials are motivated to tackle finer governance issues.
In the next section, we detail how the four cases illustrate China’s fiscal and personnel
incentive distortions, and how local administrations vary in both their levels of transparency with
regard to the promotion-based tournament and their degrees of bargaining power over fiscal
autonomy.
Fiscal Incentive Distortions
Bureaucratic Entrepreneurship
Local governments are transformed into market-driven players whose main goal is short-
term profit maximization. Instead of focusing on the provision of public goods and services,
local governments swing for the fences to attract external investments. Given their administrative
power, local authorities can also easily become rent-seeking bureaucracies, cutting the quality

- 15 -

and quantity of public services and siphoning off local enterprises’ profits through taxes and fees
(Chan 2004; Frye and Shleifer 1997). In the long run, however, such behaviors will seriously
undermine market efficiency and quell outside entrepreneurs’ enthusiasm for investing, which in
turn will accelerate local bureaucracies’ greed in relation to local businesses and lock them into a
vicious cycle (Chen, Hillman, and Gu 2002; Zhou 2008).
The Mo County government, for example, had a number of bureaucratic incentive
schemes for attracting outside investors. One such scheme involved a tournament for attracting
the most investments within one hundred days as a way to boost its economic growth
performance. The aim of the scheme was to capture at least 100 new investment projects, each
of which should be valued at no less than five million RMB. Those who acquired a qualified
investment would be immediately awarded 1% of the investment's value; those who introduced
investment worth between a hundred million and two hundred million RMB would be awarded
150,000 RMB; those who introduced investments worth more than two hundred million would
be awarded 300,000 RMB.
Given Mo County is located in an underdeveloped region, it is hardly attractive for
business investments. To attract sizable outside investments, local officials relied heavily on
preferential policies, including such incentives as free land, free electricity, and free water.
Some enterprises were given permission to extract groundwater for free, regardless of the
potential impact on the groundwater basins. These policies have created many unintended
problems. First, they escalated the conflicts between the government and local farmers and
residents. As the government was offering lands to these investors at low prices, it could only
provide very low compensations to current farmers and residents, thus causing strong resistance
from them. As a result, the number of land-related conflicts has increased dramatically in recent

- 16 -

years. In 2009 alone, local residents initiated 18 petitions to higher-level authorities, despite the
fact that this means of citizen appeal was actively discouraged by all levels of government.
Second, many of these projects turned out to be established only for reporting performance. As a
cadre in Mo County mentioned:
In order to accomplish our mission of developing the industrial areas in our county, we
tried our best to appeal to the businessmen. In some cases, we even provided them with
capital. As a result, many manufacturing facilities were built, but have not been put into
production. As far as I can tell, only a quarter of the enterprises in our industrial areas are
actually in operation (He, Zhao, and Wei 2011, p. 55).
Although the overall fiscal incentives are for local governments to foster economic
growth, some local governments may succumb to short-term fiscal pressure by extracting
whatever they can from existing enterprises within their jurisdictions. Mo County’s budgeting
system was, for example, not at all investor-friendly. Using the principle of “using expenditures
to determine revenues”, the county government estimated the annual expenditure first and then
used it as the “target” for tax and fee collection. All governmental departments were required to
collect targeted amounts of taxes and fees. Not surprisingly, larger companies were seen as the
main targets; officials often imposed unreasonable tax and fee burdens on these larger
companies, thus undermining the jurisdiction’s long-term business environment.
In a similar fashion, since 2004, J town and its subordinate government units have
ironically been motivated to disfavor foreign enterprise as a result of a major policy change at the
national level that provided foreign enterprises with different types of tax exemptions. As a result
of this policy, these local government units prioritized their goals of attracting domestic
enterprises that generated high levels of local taxes. Among them, real estate companies became
favorites among the local officials.

- 17 -

Reliance on Extra-Budgetary Revenues
In areas that are economically disadvantaged yet insufficiently destitute to qualify for
significant subsidies, large companies are scarce and the local government is forced to shoulder
spending programs arbitrarily imposed by higher-level governments. An easy way, then, to
maximize the “residual” revenues beyond the threshold stipulated by higher-level government(s)
is by levying various administrative charges (Hurst, et al. 2014). Many local governments have
resorted to inconsistent charges, fund-raising quotas, and unreasonable fines as tools for raising
revenues. Budgeted fiscal allocations in the W County government, for example, covered only a
small fraction of its administrative costs, making it heavily dependent on extra-budgetary
revenues, such as administrative charges, fines, and other profit-seeking opportunities. As
estimated by the Head of the Animal Husbandry Bureau, which provided crucial agricultural
services in this rural county, the total administrative costs for the Bureau were approximately 40
million per year, whereas the budgeted allocation was less than two million. Thus the budgeted
amount could barely cover the costs of the telephone bills, let alone all the other bills.
To partially fill in this budgetary gap, the Bureau leased out some of its offices to
commercial enterprises. Despite the fact that it was allegedly illegal to use that kind of income
to support the bureau’s general operations, the bureau chief frankly acknowledged the practice,
claiming that there was no other way to meet the operational expenses (Zhou 2004, p.191). The
auditing agency from the superior government came to investigate, but the bureau continued the
practice after the county government intervened on its behalf.
Excessive Borrowing
According to the statistics provided by China’s National Audit Office (2014), borrowing
by provinces, counties, and townships reached 17.9 trillion Yuan ($2.96 trillion) in June 2013.

- 18 -

Bloomberg’s analysis (2013) further indicates that local governments indeed possess no
incentives to repay the debt unless it becomes a regional or systemic problem. Even if it does
reach this level, as argued by Bardhan (2002), local governments would not be affected because
“upper tier governments will have difficulty ignoring the political pressure that will be generated
in favor of bailing them out” (p.202). For instance, J Town spent almost ten years (1994-2004) to
help its subordinate villages pay off their bank loans. Although the specific amounts of debt were
unknown from the case, the long duration suggested that it was a pervasive problem.
Given that borrowing is essentially risk-free, local governments tend to employ this
method as a way of eschewing the inadequacies of intergovernmental transfers or hiding their
own fiscal mismanagement, which ironically distorts the initial purpose of the budgetary
incentives (e.g., Wang 2017). In 2007, for instance, all six newly built roads in Mo County were
financed by bank loans, totaling around 60 million. The total annual revenue for the county at
the time was approximately 137 million, whereas the total expenditure teetered around 630
million, resulting in an enormous gap of approximately 500 million. Such huge gaps can never
be filled entirely by administrative charges and tax levies. For many financially strapped local
governments, getting loans from banks has become the de-facto procedure for dealing with
financial shortfalls.
Variations in Bargaining Powers
In general, local governments in China do not have the power to either adjust local tax
rates or expand taxable categories (Lin, Tao and Liu 2007). Specifically, local tax revenues
depend mostly on value-added taxes, sales taxes, and corporate income taxes, all of which are
subject to fixed and centrally mandated rates. Total tax revenues thus depend heavily on the
absolute size of the underlying tax base. Since larger tax bases (i.e., more profitable enterprises)

- 19 -

are more likely to stay in economically prosperous regions where the residents’ purchasing
power is stronger and the local infrastructure is better, collecting adequate tax revenues tends to
be easier for local jurisdictions that are less dependent on transfers from higher-level
governments. More fiscal self-sufficiency, consequently, provides local jurisdictions with more
bargaining powers when they negotiate with higher-level authorities. Located in an economically
advanced region, the J Town government is a case in point. It undertook an eight-month long
negotiation with its higher-level authorities concerning the fiscal revenue-sharing contracts in
2007. As a result, the H district government made significant concessions to J Town with respect
to the property tax sharing formula
3
and promised to pay for a number of underfunded projects,
demonstrating the significant bargaining power of local governments in an economically
advanced region.
In contrast, local governments in economically less-developed regions lack bargaining
power and are often forced to passively accept the tax-sharing contract imposed by higher-level
governments, resulting in an ever-increasing financial imbalance between revenue sources and
expenditure mandates (Fedelino and Minassian 2006). Several factors are relevant. First, local
residents in less-developed regions are politically and economically vulnerable, meaning that
their tax contributions to the local government are quite limited (Park, et al.1996). Second, a
shortage of funds reduces both the local officials’ opportunities to receive higher education and
the likelihood that professional staff and college graduates will transfer to the area (Wong
2009).
4
A lack of local talent further restricts the local government’s ability to maximize the

3
After several rounds of negotiation, J Town was approved to retain 6%, instead of 5% as initially determined by
the H District government, of the revenue generated from property taxes (Zhang 2011, p. 118-125).

4
For example, the head of the Agricultural Bureau in Mo County explained, “the budget our bureau receives each
year is barely sufficient to maintain its internal operations. When we were at our wit’s end, we had no other options
than asking for higher-level governments’ support, mainly in the form of special projects. That being said, it has

- 20 -

benefits of established projects, ironically turning their sustenance into new sources of financial
burdens. As a result, local governments in these regions are limited both in bargaining power in
relation to negotiating with their administrative superiors and in their abilities to seize
opportunities for economic development. These dire conditions further motivate the local
governments to behave recklessly.
Both located in less-developed regions, Mo County and W County are two examples. In
2008, Mo County retained only 180 million in tax revenues after higher-level governments took
a significant portion. Yet over 200 million was required to cover just the payroll, not to mention
other overhead costs for multiple social programs. Faced with a similar financial situation, W
County addressed its financial challenges by encouraging its agencies to engage in profit-making
activities and in generating “extra-budgetary revenues” through various types of fines and
administrative charges. In 2003, W County's value-added tax was approximately three million,
and other types of taxes totaled seven million. Nonetheless, extra-budgetary revenues generated
by government-affiliated organizations, under the guise of “administrative charges and fines,”
reached 17 million! Obviously, when faced with underfunded administrative projects, severe
fiscal shortages, and a lack of negotiating powers with higher-level authorities, these local
governments are likely to become bureaucratic entrepreneurs. Another common strategy was to
lobby for added appropriations from higher authorities, sometimes in a dishonest fashion. Rather
than bargaining with its administrative superiors concerning tax retention rates, W County often
used the following two approaches. One approach was “fake matching”: whenever a matching
grant was available, the county would apply for it. However, once the money was granted, the

become impossible for us to invest in our personnel, such as providing them training opportunities. As a result, new
graduates rarely want to come to our bureau. A lack of talents further cripples our bureau’s ability to develop
innovative practices that warrant higher-level entities’ attention, both administratively and financially. A vicious
circle is thus at work” (He, Zhao, and Wei 2011, p. 35).

- 21 -

county would fail to provide the stipulated matching funds or would use the grants for other
purposes. The other approach was for the county to encourage its agencies to destroy or trash
usable equipment in order to justify requests for additional fiscal appropriations.
Personnel Incentive Distortions
Making the Numbers Regardless of Outcomes
Although the “desired outcomes” for a local government are naturally multifaceted, using
quantitative indicators is a convenient method for higher-level officials to measure their
subordinates’ performance. GDP growth, given its measurability (Eisenhardt 1989), is heavily
valued in the current target-based measurement system. As GDP growth and related economic
performance indicators account for the largest portion of the performance evaluation system,
local (especially the county level) officials are encouraged to utilize their administrative power to
promote industrial development projects, even if their jurisdictions are ill suited for these
projects or if these projects pose a great threat to the environment.
For the target-based measurement system in Mo County, economic goals account for 40
points on a 70-point scale, while environmental protection accounts for only two points. In J
Town, economic performance served as the base value in the grading rubric of the target-based
measurement system, whereas performance on other policy areas (e.g., social affairs,
environmental protection) had only a marginal effect on the total score. The formula for
calculating the final score was quite complicated but worth explaining. For example, the
completion of economic tasks equaled 200 points, while taking appropriate measures in lowering
local factories’ carbon dioxide emissions equaled 300 points in total. One might be pleased to
see that environmental protection had been placed as a top priority in J Town government’s

- 22 -

agenda. However, this was not exactly the case. In fact, points gained from the completion of
economic tasks were 100% transferred into the total score, whereas points gained from other
measured aspects were transferred into the total score merely as coefficients. For example, if J
town received 150 points in its completion of economic tasks and 250 points in its work on
environmental protection, the total score for J town = 150 * 1.25 = 187.5
5
. This score would be
even lower than that for a certain county that obtained 0 from environmental protection but 190
points from economic tasks. Furthermore, as the performance evaluations of non-economic
accomplishments usually did not vary much across jurisdictions, the total score and relative
rankings were indeed determined mainly by economic performance.
In recent years, some non-economic performance targets have become increasingly
important for local officials, but those targets may not be directly beneficial to the local
residents. For example, stability maintenance has become a major performance target for local
officials. In 2009, J Town was assigned the task of guaranteeing “zero Beijing petitions” on the
National Day that celebrated the 60
th
anniversary of the People's Republic. This goal, as
mentioned in the performance contract, was subject to the one-strike veto rule, meaning that if
local cadres failed to ensure that no one in their jurisdiction petitioned the central government on
that day, all other accomplishments would be negated, and all chances for bonuses, promotions,
and eligibility to compete for honors would be denied. Given this performance target, local
officials pressured the local judicial branch to issue subpoenas to potential petitioners, reminding
them of the legal consequences of leaving their homes without authorization; in addition, they

5
The formula was specified as follows: total score = (points earned in economic task completion) * 100% * [1+
(aggregated points earned in other measured aspects/1000)]. The maximum score for economic completion was
100, whereas the maximum total score assigned to other measured aspects was 1000. In this way, the points earned
in other measured aspects were heavily discounted.

- 23 -

also threatened the use of police force and blocked off “key villages” to make sure that these
potential petitioners did not even have a chance to leave their hometowns (Zhang 2011, p. 177)
6
.
In W County, fabricating numbers was a means frequently used by local officials to
satisfy auditors sent from higher-level governments. Creative accounting, such as using
appropriated budget for the subsequent year to fill the gap for the current year, was also
commonly used. In Central County, a former party secretary complained to the interviewer that
performance fabrication was ultimately caused by higher-level governments that imposed totally
unrealistic growth targets on their subordinate units. In his words:
When you are handed a 100 million GDP target, how can you ever achieve it, unless you
ask each shoe repairer to be responsible for 1 million? At my time, many cadres got
promoted by fabricating performance... Since I was a peasant before, I know their
difficulties. Even under this tremendous burden, I insisted on not taking a cow from
them, nor robbing their grains. At that time, I was like sitting at the mouth of a volcano
every day. Therefore, I insisted on not being a party secretary anymore (Feng 2010, p.
150).
During the time of the case investigation, performance fabrication continued unabated. A
leading official in the county admitted that township and village officials often burned trash in
the industrial area when county officials came for inspection as evidence of industrial
development. Or, when there were site visits, the local officials would turn the machines on, but
once visitors had left, production would also be over (Feng 2010, p. 144).
Short-Sightedness
Meeting measurable targets is critical for a local official’s prospect for promotion, and
the promotion tournament is time sensitive. Local officials must accumulate sufficient

6
In J Town, the conflicts between government and local residents were caused mainly by disputes over land
acquisitions (p. 166). Hurst et al. (2014) echoed this phenomenon by suggesting that “collective petitioning has
likely become more common in wealthier areas, where land requisitions… are concentrated” (p.465).

- 24 -

“achievements” in the shortest time possible to stay competitive in the tournament. Given this
urgency, local officials tend to be less concerned about long-term social development projects
such as those related to science, culture, and health. According to Zhou (2007), local
governments’ total spending on these areas in 2005 was less than that in 1998, despite the fact
that GDP itself experienced a threefold increase. Under the guise of creating market competition
and lessening the effects of government monopolies, many local governments sought to
commercialize the supply of educational and healthcare resources (Su, Walker, and Xue 2013),
making it increasingly difficult for disadvantaged populations to access. Additionally, given that
the opportunities to advance in a given time period are fixed, local officials compete with one
another in zero-sum games: one official’s promotion reduces the likelihood that his or her peers
will be promoted. Thus some local officials resorted to local protectionism as a method for
reducing competition in this political tournament.
In J Town, for example, local officials competed for investment projects that were worth
more than five million, and they sought to raid potential investors from other jurisdictions by
offering them such benefits as preferential tax incentives and exemptions from environmental
regulations. Officials in other towns were known to have taken countermeasures against such
raids, for example, by placing security guards near fancy office buildings to monitor, report, and
prevent the entrance of unauthorized persons.
In Central County, officials hastily decided to establish several large-scale paper mills in
1995 upon hearing stories about their profitability, without carefully considering the local
geographic conditions and environmental consequences. These paper mills discharged large
amounts of alkaline water and caused massive livestock death, eventually leading to orders from
a higher-level government to shut them all down. Likewise, in W County, local officials were

- 25 -

enthusiastic about attracting external investments on which their personal achievements were
predominately measured. Excessive preferential policy terms were thus often offered to attract
investors. Naturally, as local cadres’ attention was fully committed to this single subject, other
equally important issues in local governance, albeit less likely to be assessed and recognized by
their administrative superiors, were largely ignored. One prominent example stemmed from a
program, titled “Bring Technology to the Village”, tasked by the central government. Since the
county government was not provided with extra funds for administering the program, it lacked
the motivation to support it. The program resulted in no more than the county government
sending some old computers, refrigerators, and electronic books/brochures to the villages.
Variations in Levels of Transparency
As Cai and Treisman (2005) pointed out, Chinese local officials’ promotion prospects
vary based on the economic and cultural conditions of their geographic region. Local officials’
efforts are likely to go unrewarded in underdeveloped areas due to fiscal imbalances and the
region’s unattractiveness to outside investors. As compared with those in more developed
regions, officials in the less developed regions face more difficulties in promoting economic
development and consequently have more limited prospects for career advancement.
Paradoxically, the marginal benefits local officials in underdeveloped areas derive from
promotion tend to be significantly larger than those for officials in economically advanced areas.
Since employment and investment opportunities in less-developed regions are extremely limited,
local officials in these regions highly value their governmental positions, which come with
steady pay. A small promotion may significantly improve one’s financial situation and monthly
pension payments after retirement. Given its being less reliant on easily documented economic
performance indicators and its high stake among officials, the promotion-based incentive system

- 26 -

in less developed regions tends to be subject to a certain level of opacity. In these regions, one's
informal networks and interpersonal connections play a more critical role in deciding whether or
not one will be promoted.
Based on multiple interviews with local officials in W County, the most underdeveloped
among the four cases, Zhou (2004) found that when they were asked to present their contracts in
which their assigned annual tasks were spelled out, some of them searched in vain through dusty
piles of paper (p. 132). Shockingly, some other officials had no idea where they put them.
Perhaps, due to W County’s inherent economic disadvantages and the resulting difficulty for
local officials to complete assigned tasks, higher-level officials never took the contract seriously.
As a result, county officials viewed their performance contracts as a formality and saw factors
such as networking skills and social ties as more significant for their promotion potential.
7
As
opined by a retired official in W County, it was common for cadres with no outstanding
achievements to get promoted. Put differently, a key reason why a local official would fail to get
promoted might be that he failed to form a “close” relationship with the key personnel, namely
the party secretary.
In Central County, which is in the mid-level of development among the four cases,
although to some extent networking skills and social ties played a role in advancing local
officials’ careers
8
, the majority of the promoted officials between 1998 and 2008 were those who

7
In addition to the fact that performance contracts in W County had not been taken seriously, some specific items
listed on these contracts were hardly inspiring. For example, one item was about “1-2 point penalties for local
officials who do not submit their study notes on time” (Zhou 2004, p. 142). As the case author mentioned,
performance contracts of this nature can hardly be seen as an instrument for incentivizing individuals to perform, but
more of a study plan for underperforming students.

8
The case author noted, “When I was trying to figure out whether they [local officials in Central County] would be
willing to accept my interviews in the afternoon, they told me that afternoon was not an option. Most likely, I would
not find my interviewees in their offices. The typical schedule for local officials in Central County was as follows:
they started reaching out to people for lunch at 11. During lunch, they would drink and exchange information.

- 27 -

had exceeded their assigned GDP growth targets. Moreover, many local officials may have
changed their promotion philosophy, evidenced by the fact that their children have a wider array
of employment and investment choices than they did. Based on Feng’s investigation (2010),
most of these children are now living and working in Beijing and Shanghai. Many local officials
believe that larger cities provide more career opportunities. Even if their kids do not choose to
pursue a government career, other career paths are equally promising. A positive impact of this
trend may be that future bureaucratic incentive systems are moving towards greater transparency
beginning from the economically advanced jurisdictions, as climbing the hierarchical ladder is
gradually losing its incomparable appeal for individuals in these areas.
The awards system utilized by the H District government, the most prosperous among the
four cases, to encourage J Town officials to attract external investments adds empirical support
to this conjecture. Local officials’ completion of the assigned tasks was subject to various
monetary awards with clear cutoffs. Specifically, different levels of awards were given to
individual officials who accomplished between 130% and over 230% of the stipulated goal.
9
The
recipients of these awards naturally then became the favorites for subsequent promotion.
Apparently, a relatively transparent reward system for performance has been in place for officials
there. Table 2-2 provides a summary of the fiscal and personnel incentive distortions reported in
the four cases.

Afterward, they always went back home to take a nap. Another round of gathering started at night” (Feng 2010, p.
165).

9
The award system in J Town included three types of prizes: top-tier, second-tier, and third-tier. Top-tier winners
were those who more than doubled the stipulated goal (accomplished 230% of the goal), second-tier winners were
those who exceeded the stipulated goal by at least 60% (accomplished 160% of the goal), and third-tier winners
were those who surpassed the stipulated goal by 30% (accomplished 130% of the goal). In 2007, top-tier winners
were given a personal bonus of 100,000, second-tier winners a bonus of 60,000, and third-tier winners a bonus of
40,000.

- 28 -

Broader Institutional Context
Weingast and his colleagues have popularized the idea that China has created its own
“style” of fiscal federalism with market-preserving attributes, and that China can be a model of
reform for other transitioning economies (Montinola, Qian, and Weingast 1995; Qian and
Weingast 1997). In a more recent article, Weingast (2009) explicitly stated the following.
Under some circumstances, a formerly predatory government may seek reform. How is it
to improve economic performance? China’s successful creation of market-preserving
federalism suggests one way around these problems (p. 289).
This argument is by no means his first claim about China as a positive example of
market-preserving federalism. Back in the mid-1990s, Montinola, Qian and Weingast (1995)
already attributed China’s miraculous economic growth to its decentralized fiscal system. Many
scholars at the time raised doubts about how a nondemocratic government might maintain a
credible commitment to fiscal decentralization, but Montinola, Qian, and Weingast (1995)
asserted that a lack of democratic institutions would not hinder the success of fiscal
decentralization at large
10
.
Market-preserving federalism in no way depends on these factors [i.e., political freedom,
representation, and democratization]. Instead, it depends on the political relationship
among levels of government, with no reference to an explicit or constitutional basis or its
promotion of individual rights and political freedom (p. 61).
Their confidence that a decentralized fiscal system would continuously serve as the
institutional driver of China’s economic growth stemmed mainly from their belief that

10
Similar arguments exist to date. For instance, Tsai (2015) indicates that citizen noncompliance is not necessarily
detrimental to political stability. Instead, constructive noncompliance helps decision-makers gather information at
local levels and readjust policies to better accommodate local needs. The majority of the policies that are
experimental in nature, as Tsai suggests, “invite modification through implementation” (p. 273) and therefore
implicitly encourage citizen noncompliance. She argues, “In the form of constructive noncompliance …even non-
democratic and transitional systems can experience citizen support and high levels of political stability” (p. 274).

- 29 -

recentralization was no longer politically feasible in China. In their view, the Chinese people had
gained economically from a variety of reforms/experimentations in multiple arenas and hence
had tasted the irresistible flavor of pro-market policies and a fiscally decentralized governance
structure. Even though China had yet attained a complete version of market-preserving
federalism due to the absence of an institutionalized delineation of intergovernmental fiscal
authorities/responsibilities, any attempt at recentralization would potentially cause popular
discontent, putting the central government’s ruling legitimacy on the line. In their view, the
possible factors that could potentially thwart the momentum of China’s economic development
included: 1) China’s limited experience with market-oriented economy; 2) “the absence of
centralized control over the monetary system (p. 60)”, which could soften the budgetary
constraints on local governments; and 3) over-competition between local governments under the
layout of fiscal decentralization and various kinds of accompanying local protectionism.
In retrospect, however, Montinola, Qian, and Weignast (1995) had not correctly specified
all the antecedents and consequences relevant to China’s experience over the past twenty years.
First, China can hardly be considered now as a novice in the use of markets given its additional
experience during the past 20 years. Second, the problem of soft budgetary constraints for local
governments still persists, but a centralized monetary system has been well established
11
and has
not been an effective remedy for the soft budgetary constraint problem (Ang 2009; Ong 2012).
12

Third, trade barriers are more pervasive among governments at the township level, and this

11
This is evidenced by the fact that China’s central government recentralized its banking industry in the mid-1990s.
As Ong (2012) suggests, loan decisions, previously determined solely by governments at the county level, have been
recentralized “at the prefectural level and above” (p. 200), particularly since 2000.

12
Although centralized budgeting system in China plays a pivotal role in transferring and earmarking grants to local
governments in more reliable and transparent manner, Ang (2009) bluntly pointed out that the system by itself won’t
be sufficient in achieving this envisioned goal. According to her analysis, it takes tremendous amount of time for the
system to “percolate to lower level governments” (p. 271). Hence, countermeasures can be devised by local
governments during the course of this very process.

- 30 -

partially contradicts the prediction that township governments are most likely to face a hard
budgetary constraint and are least likely to set trade barriers. Thus a key puzzle arises as to why a
governing system with experience in using markets and maintaining monetary stability still faces
many incentive distortion problems.
Based on the case analysis covered earlier in the article, Table 2-3 provides a summary of
the extent to which post-1994 China has mismatched the five necessary conditions that
characterize market-preserving federalism. As can be seen in the table, the mismatch is more
prevalent than what was suggested by Weingast and his colleagues. The mismatch did not create
only economic problems; it also created different fiscal and personnel incentive distortions that
made it more difficult for the Chinese government system to tackle finer governance issues such
as those related to redistribution, social service provision, and environmental protection.
First of all, Weingast and his colleagues failed to recognize that although the central
government may not announce explicitly its intention to recentralize all fiscal powers, it can do
so subtly. The tax assignment system introduced in 1994 was a prominent example. In the
sheep’s clothing of enacting a more formal system of fiscal federalism, the tax assignment
system has essentially restored predominant fiscal powers back to the central government. This
recentralization of fiscal powers either reduced incentives for local governments to foster
economic growth or forced local officials to raise extra-budgetary revenues from local
enterprises. Particularly for local governments in economically indigent areas where tax benefits
obtained from their subordinate administrative units are trivial, they have resorted to raising
extra-budgetary revenues in order to survive. According to relevant statistics (Wu 2013), the
aggregate local fiscal incomes accounted for 45% of national revenues in 2004, whereas
aggregate local spending consisted of 72% of national total spending. Moreover, the central

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government spent approximately 22 billion on education, while local governments spent 300
billion, which was 14 times as much as the central government. Apparently, when F1 and F5,
clear and institutionalized delineation of authority across levels of government, were not
safeguarded, higher-level authorities have acted opportunistically, though invisibly, by retaining
a predominant portion of financial resources, while pushing responsibilities down through the
administrative hierarchy (Zheng, Jong, and Koppenjan 2010), regardless of whether the local
units have the fiscal capacity to handle these responsibilities, thus compromising the subnational
autonomy (F2) condition.
In addition, although Montinola, Qian, and Weingast (1995) were aware of the
importance of a common market (F3), they attributed its formation almost exclusively to the
elimination of local protectionism. Admittedly, within the framework of promotion-based
competition in which leading officials must reach assigned targets within short time limits, local
officials are motivated to comply with highly unrealistic targets or seek to falsify records if
needed. As illustrated in our case analysis, local protectionism has also been a means by local
officials to ward off competitors in the promotion tournament. A strong bureaucratic incentive
for local protectionism has also hindered the development of a common market environment,
which is crucial for China’s attempt to both “upgrade industry as a whole” (Chan 2004, p. 718)
and to maximize public welfare at the county and township levels.
Yet, as China’s rate of urbanization accelerates, local protectionism becomes less a
problem than the restriction of household registration in metropolitan regions. As argued by
Tiebout (1956), local government competition through the “voting with your feet” mechanism
may help to promote efficient provision of local public goods that meet the needs of local
residents. However, in order for the competitive mechanism to work, production factors must be

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highly mobile across jurisdictional boundaries. That being said, the existence of a common
market is an essential precondition for cultivating healthy intergovernmental competition. In
China, the current household registration (hukou) system

severely limits citizens’ ability to attain
residential status outside their area of birth.
13
Although this system ensures the relative stability
of local tax bases, such restrictions often result in local officials’ willful neglect of the needs and
discontentment of local residents. In a deeper sense, since democratic elections might not be
politically feasible at this point, a common market becomes the only leverage for citizens to
“throw the rascals out” (Weingast 2009, p. 287). The absence of this mobility factor provides
local officials with little incentive to honor citizens’ rights, evidenced by J Town officials’
utilization of the police forces to clamp down on local petitioners. Furthermore, local officials
are utterly unmotivated to cater to the needs of the local residents if those needs are incompatible
with key criteria for their promotion evaluation.
Moreover, Weingast (2009) has largely neglected the pivotal role that the personnel
incentive system plays in softening local administrations’ budgetary constraints (F4). Local
officials in China are subject to the joint responsibility system, in which the adjacent higher-level
government is jointly held accountable for the mistakes committed by their immediate
subordinate administration. While this system motivates officials to closely supervise the actions
of their immediate subordinates, it also creates incentives for them to hide their subordinates’

13
Although the household registration system is currently under heated debate and is highly likely to be reformed
soon (e.g., Jiangxi Province has drafted the reformed provincial household registration system on 11th, January
2015), its negative impact is likely to continue into the foreseeable future. First, top-tier cities such as Beijing,
Shanghai, Guangzhou, and Shenzhen are unlikely to ease their respective restrictions on household registrations due
to their overpopulated situations. For people who already possess “hukou” in top-tier cities, they are unlikely to
move to second-tier cities where the medical and educational resources are much inferior; but most of the migrant
workers are working exactly in those top-tier cities where getting “hukou” is extremely difficult, regardless of
whether the related policy will be reformed or not. For residents living in second-tier cities, nonetheless, moving to
top-tier cities is not necessarily ideal either. The skyrocketing housing prices plus fierce competition in the
employment market (particularly the high-end labor market) become the major obstacle to the formation of a truly
“common market”.

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mistakes when they inevitably arise. As a result, officials are motivated to protect their lower-
level subordinates even when they raise revenues illegally, or to bail them out when their unit
fails to meet its debt obligations. This partly explains the excessive borrowing by local
governments over the past two decades despite the presence of a relatively centralized banking
system. The resulting attenuation of F4 “the hard budgetary constraint” condition has created
considerable threats to China’s economic stability.
As argued by Weingast (2009), well-developed market-preserving federalism also
facilitates the effective functioning of intergovernmental transfers aimed at helping the
disadvantaged. Yet as demonstrated in our case analysis, the current intergovernmental transfer
system has faced many incentive distortion problems. For example, much of the current system
aims at supporting local social service projects (Liu 2009). Unfortunately, this system has failed
to address many serious regional inequity problems as disadvantaged populations in poor regions
have ironically received limited benefits from these programs (Ma and Yu 2003). Making
matters worse, fiscal transfers travel through many layers of government before reaching their
target populations, and many local governments have set up various schemes to siphon off
transfer funds by developing “industrial improvement projects” that are a ruse to affect the
transfer decisions but have little real impact on the local economy. Some have also used funds to
set up representative offices in Beijing, where they can entertain officials from the central
government and lobby for transfers. Although the central government has recognized W County
as “poverty-stricken,” for example, its budget for entertaining higher-level officials is staggering.
Based on rough estimates, the annual spending on “greeting” higher-level officials during
inspections, which are golden chances to lobby for fiscal transfers, was between 700,000 and
800,000 RMB (Zhou 2004, p. 159).

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Lastly, although the current decentralized fiscal system has provided local government
officials with incentives to support pro-market policies and to promote local economic growth,
the personnel system ironically encourages local officials to adopt a short-term perspective in
their economic development strategies. Specifically, given the policy preference for promoting
younger cadres, local officials are forced to reach and even surpass the stipulated targets quickly
so that they do not exceed the eligible age limit at their next promotion opportunity. Under such
time pressure, they may expand efforts to attract external businesses on the one hand, while
trying to extract extra-budgetary revenues from local enterprises on the other. This helps explain
why Mo County officials put forth preferential policies to attract sizable outside investments in
the first place, while switching their attitudes afterward and imposing unreasonable burdens on
existing enterprises.
Notably, local officials inevitably find the promotion-based tournament less attractive as
they grow older, leading to the “Age 59 Phenomenon.”
14
That is, according to statistics, the
average age of Chinese officials found guilty of corruption is approximately 59. Having lost
their motivation to continue to climb the administrative ladder given the mandatory retirement
age of 60, local employees begin to use their remaining political power to grab as much cash and
property as possible before retirement. It is interesting to note that out of the 32 local officials
who were investigated or convicted over the past thirty years in Central County, 17 were the
former heads of internal departments within the county. In the context of the Chinese
bureaucracy, being head of an internal department usually signifies that someone has a limited
chance for further promotion. As the likelihood of promotion becomes slimmer, especially

14
Many studies, written in Chinese, have examined this phenomenon. Zhu (2008, p. 269), for example, provided
explanations in his book, titled “Officials' Promotion Likelihood and Regional Variation of Corruption in China,”
for why the age of 59 is so closely related to corruption.

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during in the later years of their careers, officials are more likely to think about life after
retirement and become more susceptible to corruption.
In sum, the current fiscal and personnel systems have undeniably helped promote the
rapid development of China’s economy. They have provided local governments/officials with
strong incentives to create signs of economic prosperity within their respective jurisdictions.
Many local economic success stories accumulated in the past thirty years have indeed increased
the price of recentralization and anti-market policies of any kind. Yet as illustrated in our case
analysis, China is still missing several critical preconditions for fully developed market-
preserving federalism. Particularly when the institutionalized demarcation of intergovernmental
fiscal authority is not fully in place, governments at each level are inclined to act
opportunistically in the face of incentive distortions, which in the long run will create many
economic and non-economic governance issues. Although Montinola, Qian, and Weingast
(1995) might disagree, one may assuredly argue that well-developed market-preserving
federalism ultimately depends on a stable and reliable constitutional framework.
Conclusion and Discussion
This article contributes to the current literature in several ways. First, it provides ample
case-based evidence
15
to illustrate the unintended consequences of China’s fiscal and personnel
incentive systems. Second, it provides an initial analysis of how incentive distortions in China’s
fiscal and personnel system may vary across socio-economic contexts within the same country
16
.

15
These case-based analyses have many virtues, one of which is the inclusion of information obtained from
interviews with local officials. As Zheng, Jong, and Koppenjan (2010) recognized, “In China…interviewing key
players [officials], however, is extremely uncommon…. Thus, the conducting of interviews for the empirical
research…was not feasible” (p. 405).

16
The importance of regional variations has been increasingly recognized as crucial for understanding development
in China. Hurst et al. (2014), for example, argue, “it would be an invalid part-to-whole mapping to ascribe the

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Highlighting the vital role of bargaining power in mitigating incentive distortions, the article
shows the divergent paths of development in different regions. Additionally, the article places
the fiscal and personnel incentive distortions within the broader intergovernmental framework,
emphasizing the need to develop institutional safeguards against opportunistic behaviors from all
levels of government. This discussion contributes to a deeper understanding of what Weingast
(2009) called the second generation of fiscal federalism by examining specifically how personnel
incentives may shape intergovernmental relationships, particularly during the post-tax reform era
when the tax assignment system has dominated the fiscal relationship between central and local
governments. The article contextualizes the importance of considering both the fiscal and
personnel systems together in order to understand more fully the drivers of bureaucratic
behaviors in China. Lastly, this article also examines several aspects in which China is still
lacking in attaining a fully developed market-preserving federalism, more so than what Weingast
and his colleagues have presumed.
China’s problems with fiscal and personnel distortions are not unique among developing
countries. In Indonesia, for example, local governments are responsible for handling a relatively
large share of total public expenditures, despite the fact that many of them are closely supervised
by the central government (Almeida 2005). Local governments thus rely heavily on the central
authority’s fiscal transfers, leaving themselves with limited financial ability to make critical and
timely local decisions. Similarly, in Uganda, local administrations are supposed to deliver public
services worthy of 21% of aggregated public spending, whereas their budgeted revenues for
accomplishing this task account for only 8% of total public revenues. Not surprisingly, most of

virtuous set of organizational roles and relationships uncovered in some areas of one province to all of China” (p.
474).

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the planned services, in the form of health and education programs, have been stillborn (Smoke
2001). Brazil is another case in point. Mandated by the so-called “fiscal responsibility law” put
forth in 2000, local governments were required to “compensate” the central authority’s revenue
deficit in the guise of “social contribution”. Statistics later showed that the amount of “social
contribution” collected in that year constituted 20% of the central government’s annual revenue,
compared to merely 6% in the previous year, and has since then become the most important tool
for the central authority to deal with its own fiscal shortfall (Smoke 2001). As shown in our
analysis on China, as the central authority’s exploitive behavior continues and local
administrations’ fiscal inability persists, local officials will either act strategically or lose their
interest in promoting the welfare of their local communities.
In the final analysis, most of the incentive distortions identified in this article are rooted
in China’s predominant reliance on a vertical, single-party accountability system to shape
bureaucratic behavior. This system is premised on long chains of principal-agent relations from
Beijing down to the township and village level. As argued long ago by Downs (1967), a
centralized control system inevitability suffers from the law of authority leakage and the law of
counter control—the former referring to the inevitable distortions of information and orders as
they are passed up and down a steep hierarchy, and the latter referring to the extra efforts
subordinates will exert to counteract increased monitoring efforts by their superiors. In the
absence of institutional guarantees preventing the central government from arbitrary
interventions, the Chinese governing system may have already reached its limit in terms of using
its centralized personnel system, in combination with a relatively decentralized fiscal system, as
the institutionalized device for fostering economic growth. Precisely as illustrated in our
analyses, this system has created many distortions especially in relation to local officials’ lack of

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interest in tackling other long-term and fine-grained governance issues such as environmental
protection, social justice, and various social development issues. Viewed in this way, governance
reform in China should not be focusing entirely on fixing problems with the vertical
accountability system. In addition to delineating more clearly the respective authorities and
responsibilities at different levels of government, the Chinese governing system needs more
horizontal accountability mechanisms by increasing the oversight authority of the local people’s
congresses, introducing democratic elections of elected representatives, enhancing government
transparency, protecting open media, and facilitating citizen participation in public policy
making (Tang 2012).
Although these institutional reforms clearly ought to be the long-term goals for
governance reform in China, it is less clear how China may accomplish these goals in an orderly
fashion. It is also noteworthy that market-preserving fiscal federalism is an ideal type, meaning
that no country would perfectly attain all five institutional prerequisites. Different countries,
including the United States, resemble market-preserving fiscal federalism only to a certain extent
by partially meeting these ideal-type characteristics (Fornasari, Webb, and Zou 1999; Rodden
2002). Given China’s fishbowl-like political environment, much research remains to be done to
identify actionable solutions that can strike a delicate balance between maintaining the current
systems’ positive effects on economic development and nudging them towards being more
sensitive to other finer issues in governance.

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Appendices
Table 2-1 Profiles of the Four Cases
W County Mo County Central County J Town
Sources Zhou, 2004 He, et al., 2011 Feng, 2010 Zhang, 2011
Study Period 1994-2000 2008-2009 1978-2009 2000-2009
Province Inner Mongolia
Autonomous Region
Henan Province Henan Province Zhejiang Province
Geographical
Features
Northern Region
Population: 0.47 million
Size: 11882 km
2
Central Region Central Region
Population: 0.8 million
Size: 1000 km
2

Coastal Region
Economic
Development Levels
Severely Underdeveloped

Economic base:
agriculture & animal
husbandry

Fiscal revenue in 1999:
57 million

One of China’s “national-
level poverty-stricken
counties”
Moderately
Underdeveloped

Economic Base:
agriculturally-related
business

Fiscal revenue in
2008:
180 million

Strived to develop its
secondary industry
Middle

Economic Base:
Animal husbandry and
cotton production

Fiscal revenue in 2009:
200 million

Owned the biggest high-
quality cotton production
base in China
High

Economic Base:
Manufacturing and
tertiary industry

Fiscal revenue in
2008: 140 million

External investment
was the main driver
of local economy
Main Research
Method(s)
In-depth interviews

Archival investigation

Analytical observation
(the author was not a
member of the study
population)
In-depth interviews

Archival investigation

Analytical observation
(the author was not a
member of the study
population)
In-depth interviews

Archival investigation

Participant observation
(the author was a
member of study
population)
In-depth interviews

Archival
investigation

Analytical
observation
(the author was not
a member of the
study population)
Study Focus How the structure of
government’s power
distribution influenced the
ways local officials
fulfilled stipulated goals
How the government
confronted the severe
fiscal deficit caused by
the elimination of
agricultural tax in
2006
Trajectories of local
cadres’ political careers
The logic behind
government’s
gamesmanship
behavior (distorting
directives from
higher-level
authorities)

- 40 -

Table 2-2 Examples of Officials’ Behavioral Responses to Fiscal and Personnel Incentive Distortions
W County Mo County Central County J Town
Research Emphasis Personnel Incentives & Fiscal
Incentives
Fiscal Incentives Personnel Incentives Personnel Incentives & Fiscal
Incentives
Fiscal Incentive Distortions
Bureaucratic
Entrepreneurship
No specific examples Developed tournaments to
encourage official efforts in
attracting businesses

Granted preferential treatments
to new external investments,
regardless of environmental
and societal consequences and
their business viability

Imposed unreasonable tax and
fee burden on existing
enterprises
No specific examples Disfavored foreign enterprises
to avoid granting tax
exemption status as mandated
by the central government
since 2004
Reliance on Extra-
budgetary Revenues
Underfunded agencies raised
extra budgetary revenues by
imposing administrative
charges and fees, and engaged
in, sometimes illegal, profit-
making activities
No specific examples No specific examples No specific examples
Excessive borrowing No specific examples Engaged in excessive
borrowing to fund public
projects and administrative
expenses, often without
intention for repayment
No specific examples Subordinate governments
engaged in excessive
borrowing, subsequently
forcing the township
government to repay loans
over extended periods of time
Variations in Bargaining
Powers
With limited power to
negotiate for more favorable
revenue sharing contracts,
officials sought fiscal transfers
by dishonest tactics
No specific examples No specific examples Negotiated with higher-level
authorities, leading to
adjustments of fiscal revenue-
sharing contracts in the
township’s favor.
Personnel Incentive Distortions
Making the Numbers
Regardless of Outcomes
Resorted to data fabrication
and creative accounting to
meet performance targets
Focused on meeting economic
performance indicators as
those for other policy areas
such as environmental
protection played a much
smaller role in calculating the
total performance score
Resorted to data fabrication to
meet hard GDP targets
Focused on meeting economic
performance indicators as
those for other policy areas
such as environmental
protection played a much
smaller role in calculating the
total score

Used court orders and police
force to confine potential
petitioners to their hometowns
in order to meet the one-veto
target stability maintenance
Short-sightedness Offered extensive preferential
treatments to attract outside
investors

Failed to devote sufficient
resources to implement long-
term social development
programs
No specific examples Bought in speculative
industrial projects without
considering environmental
consequences
Offered extensive preferential
treatments to attract outside
(domestic) investors

Blocked neighboring
jurisdiction’s efforts to attract
investors from their own
jurisdiction
Variations in Levels of
Transparency
Viewed performance contracts
as a formality, but focused on
developing networking skills
and social ties as a way to
enhance chances for
promotion.
No specific examples Networking skills and social
skills were important, but
reaching the assigned GDP
target growth was key for
promotion.
Used relatively clear and well-
specified awards systems to
encourage officials to attract
external investment. Promotion
opportunities favored award
recipients.

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Table 2-3 Mismatching Necessary Conditions of Market-Preserving Federalism
Necessary Conditions Specific Requirements China Since the Tax Assignment Reform in 1994
F1: Hierarchy “A hierarchy of governments
exists with each level having
a delineated scope of
authority” (Weingast 2009, p.
281)
Fulfilled with limits: (1) Higher-level governments maintain
authority to restructure subordinate governments. (2) Higher-
level governments maintain authority to readjust tax-sharing
formulae. (3) Higher-level governments maintain authority to
imposed unfunded and under-funded mandates on lower-level
governments.
F2: Subnational Autonomy

“Subnational governments
have primary both local
regulation of the economy and
authority over public goods
and service provision” (p.
281)
Compromised: (1) The principle of personnel subcontracting
ensures that higher-level officials have strong leverage over
their subordinates by assigning them specific performance
targets, regardless of their viability.
F3: Common Market “The national government
provides for and polices a
common market that allows
factor product mobility” (p.
281)
Compromised: (1) The household registration (hukou)
system limits citizens’ ability to seek residential status other
than the area in which he or she was born. (2) Promotion
tournaments encourage local officials to use local
protectionism to increase their odds of getting promoted.
F4: Hard Budget
Constraints
“All governments, especially
subnational ones, face hard
budget constraints” (p. 281)
Compromised: (1) A hierarchical personnel system
encourages subordinate governments to unconditionally
accept the service responsibilities of unfunded or under-
funded mandates by superior authorities. (2) The joint-
responsibility principle incentivizes higher-level
administrations to pay off bank loans for their subordinate
entities, thus motivating the later to use borrowing to
implement under-funded mandates.
F5: Institutionalized
Authority
“The allocation of authority is
institutionalized” (p. 281)
Absence: (1) No legal document explicitly stipulates the
specific amounts (proportions) of local tax revenues that go to
the central government under the tax assignment system
adopted since 1994, leaving room for the central government
to adjust shared amounts in its favors.

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Chapter 3
Reforming Civil Service While Employees Are Unhappy
17

Given that a competent, clean, and merit-based civil service is crucial to further economic
reform and social development, various authorities in Asia seek to design civil service
reforms that will affect the behavior of government employees, and thus, improve
administrative performance. In the effort to make the bureaucracy more meritocratic,
authorities in China are no exception (Wang 2012, p. 2).
China’s civil service system has experienced multiple reforms in the past three decades
(e.g., Liu, Liu, and Hu 2010). A key theme underlying these reforms has been to professionalize
the Chinese civil service as a way to improve administrative performance. To develop and
maintain a professionalized civil service, Chinese leaders have faced the challenge of attracting
talented individuals to join public organizations and keeping them motivated. Nonetheless, as
widely reported in the media, there have recently been unprecedentedly high turnover rates in
government agencies, particularly those in top-tier cities (e.g., Dai 2015). This recent
phenomenon contrasts with the not-so-distant past in which numerous college graduates signed
up each year for civil service exams to compete for very limited openings. Similarly, government
job seekers have declined considerably in number in recent years (e.g., Sheng 2014; Gao 2015).
These trends raise questions about the level of job satisfaction
18
among public employees and
how it may affect administrative performance. Has job satisfaction dropped among public
employees? Have there been changes in the antecedents of job satisfaction among public
employees over time? As the civil service becomes more professionalized and faces ever-
increasing political and societal pressures for better performance, has it become more difficult to

17
This chapter is a modified version of a paper I co-authored with Drs. Shui-Yan Tang and Carlos Wing-Hung Lo.

18
Job satisfaction is commonly considered as “the single most reliable predictor of turnover” (Moynihan and
Pandey 2007, p. 208; also see: Iverson and Currivan 2003).

- 43 -

keep public employees satisfied with their jobs? Have changes in job satisfaction affected the
overall functioning of public agencies? Answers to these questions are critically important for
civil service reform in China.
In the existing English literature, few studies focus on the job satisfaction of Chinese
public-sector employees. Although a handful of scholars have discussed this issue, most of them
worked on the largely unexamined, and probably outdated, assumption that Chinese officials
generally feel satisfied with their jobs, which are presumably accompanied by alluring perks
ranging from tenure security and low performance expectations to varying kinds of non-wage
benefits and hidden subsidies (e.g., Chan and Ma 2011; Jiang 2005; Liu 2009). An article
published by Liu and Tang (2009) exemplifies this assumption. Assuming that public sector jobs
signal a high output (expected income) /input (anticipated effort) ratio for their holders, the
authors characterize public-sector jobs as a “steel rice bowl”. They argue that those who are
predominantly money-oriented are likely to be highly content with working in public
organizations. Nonetheless, when considering many recent policy changes, alongside with
President Xi Jinping’s high-profile anti-corruption campaign which has already led to the
imprisonment of over 200,000 high-ranking officials (see Broadhurst and Wang 2014), one must
question the conventional wisdom that public-sector jobs are inherently desirable.
This article reports on an empirical study on the changing levels of job satisfaction
among public employees in China. The study draws on surveys of enforcement officials of the
Guangzhou Environmental Protection Bureau (henceforth GEPB) in years 2000 and 2014
respectively. In addition, interviews were conducted in 2016 and 2017 with leaders of
enforcement teams of GEPB in all eleven administrative districts. Based on these surveys and

- 44 -

interview data, we were able to trace the changes in job satisfaction among this group of public
employees over the past 15 years.
Data from the two rounds of surveys among GEPB enforcement officials show that
respondents were overall less satisfied with their jobs in 2014 than those in 2000. In addition, our
interviews with enforcement team leaders in 2016 and 2017 show that they had not only raised
serious reservations about their pay scales and promotion opportunities but also expressed
earnest concerns about the generational gap between younger and senior team members, with the
latter lacking the necessary professional skills to carry out basic enforcement tasks. These
qualitative findings mirror those from the two rounds of survey, which show that mission match
(defined as the extent to which an employee’s own values and characteristics match those of the
organization) is more strongly correlated with job satisfaction in 2014 than in 2000.
These qualitative and quantitative findings also reflect, to some extent, the increasingly
challenging institutional environments faced by street-level bureaucrats: (1) rising political and
societal expectations for environmental improvements (e.g., Kostka and Nahm 2017); (2)
inadequate fiscal and personnel resources (e.g., Ran 2017); and (3) limited enforcement authority
(e.g., van Rooij et al. 2017). In addition to these challenging environments, the Civil Servant Law
came into effect in 2006, which “lays down the most detailed employment and human resource
procedures under which a civil servant might be recruited” (Wang 2012, p.5). As a result, junior
officials become more professionalized as recruitments have increasingly been based on
professional qualifications. More stringent standards have also been introduced to hold officials
accountable for performance. Owing to all these emerging contexts, the drivers of job
satisfaction have changed over the years.

- 45 -

This study illustrates a key lesson on administrative reform—as efforts are made to
enhance the professionalism of public officials, administrative agencies must be reshaped to
support the motivational needs of a more professionalized workforce. Specifically,
commensurate resources and authority must be made available to the officials. The mid-level
leadership needs to focus on creating conditions in which employees can appreciate the
organization’s mission on “both a personal basis and on its perceived societal impact” (Resh,
Marvel, and Wen 2018, p.116). Otherwise, officials’ job satisfaction will decrease and,
subsequently, agency effectiveness will suffer.
The remaining parts of this paper proceed as follows. We begin with an overview of the
institutional setup of the Chinese environmental management system. Then, we use information
from in-depth interviews to identify the possible factors impacting the job satisfaction of street-
level enforcement officials of GEPB. The third section is devoted to hypothesis development.
The fourth section details variable measurements and analytical methods. Findings are presented
in the fifth section. The paper concludes by discussing policy implications and agendas for future
research.
Environmental Governance in China
Environmental governance in China is run by a system of centralized policymaking and
supervision, but decentralized implementation. Serving as one of twenty-five integral
departments of the State Council, the State Environmental Protection Administration was
upgraded to the Ministry of Environmental Protection (MEP) in 2008 to signal its increasing
importance in the country’s overall strategic planning. Being tasked to revive China’s blue sky,
green land, and clean water, MEP assumes responsibilities for 1) promulgating environmental
laws, regulations, and guidelines, 2) supervising environmental protection agencies at the

- 46 -

provincial, city, and township levels, and 3) institutionalizing an accountability system to
monitor local regulatory enforcement. Under MEP’s leadership, a revised version of the
Environmental Protection Law with stringent amendments was enacted in 2015. Funded by its
respective level of government, the environmental management regime at each subnational level
is subject to accountability mechanisms that combine inspections from higher-level officials and
citizen complaint channels from below.
The multilayered structure of China’s environmental management system can be
sketched as follows: subordinating to MEP, the Department of Environmental Protection is
established in each province. Below this level, each city sets up its Environmental Protection
Bureau, which is followed by implementation branches based in each district within the city. In
our research, we surveyed and interviewed the enforcement team officials working for the
district-level Environmental Protection Bureaus in Guangzhou. Serving at the lowest level of the
environmental governance system, these officials are the street-level bureaucrats who enforce
environmental regulations and handle citizens’ complaints.
Theory Building: Exploring Antecedents to Job Satisfaction
We conducted two rounds of questionnaire surveys distributed to officials of the district-
level enforcement teams in the Guangzhou Environmental Protection Bureau (GEPB) and
follow-up interviews with a selected group of enforcement team leaders. In comparison with
questionnaire surveys, interviews provide more textured data with scholars’ “firsthand
involvement in the organizational setting under study” (Van Maanen 1979, p. 293); these data
may serve as a cornerstone for theory development (see also: Sutton and Staw 1995). Hence, we
first turn to results obtained from our interviews with enforcement team leaders, identifying
common denominators impacting job satisfaction of local enforcement officials.

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Between December 2016 and March 2017, we conducted semi-structured interviews with
environmental enforcement leaders in all eleven administrative districts of Guangzhou.
Interviewees were prompted to describe their teams’ major responsibilities, self-evaluate their
performance in relation to public and governmental expectations, elaborate on the difficulties
they encountered in daily enforcement activities, and describe their work pressure. These
interviews, each lasting around one to two hours, were recorded and later transcribed.
When asked about the approaches they adopted to motivate their subordinates,
interviewees unexceptionally expressed their inability to do so. They noted promotion and salary
increases as two major work motivators, but neither of which are available these days. Two
enforcement team leaders explained:
Our bureau has an official staff establishment of 57 people, of which 27 are given civil
enforcement posts ( 执法编制). Unfortunately, only 4 leadership positions are created and
budgeted for the entire enforcement team. The promotion prospects for individual
members of my team are from slim to none. Feeling hopeless to ever get promoted, their
internal work motivation must have been jeopardized.
My salary has hardly doubled over the past 20 years—in 1997, my annual income was
$120,000; currently, my annual income now is around $200,000. However, do you have
any idea about how dramatically housing and retail prices in Guangzhou have grown in
this time span? There is a widespread rumor indicating that civil servants in China
experienced a significant pay raise last year. Let me tell you how “significant” it was. My
monthly salary last year was adjusted upward to be $100 more than my previous one.
Don’t you find it rather amusing?
Nearly all interviewees flew off the handle when they began detailing the accountability
system that was designed to ensure their responsiveness to citizen complaints. Based on the data
provided by these interviewees, on average each enforcement team handled more than 2,000
citizen complaints in 2016 alone. In the opinion of these interviewees, many of these complaints
were neither reasonable nor resolvable. Nonetheless, the enforcement team faced serious
consequences if it failed to promptly respond in writing to all complaints. The head of the

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enforcement team, for instance, could be held personally accountable and face sanctions, ranging
from pay decreases to forced resignation. In the words of one team leader:
Citizens never ask themselves whether they have made any contributions to this society.
Instead, they have endless demands and requests. They hope to reap all societal benefits
without paying any prices, and this selfish motive is revealed in their complaints. On the
one hand, for example, they are extremely content that their property prices are soaring.
On the other hand, they consider those restaurants in their neighborhoods nuisances. They
thus file air pollution complaints, urging us to shut down those restaurants. What can we
do about these complaints? Our gut feeling was that they complained to the wrong
department. It was the planning department that should be responsible for the
unpleasantness. That is, land-use licenses should not have been issued to any restaurants
locating unreasonably close to residential buildings in the first place. Unfortunately, we
couldn’t say it out loud; otherwise, we would be “held accountable”.
We then sent our teammates to investigate the restaurant those citizens alluded to. It
turned out that the volume of the cooking oil fumes emitted by the diner was completely
within the legal limits. We had no basis to put a stop to its operation. When we patiently
explained the whole situation to the citizens, they didn’t even want to listen. They
accused us of condoning the wrongdoing of the restaurant owner—a groundless
allegation that was emotionally very hurtful to us. I personally want to ask these angry
citizens a very simple question: “do you really think that your house can still value a
million dollars even in the absence of those restaurants that have brought huge
convenience to the surrounding residents and office staff?”
When commenting on their subordinates’ performance, team leaders uniformly pointed to
the existence of intergenerational differences in work-related skills, abilities, and attitudes.
Apparently, some senior members of the environmental enforcement teams are demobilized
soldiers. They were offered government positions as a compensatory scheme for military
personnel. Junior members, on the contrary, are mostly college graduates who passed the
admission examination for public employment administered by the Ministry of Education; these
younger team members are technically more skillful and attitudinally more upbeat. As one
interviewee suggested,
Youngsters are more competent and dedicated; they have a strong sense of responsibility
for their job and high moral standards. Most of the senior members are demobilized
soldiers assigned to our team. While experienced, they haven’t received any professional
training and have no idea what this job currently entails. Some of them, given their prior

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service to the country, administratively outrank me. In this scenario, I feel that I am not in
the position to ask them to do anything. For example, our team recently purchased mobile
tracking devises to enhance enforcement effectiveness. However, a few senior teammates
don’t even know how to operate a tablet. Considering that my request for the quota of
new recruits was denied, I am at my wit’s end.
Overall, information derived from these interviews indicates several major challenges
faced by the enforcement teams: insufficient extrinsic rewards, an unreasonable accountability
system, and generational gaps between senior and younger team members.
Based on an understanding of these challenges, together with an appreciation of other
contextual factors, one can begin to speculate the antecedents of job satisfaction among
environmental enforcement officials in Guangzhou. First of all, if enforcement team leaders
believe that their pay severely lags behind inflation and that of other professions, their
subordinates are likely to echo this sentiment. Similarly, when leaders feel an enormous pressure
from handling citizens’ complaints, their subordinates can hardly agree otherwise, because they
are the ones who tackle these complaints daily. In addition, given the highly hierarchical nature
of the Chinese bureaucracy, management support is likely to be a key determinant of officials’
psychological welfare. If team members perceive an instructive, protective, and supportive
leadership, they are likely to feel less burdened in their dealings with complaints and thus more
satisfied with their jobs.
Finally, our sympathies go to those demobilized soldiers who were assigned to the
enforcement teams as part of their post-service resettlement. Their dearth of professional
knowledge and skills, coupled with a lack of personal interest in environmental issues, can be
conceptualized as a form of mission misalignment between individual members and their units.
Such a mission misalignment may lead to a perception of low self-efficacy that has been shown

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in many studies to be negatively correlated with job satisfaction (e.g., Caprara et al. 2006; Judge
and Bono 2001).
Since we conducted questionnaire surveys on the enforcement teams in 2000 and 2014,
data from the two surveys enable us to examine quantitatively how mission match, extrinsic
benefits, and management support are related to job satisfaction of the enforcement officials;
data gained from these two surveys also allow us to examine changes in correlations over time.
Hypothesis Development
1) Overall Job Satisfaction
There are at least two reasons why job satisfaction may have been falling among Chinese
public employees over the past 15 years. First, although several civil service reforms pronounced
to increase the pay for grassroots civil servants, the actual pay raises have remained nominal,
leading to growing turnovers of competent employees who believed that their earnings paled in
comparison to their contributions (e.g., Li 2015; Tang 2015; Wang 2016).
Second, since most megacities such as Guangzhou have experienced severe
environmental degradation and widespread public resentment over it, local enforcement officials
have been under considerable work-related stress (e.g., Johnson 2013; Wang 2001; Xie 2001).
Behind the splendid skyscrapers mushrooming in the city, GEPB employees appear to be
distressed over their inability to narrow the pronounced wedge “between environmental
regulation and regulatory enforcement” (Lo and Fryxell 2005, p. 561) driven partly by the pro-
growth local interests embedded in the local party-state establishment. Although societal
expectations and political pressure from higher-level governments have skyrocketed in recent
years, the authority and resources at the disposable of district-level EPBs have not been

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increased proportionally. Each local EPB continues to be funded primarily by its respective
district government, whose leadership must balance environmental protection against other
competing priorities. As a result, most district-level EPBs have continued to suffer from a) a lack
of resources needed for timely enforcement (Francesch-Huidobro et al. 2012), b) feeble de-facto
power to deter noncompliance by regulated industries (Lo and Fryxell 2005), and c) inconsistent
and unreliable horizontal support from municipal agencies that prioritize on economic issues
(Zhan, Lo, and Tang 2014). These, together with our interviewees’ complaints about a lack of
promotion opportunities and meaningful salary raises, lead us to propose the hypothesis as
follows.
H1: The overall job satisfaction among GEPB enforcement officials was lower in 2014
than in 2000.
2) Mission Match
There is a sizable literature suggesting that mission match, defined as “the intrinsic value
afforded by the organization’s mission” (Wright 2007, p. 60), contributes to job satisfaction and
other related outcomes. Moynihan and Pandey (2007) found that when public employees
perceived a strong fit between their personal and organizational values, their expressed intention
to quit significantly declined. In addition, Smith (2016) argued that individual workers tend to
exert more effort into their jobs when they are convinced that (a) the achievement of
organizational mission(s) was beneficial to society (i.e., social-impact) and (b) their daily tasks
are consistent with their true interests and values (i.e., self-concordance). Despite a lack of direct
evidence from studies in the Chinese context, it is reasonable to posit a positive correlation

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between mission match and job satisfaction among public officials in China.
19
Our second
hypothesis, as indicated below, is also consistent with what we learned from the enforcement
team leaders as they repeatedly stressed their frustration in not being able to accomplish their
tasks and organizational mission within existing institutional constraints.
H2: In both 2000 and 2014, GEPB enforcement officials with a higher degree of mission
match are more likely to have higher job satisfaction.
With the adoption of the Civil Service Law in 2006, the recruitment to Chinese public
agencies has increasingly been based on openness and transparency, as well as applicants’
professional qualifications and performance in civil service examinations (Burns and Wang
2010; Chan and Li 2007; Chou 2007). Environmental agencies in big cities have followed a
similar trend; their new recruits in the past decade have become more professionalized, with
more and more of them having an educational background in fields that are closely related to
environmental engineering and management. Such a trend has also been repeatedly mentioned
by our interviewees. In comparison with their past-generation counterparts who tend to consider
jobs in the environmental bureau as merely a means to eke out a living, recent enforcement
officials are more likely to consider their jobs as a personal calling (Hall and Chandler 2005; Dik
and Duffy 2009), which is associated with heightened expectations of an alignment with
organizational missions (Brown and Yoshioka 2003). In other words, mission match carries

19
As far as we know, no studies have explicitly studied the connection between mission match and job satisfaction
among public employees in China. Zhan, Lo, and Tang (2014) conducted an empirical study that included job
satisfaction as a variable; but they did not examine, in particular, the antecedents of job satisfaction. Robertson, Lo,
and Tang (2007), examined the antecedents of organizational commitment among local enforcement officials in
China; they found a positive correlation between what they termed “role fit” and organizational commitment.
Although organizational commitment is conceptually similar to job satisfaction, the two are different concepts after
all. As argued by Wiener and Vardi (1980), “an individual can be committed to his organization but dissatisfied with
his job or task and vice versa” (p. 82). Likewise, “role fit” overlaps with “mission match”, but the two are
conceptually distinct.

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greater weight in determining job satisfaction among enforcement officials in 2014 than those in
2000, which leads to the hypothesis formulated as follows.
H3: Mission match was more strongly correlated with job satisfaction among GEPB
enforcement officials in 2014 than in 2000.
3) Extrinsic Rewards
The classic crowding-out theory (e.g., Deci et al. 1999) suggested that an emphasis on
extrinsic rewards might risk undermining government employees’ service-oriented motivations.
Recent scholarship, however, questions this argument by showing that two pillars—the
achievability of organizational goals with social importance and adequate provision of extrinsic
rewards—work in concert to ensure public employees’ satisfaction with and commitment to their
positions
20
. Information from our recent interviews with enforcement team leaders in Guangzhou
suggests the important role extrinsic rewards play in officials’ job satisfaction as the interviewees
repeatedly mentioned their disappointment in poor promotion prospects and pay stagnation; thus,
we posit the hypothesis as follows.
H4: Extrinsic rewards are positively correlated with job satisfaction among GEPB
enforcement officials in both 2000 and 2014.
As many news reports have pointed out, particularly in top-tier cities where housing
prices have been skyrocketing and periodic pay raises have repeatedly failed to catch up with
inflation, public employees no longer take a shine to their positions once considered prestigious.
This was, however, far from the case 15 years ago. While subsidized housing projects for public

20
In the Chinese context, the effects of extrinsic rewards on public officials have also been contested. Based on a
survey of the entire staff of environmental protection bureaus in three large cities in China in 2000, Robertson, Lo,
and Tang (2007) showed that the positive correlation between extrinsic rewards and organizational commitment is
statistically significant among officials in only one of the three bureaus.

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employees were halted in the mid-1990s as part of the state-owned enterprise reform, most
public organizations resorted to incremental compliance. It wasn’t until the early 2000s that
government-allocated housing fully exited the picture. The GEPB was not an exception; its
enforcement officials in the year 2000 still benefited from subsidized housing. Those who
entered the service after the early 2000s are less lucky in the sense that they have to bear the
exorbitantly high property prices themselves. In the absence of family support, their personal
incomes (salaries plus housing subsidies) are simply a drop in the bucket compared to the
millions of RMBs needed to own a roof over their heads. Even without considering the housing
issue, as noted by most of our interviewees, the purchasing power of their regular salaries has
seriously lagged behind inflation in recent years, and such a gap has increasingly been a source
of frustration. Together, these considerations lead us to propose the hypothesis as follows.
H5: GEPB enforcement officials’ satisfaction with extrinsic rewards declined from 2000
to 2014.
4) Management Support
Leadership styles affect public employees’ job satisfaction (Voon et al. 2011).
Transformational leaders, for example, motivate employees by creating an inspiring vision and
articulating common grounds between employees and the organization. Ellickson (2002) showed
that a conducive organizational environment for collaboration is more important than career
prospects to public employees’ job satisfaction. We are thus led to believe that management
support is equally important for generating job satisfaction among local enforcement officials in
Guangzhou.
21
Our hypothesis is proposed as follows.

21
In their study of environmental protection bureaus, Robertson, Lo, and Tang (2007) indeed showed a positive
correlation between management support and organizational commitment among environmental officials in all three
cities in their study.

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H6: In both 2000 and 2014, GEPB enforcement officials with higher management support
are more likely to have higher job satisfaction.
Survey Data and Research Design
1) Data Collection
Quantitative data were gathered from two waves (one in 2000 and another in 2014) of
questionnaire surveys of GEPB enforcement team officials, with 175 valid responses in the
former and 207 in the latter. These two surveys are highly similar in format and wording. Both
surveys contain identical, or highly similar, questions on work environments, enforcement
effectiveness, membership allegiance, and pay satisfaction.
Surveying government officials in authoritarian states like China is extremely difficult, as
Chinese bureaucrats in general are extremely reluctant to take part in academic studies and
express their genuine thoughts. To ensure the validity of collected data, our team reached out to
division leaders in the Guangzhou EPB for permission and endorsement prior to the distribution
of each survey. In addition, we organized a briefing session before each survey was
disseminated. In these sessions, street-level enforcement officials were informed that 1) the
survey was for pure research purposes and 2) anonymity was guaranteed.
2) Variable Measurements
Job Satisfaction: Bono and Judge’s (2003) job satisfaction scale (JSC) is widely used in
private-sector management research. The scale includes three key items: 1) most days I am
enthusiastic about my work, 2) I find real enjoyment in my work, and 3) every day at work
seems like it will never end (reversed-scored). Since JSC has been considered applicable to
public organizations across cultural contexts (e.g., Liu, Tang, and Zhu 2008), we operationalized

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job satisfaction using four items that largely correspond to the items in JSC: 1) I am proud to tell
others that I am part of this environmental organization; 2) I talk up this organization to my
friends as a great organization to work for; 3) my organization is an ideal place for me to work
in, and 4) I would like to work for this organization in the long run. The internal reliability
estimate, Cronbach’s coefficient alpha, for this measure reaches 0.81.
Mission Match: Smith (2016) suggested two dimensions of mission match: social impact
and self-concordance. Survey items selected to measure this variable include proxies for both
dimensions: for example, 1) my organization is providing an important public service, and 2) I
find that my values and the organization’s values are very similar. The Cronbach’s coefficient
alpha for this measure reaches 0.80.
Extrinsic Rewards: When discussing the reasons why competent public employees
ultimately all landed their feet on big agencies, Ellickson (2002) suggested that big organizations
are able to make sizable “investments” on their employees, but such investments can seldom be
afforded by small entities. These loyalty-securing investments often included, but not limited to,
ample opportunities for career advancement, performance-based bonuses of various kinds, and
miscellaneous fringe benefits (also see Romzek 1990). In accordance with these earning
categories, we chose survey items that asked how enforcement officials felt about their basic pay
level, benefits-in-kind, and promotion prospects. The Cronbach’s coefficient alpha for this
measure reaches 0.85.
Management Support: A productive management structure is expected to embody
leaders with diverse skills, three most important of which are the abilities to 1) demonstrate,
articulate, and communicate organizational purposes in an encouraging manner, 2) use
performance-based incentives, and 3) boost employee morale so that employees are self-driven

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to work efficiently and conscientiously (Eagly et al. 2003; Schneider and Vaught 1993). The
survey items we used to represent management support echo these three elements: 1) leadership
in the organization has defined a clear mission for its employees; 2) my supervisor gives me the
support and guidance I need to be effective in my work; and 3) my supervisor treats me with
concern and respect. The Cronbach’s coefficient alpha for this measure reaches 0.82.
Control Variables: In both questionnaires, respondents were inquired about their
demographic information, including gender, age, and educational level. These individual-level
characteristics thus served as control variables in the analysis. We also included environmental
consciousness as a control. Given the fact that frontline officials are directly responsible for
regulatory enforcement, their environmental consciousness may affect their dedication to and
satisfaction with their jobs (Francesch-Huidobro, Lo, and Tang 2012).
Respondents’ answers to all survey questions are measured on a five-point Likert scale,
in which 1 stands for strongly disagree and 5 stands for strongly agree. Negatively phrased items
were reverse scored prior to calculating their respective means. Specific survey items employed
to measure all the respective variables are identified in Table 3-1.
Insert Table 3-1 about Here
3) Analytical Strategies
Our research data were analyzed using multivariate OLS regressions. The dependent
variable, job satisfaction, was regressed on mission match, extrinsic rewards, management
support, and other control variables in separate equations, one based on data from 2000 and the
other from 2014. To evaluate the predictive power of each explanatory variable, the model was
built in three hierarchical steps. The control variables were entered first, followed by the main

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predictors one-at-a-time. In the third step, comprehensive models were displayed for both years
(Insert Table 3-2 about Here). To examine hypothesis 3, job satisfaction was regressed on
mission match, year (t=0 if 2000 and t=1 if 2014), the interaction between the two, and other
covariates. To account for possible heteroscedasticity, Huber-White standard errors were
computed.
Prior to hypothesis testing, we performed structural equation modeling to assess the
overall fit of the proposed measurement model.
22
Modification fit indices were reported as
follows: the comparative fit index (CFI) = 0.920, the root mean squared error of approximation
(RMSEA) = 0.077, and the standardized root mean squared residual (SRMR) = 0.06. As the
three most commonly used goodness-of-fit indices, their cutoff levels for defining model fit
reaches a consensus among scholars specializing in quantitative inquiries. In general, a
theoretical model is considered accurate in capturing the pattern of relationships existing in the
data if CFI achieves 0.90 (e.g., Pandey, Bradley, and Moynihan 2012), RMSEA is preferably
smaller than 0.06 (e.g., Hu and Bentler 1999)
23
, and SRMR does not exceed 0.08 (e.g., Schreiber
et al. 2006). Based on these suggested criteria, we believe that there is a plausible fit between our
“mental” model and observable variables.
Finally, a parallel analysis was conducted to ensure that redundant dimensions were
excluded from each composite variable. Compared to the eigenvalue-greater-than-one rule,
which “is problematic and inefficient when it comes to determining the number of factors”,
parallel analysis is a more stable approach for determining what factors to retain (Ledesma and

22
Confirmatory factor analysis was also employed to ensure construct validity for each latent variable. The results
suggested the manifest variables (i.e., survey items) reliably fit to their respective underlying concepts subsequently
quantified and treated as dependent and independent variables in regression analysis (Insert Table 3-3 about Here).

23
A RMSEA value of 0.06 or less indicates excellent model fit. Nonetheless, a value of 0.08 or less is often
considered acceptable for small-scaled studies (e.g., Browne and Cudeck 1993).

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Valero-Mora 2007, p. 2). Specifically, a factor is considered retainable if its respective
eigenvalue is greater than its averaged counterpart obtained from 10 randomly generated
observations. Table 3-4 below shows the role that each item plays in representing its underlying
construct.
Insert Table 3-4 about Here
Empirical Findings
Correlation matrices for all dependent and independent variables are presented in Table
3-5. The correlations between job satisfaction and all three antecedent variables—mission match,
extrinsic rewards, and management support—are significant, indicating that each contributes to
the variance of job satisfaction. Given the psychometric nature of our survey instruments, some
significant correlations among the explanatory variables were detected, warranting concerns
about multicollinearity. To address this potential problem, variance inflation factor (VIF) scores
were computed for both regressions, yielding results of 1.69 and 3.89 for the years 2000 and
2014, respectively. According to the most-commonly used standard, a VIF score less than 10
suggests that multicollinearity is not a serious problem (Miles and Shevlin 2001).
Insert Table 3-5 about Here
1) Descriptive Analysis
Descriptive statistics for all dependent, explanatory, and control variables in both years
are detailed in Table 3-6.
Insert Table 3-6 about Here
The overall job satisfaction of enforcement officials declined from 3.62 in 2000 to 3.48 in
2014. Taking into account the respective sample sizes, a Student’s t-test was performed to assess

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whether a statistically significant difference in job satisfaction existed across the two samples.
This test statistic was significant at the 1% level, supporting our first hypothesis that enforcement
officials’ job satisfaction had decreased over the 14-year period. A similar, though more
pronounced, tendency was found in the dimension of extrinsic rewards. Enforcement officials’
average rating for this composite measure of three items was 3.08/5 in 2000 but 2.74/5 in 2014.
The difference between these two numbers reached the 1% significance level. Since the
numerical value 3 is the midpoint between positive and negative sentiments in the scale, an
average score below 3 not only corroborates Hypothesis 5 that GEPB enforcement officials’
satisfaction with extrinsic rewards went down from 2000 to 2014 but also shows the negative
emotions generated by this downward trend.
2) Regression Results
Regression outputs are shown in Table 3-7. The R
2
for both regressions are above 0.5,
suggesting that a substantial portion of the variance in job satisfaction can be explained by the
proposed factors that include mission match, overall contentment with extrinsic rewards, and the
presence of supportive managers. Specifically, mission-matched respondents were more likely
than their mission-mismatched counterparts to report higher job satisfaction in both years
(supporting Hypothesis 2). In addition, Hypotheses 4 and 6 are partially supported given that the
coefficients for extrinsic rewards and management support were statistically significant only in
2014.
Insert Table 3-7 about Here

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3) Interaction Effect of Mission Match and Time on Job Satisfaction
Since we only possess repeated cross-section data
24
, a good approach to estimating
possible changes over time is to “think of time as a variable that moderates the effect of X on Y.
Instead of using time as the basis for differencing, we include time in the model as a variable and
interact it with the variable(s) of interest” (Firebaugh 2008, p. 179). If the slope for the
interaction term is statistically significant, this suggests that the correlation between X and Y
varies at different times.
Hence, we created a binary time variable “t”, which equals 0 and 1 in years 2000 and
2014 respectively, prior to appending the datasets in STATA. In the merged file, we generated an
interactive variable between mission match and time. Job satisfaction was regressed on all
variables of interest plus the interaction term (see Table 3-8). Both the interaction term and time
were statistically significant at the 5% level. Specifically, 1) the coefficient for time was
negative, indicating a declining trend of job satisfaction between 2000 and 2014; and 2) the
interaction term had a positive coefficient, indicating that the increasingly important role mission
match played in affecting job satisfaction among enforcement officials between the two years.
Many underlying factors may account for the results. Compared to 14 years ago,
individuals are now living in an increasingly interconnected and globalized world filled with
more challenges, uncertainties, and opportunities. Particularly for public employees who are
mostly well educated, farsighted, and marketable, there are many options other than their
government jobs
25
(see Gailmard 2010; Gailmard and Patty 2007). Our two surveys indeed

24
Repeated cross-section data are suited for studying broad social changes given the fact that fresh respondents are
selected each time.

25
As one of the team leaders put it, “I want to quit this job, as it is too stressful. However, at the age of 50, I am well
aware that I am not a desirable candidate to companies. Nonetheless, for those young people who get the bit between
their teeth, leaving is not a big deal.”

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captured an overall increase in educational levels of local enforcement officials in Guangzhou. In
both surveys, “secondary school” was coded as 1, “college/university” as 2, and “postgraduate”
as 3. The average in the 2000 survey was 2.3, while that in the 2014 survey was 2.8. The
difference is statistically significant at the 1% level.
With higher educational levels, enforcement officials also have heightened expectations
on the quality, utility, and meaningfulness of their chosen option—a government job. These
expectations can be a double-edged sword (see: Iyengar et al. 2006). For instance, if the public
employees realize that the organization’s mission is incompatible with their personal plans and
aspirations, they are likely to become more dissatisfied. The same logic can be applied to the
Chinese context. In contrast to their counterparts fifteen years ago when government jobs were
probably considered an ideal placement, enforcement officials in 2014 had a variety of irons in
the fire and tended to be more adamant about devoting themselves to value-congruent and
socially impactful careers.
Insert Table 3-8 about Here
Figure 3-1 visualizes how time moderates the correlation between mission match and job
satisfaction. The line depicting the relationship between mission match and job satisfaction in
2014 is steeper than the one in 2000, supporting Hypothesis 3.
Insert Figure 3-1 about Here
Discussion and Conclusion
Against the background of increasing political and societal demand for bureaucratic
accountability, local public officials in China are often perceived by the public as free riders, the
privileged few, or bureaucratic parasites (e.g., Pei 2007; Xie, Zheng, and Yan 2008). Public

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opinion surveys have shown repeatedly in recent years that the public perceived the central
government as comparatively trustworthy often due to the belief that central leaders were “well-
meaning but totally incapacitated” while local officials were the ones who sabotaged well-
meaning policies from above (Li 2016, p. 116).
While often perceived by the public as the cause of policy failures, local officials are
themselves increasingly frustrated. This phenomenon was particularly pronounced among
officials in top-tier cities such as Beijing, Shanghai, and Guangzhou, in which a swelling number
of high-ranking officials resigned from their relatively powerful positions to seek private
employment (e.g., Ko and Han 2013). Although many factors may account for this tide of
departures, monetary considerations are definitely one in spades. As Zhu (2015) explained,
taking into account their educational qualifications and work experience, local public-sector
employees in China are generally underpaid. Particularly for those who reside at the bottom of
the pyramid, their salaries are not even remotely commensurate with their years of hard work and
contribution. The 2015 civil service reform did put forth the goal of guaranteeing a pay raise for
public employees. Unfortunately, after accounting for adjustments in pension plans and pre-tax
cutoff rates, this pay hike scheme eventually resulted in a nominal increase of a few hundred
RMBs only (Wang 2016)
26
.
With discouraging information piling up, one may wonder if the portrayal of depressing
Chinese public officials reflects reality. Drawing on data from two rounds of surveys, we found
that job satisfaction of enforcement officers serving in GEPB declined from 2000 to 2014. This
decline in job satisfaction can be partly seen as an unintended consequence of institutional

26
Also see a recent in-depth report [in Chinese], titled “Pay Raises or Adjustments in Pay Structures?” by Sohu
News (2018). The full text can be retrieved from: http://www.sohu.com/a/215756381_380471.

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reforms in recent years. For example, the implementation of the tax-assignment system severely
crippled the fiscal capacity of local governments, whose resultant reliance on land-based finance
arguably contributed to the housing price bubble that has lasted into the present day (e.g., Cao,
Feng, and Tao 2008; Pan, Huang, and Chiang 2015). The subsequent state-owned enterprise
reform, which abolished subsidized housing in the early 2000s, added fuel to the fire by reducing
substantially the total compensation packages available to local public officials. Other
institutional reforms—such as increasing the accountability for bureaucratic performance and
providing convenient channels of citizen complaints while limiting the size of the bureaucracy
and official compensations—have created a different work environment for many local
government officials. The building of a more professionalized government bureaucracy also has
its unintended consequences. In addition to being disappointed about extrinsic rewards, the
younger generation of government officials has become more concerned with the extent to which
their professional and social values are compatible with their agency’s goals and missions.
Together, all these changes call for a new type of public-sector leadership that can 1) recruit
officials with a higher mission-match potential, 2) adopt a transformational style of leadership to
foster mutual trust and work motivation among employees, and 3) provide salaries at a
competitive, locally-adjusted level.
Although there is a sizable literature examining sources of job satisfaction in the public
sector, few studies investigate this very issue in China. As the most populated country in the
world, China has an estimated 50 million public-sector employees working in government
agencies, state-owned enterprises, and service organization units (see: Burns 2007; Brødsgaard
and Chen 2014; Tang and Lo 2009). Neglecting their emotional well-being would be a grave
policy mistake. This paper thus fills a literature gap in that it not only looks into the black box of

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the inner world of Chinese civil servants but also gets a foothold in the discussion about the
changes in these public employees’ job satisfaction over time and the possible reasons
contributing to such a trend. Relevant policymakers need to consider whether there will be a
chance of simultaneously forging a more satisfied, productive, and accountable public
workforce.
This study has several limitations. First, the quantitative analyses are based on data from
questionnaire surveys, which are subject to self-reporting and common-source biases (Groves et
al. 2011). Second, because of the anonymity of the two surveys, we are not able to trace if there
have been changes for the same individuals who might have participated in both surveys.
Another limitation is that our study examined the job satisfaction of officials in Guangzhou,
which is one of the most economically advanced cities in China. It remains a puzzle as to
whether the same set of changes has happened to local officials in less economically-developed
regions of the country. Third, our study focused on officials responsible for environmental
regulation enforcement, which involves specialized technical and professional knowledge. This
may partly explain our results regarding the changing correlation between mission match and job
satisfaction. Similar research needs to replicate in other areas of bureaucratic operations to fully
test our theoretical arguments. Finally, future studies may explore how job satisfaction affects
individual performance as well as overall efficiency and effectiveness at the agency level.

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Appendices
Table 3-1 Variable Measurements
Variables Items Statistics Year T-Statistic
2000 2014
Job Satisfaction

I am proud to tell others that I am part of this
environmental organization (proud)
Mean
(SD)
3.74
(0.74)
3.43
(1.00)
3.48***
Case no. 181 207
I talk up this organization to my friends as a great
organization to work for (outstanding_organization)
Mean
(SD)
3.51
(0.76)
3.50
(0.92)
0.10
Case no. 174 207
My organization is an ideal place for me to work in
(ideal_place)
Mean
(SD)
3.46
(0.80)
3.38
(0.94)
0.89
Case no. 175 207
I would like to work for this organization in the long
term (long_run)
Mean
(SD)
3.76
(0.71)
3.62
(0.90)
1.68*
Case no. 175 207
Mission Match

My organization is providing an important public
service (important_service)
Mean
(SD)
3.94
(0.53)
3.86
(0.74)
1.17
Case no. 176 207
In general, my work is meaningful and challenging
(challenging_work)
Mean
(SD)
3.55
(0.72)
3.59
(0.84)
-0.60
Case no. 176 207
My organizational unit allows me to work to the best of
my strength (demonstrate_strength)
Mean
(SD)
3.30
(0.84)
3.54
(0.89)
-2.70***
Case no. 168 207
I can see how my work contributes to the mission of
the organization (contribute_to_goal)
Mean
(SD)
3.86
(0.62)
3.88
(0.70)
-0.35
Case no. 179 207
I find that my values and the organization's values are
very similar (similar_value)
Mean
(SD)
3.60
(0.73)
3.63
(0.85)
-0.35

Case no. 167 207
Extrinsic Rewards

I am generally satisfied with the amount of pay and
fringe benefits I receive (satisfied_payment)
Mean
(SD)
3.11
(0.89)
2.60
(1.14)
4.68***
Case no. 171 207
I am paid fairly for what I contribute to this
organization (paid_fairly)
Mean
(SD)
3.22
(0.92)
2.68
(1.10)
5.13***
Case no. 169 207
This organization provides me with a fair opportunity
for advancement or promotion
(promotion_opportunity)
Mean
(SD)
2.92
(0.89)
2.93
(1.07)
-0.06
Case no. 166 207
Management Support

My supervisor gives me the support and guidance I
need to be effective in my work (boss_guidance)
Mean
(SD)
3.62
(0.69)
3.47
(0.91)
1.76*
Case no. 170 207
Leadership in this organization has defined a clear
mission for its employees (leaders_clearmission)
Mean
(SD)
3.68
(0.59)
3.47
(0.87)
2.70***
Case no. 169 207
My supervisor treats me with concern and respect
(boss_respect)
Mean
(SD)
3.60
(0.73)
3.44
(0.99)
1.73*
Case no. 169 207
Environmental
Consciousness

The balance of nature is vulnerable
(nature_vulnerable)
Mean
(SD)
3.92
(0.90)
3.97
(0.80)
-0.61
Case no. 198 207
Man is severely abusing the environment
(environment_abused)
Mean
(SD)
3.95
(0.89)
4.13
(0.71)
-2.15**
Case no. 195 207
Society must give priority to solving environmental
problems (priority_society)
Mean
(SD)
4.09
(0.82)
4.11
(0.78)
-0.19
Case no. 198 207
Note: The scores are based on Likert-scale questions, and the answers include “strongly disagree” (1), “disagree” (2), “neutral” (3), “agree”
(4), and “strongly agree” (5). *p < .1; **p < .05; ***p < .01. Significance based on two-tailed tests.

- 67 -

Table 3-2 Independent Explanatory Power of Different Types of Variables in the Context of Cross-sectional
Analysis
Variable
Type
Variable Name
Model 1

Model 2 Model 3 Model 4 Model 5
2000 2014 2000 2014 2000 2014 2000 2014 2000 2014
Control
Variables
Gender
(Reference
Category =Male)
0.13
(0.07)
0.05
(0.06)
-0.08
(0.10)
0.09
(0.12)
0.12
(0.07)
0.10*
(0.07)
-0.05
(0.10)
-0.01
(0.10)
-0.04
(0.09)
0.03
(0.08)
Education (Reference Category = High School)
University 0.08
(0.14)
0.24
(0.22)
0.29
(0.19)
-0.17
(0.40)
0.06
(0.13)
0.29
(0.27)
0.31
(0.17)
-0.01
(0.49)
0.38*
(0.18)
0.03
(0.14)
Postgraduate 0.08
(0.14)
0.32
(0.22)
0.16
(0.18)
0.07
(0.38)
0.07
(0.13)
0.35
(0.26)
0.19
(0.17)
0.16
(0.49)
0.25
(0.16)
0.18
(0.12)
Age 0.00
(0.00)
0.01*
(0.00)
0.00
(0.01)
0.01
(0.01)
0.00
(0.00)
0.01**
(0.00)
0.01
(0.01)
0.00
(0.01)
0.01
(0.01)
0.01
(0.00)
Environmental
Consciousness
0.12*
(0.05)
0.14*
(0.07)
0.29***
(0.08)
0.53***
(0.10)
0.13*
(0.06)
0.12
(0.08)
0.28***
(0.07)
0.46***
(0.10)
0.25**
(0.08)
0.31***
(0.08)
Independent
Variables
Mission Match 0.78***
(0.08)
0.68***
(0.07)
0.81***
(0.08)
1.00***
(0.06)

Extrinsic Rewards 0.06
(0.07)
0.08*
(0.04)
0.20**
(0.07)
0.40***
(0.06)

Management
Support
0.02
(0.10)
0.29***
(0.08)
0.32**
(0.11)
0.70***
(0.06)
Explanatory Power (R
2
) 0.58 0.73 0.15 0.15 0.58 0.66 0.21 0.38 0.23 0.59
Note: Unstandardized coefficients with heteroscedasticity-adjusted standard errors in parenthesis. *p<0.05, **p<0.01, ***p<0.001
(two-sided). Theoretically, Hierarchical Partitioning (HP) analysis helps rank a list of variables by their independent contributions to
the model. However, scholars led by Nally (2001) point out that this method offers “little guidance as to which variables to retain for
the purpose of making management decisions” (p.1399). We thus regress the dependent variable on independent variables one-at-a-
time (with all control variables). The respective R
2
values can give us a glimpse into the independent explanatory power of the key
variables under scrutiny. For reference purposes, the respective values of the full regression model (model 1) and the null regression
model (model 2) are also provided.

- 68 -

Table 3-3 Structural Equation Model Estimation
Latent Constructs Observed Variables Goodness-of-Fit Indices
RMSEA CFI SRMR
Job Satisfaction
proud
0.099 0.993 0.015
outstanding_organization
ideal_place
long_run

Mission Match
important_service
0.087 0.981 0.032
challenging_work
demonstrate_strength
contribute_to_goal
similar_value

Extrinsic Rewards
satisfied_payment
0.000 1.000 0.000 paid_fairly
promotion_opportunity

Management Support
boss_guidance
0.000 1.000 0.000 leaders_clearmission
boss_respect

Environmental Consciousness
nature_vulnerable
0.000 1.000 0.000 environment_abused
priority_society
Note: To conclude that “there is a relatively good fit between the hypothesized model and the observed data” (Hu
and Bentler 1999, p.1), the following rules of thumb must be adhered to: RMSEA < 0.06 (<0.08 is also considered
acceptable); CFI > 0.90 (preferably >0.95); SRMR < 0.08. Notably, Job Satisfaction and Mission Match have
RMSEA values slightly above the cutoff threshold. These results are not gravely troubling, as this particular
indicator is highly sensitive to sample size (when N>200, the chi-square is surely significant, increasing the
unlikelihood of gaining perfect RMSEA values).

- 69 -

Table 3-4 Parallel Factor Analysis
Variables Survey Items
Number of
Observations
FA Eigenvalues
PA Eigenvalues
Averaged over
10 Replications
Differences
Job Satisfaction
proud
375
2.58 0.12 2.46
outstanding_organization 0.71 0.03 0.68
ideal_place 0.44 -0.17 0.46
long_run 0.27 -0.11 0.38

Mission Match
important_service
367
2.83 0.16 2.68
challenging_work 0.83 0.07 0.76
demonstrate_strength 0.53 0.01 0.52
contribute_to_goal 0.42 -0.05 0.47
similar_value 0.39 -0.13 0.52

Extrinsic
Rewards
satisfied_payment
369
2.31 0.09 2.22
paid_fairly 0.52 0.01 0.51
promotion_opportunity 0.17 -0.08 0.25

Management
Support
boss_guidance
368
2.18 0.08 2.11
leaders_clearmission 0.60 0.00 0.59
boss_respect 0.21 -0.07 0.28

Environmental
Consciousness
nature_vulnerable
400
1.64 0.09 1.55
environment_abused 0.72 0.00 0.72
priority_society 0.64 -0.08 0.72
Note: Parallel Analysis is a method based on the generation of random variables to determine the number of factors
to retain. “Factor was considered significant if the associated eigenvalue was bigger than the mean of those obtained
from the random uncorrelated data (Ledesma and Valero-Mora 2007, p.3).”

- 70 -

Table 3-5 Correlation Matrix (2 Time Points, N = 355)

Job
Satisfaction
Mission Match Extrinsic
Rewards
Management
Support
Environmental
Consciousness
Job Satisfaction 1

Mission Match 0.7725* 1

Extrinsic Rewards 0.4751* 0.3541* 1

Management
Support
0.6262* 0.5697* 0.5984* 1

Environmental
Consciousness
0.3082* 0.2922* 0.0787 0.2040* 1
Note: * Correlation is significant at the 0.05 level (two-tailed)

- 71 -

Table 3-6 Descriptive Analysis: Decreased Job Satisfaction among GEPB Officials
Items Variable Names Statistics Year T-Statistic
2000 2014
Dependent Variable Job Satisfaction Mean
(SD)
3.62
(0.52)
3.48
(0.81)
1.93*
Case no. 168 207
Independent
Variables
Mission Match Mean
(SD)
3.65
(0.48)
3.70
(0.62)
-0.94
Case no. 160 207
Extrinsic Rewards Mean
(SD)
3.08
(0.75)
2.74
(0.99)
3.63***
Case no. 162 207
Management
Support
Mean
(SD)
3.61
(0.57)
3.46
(0.79)
2.05**
Case no. 161 207
Controls Variables Environmental
Consciousness
Mean
(SD)
3.98
(0.64)
4.07
(0.57)
-1.49
Case no. 193 207
Gender
(Male =1; Female=2)
Mean
(SD)
1.39
(0.49)
1.32
(0.47)
1.38
Case no. 176 207
Education
(High School =1;
University = 2;
Postgraduate =3)
Mean
(SD)
2.34
(0.72)
2.77
(0.46)
-6.77***
Case no. 174 182
Age Mean
(SD)
37.36
(9.43)
34.74
(7.51)
2.91***
Case no. 149 207
Note: Variables highlighted in green are based on Likert-scale questions, ranging unexceptionally from “strongly
disagree” (1) to “strongly agree” (5). *p < .1; **p < .05; ***p < .01. Significance based on two-tailed tests.

- 72 -

Table 3-7 OLS Regression Results: Job Satisfaction on Antecedent and Control Variables
Year 2000 Year 2014
Antecedent Variables
Mission Match 0.77***
(8.83)
0.68***
(8.30)
Extrinsic Rewards 0.05
(0.78)
0.08*
(2.02)
Management Support 0.04
(0.34)
0.29***
(3.78)
Control Variables
Environmental Consciousness 0.12*
(2.14)
0.14*
(2.02)
Gender (reference category=male) 0.13
(1.79)
0.05
(0.82)
Education (reference category = high school)
University 0.08
(0.53)
0.24
(1.10)
Postgraduate 0.08
(0.55)
0.32
(1.50)
Age 0.00
(0.26)
0.01*
(2.43)
Model Estimate
F 22.81 77.50
R
2
0.58 0.73
Number of Respondents 116 182
Note: All entries are variable coefficients with t-scores in parentheses. Breusch-Pagan tests were performed for both
regressions. As the resulting test statistic was 20.67 (Chi-square distribution with 8 degrees of freedom) for the year
2000 and 40.57 (Chi-square distribution with 8 degrees of freedom) for the year 2014, the null hypothesis of
homoscedasticity was rejected for both models. To account for heteroscedasticity, robust standard errors were
computed for inference by using the Huber-White sandwich estimator of variance. In each regression, the sample
size is reduced due to the omission of cases involving missing data. *p<0.05, **p<0.01, ***p<0.005;

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Table 3-8 Differential Effects of Mission Match on Job Satisfaction across Time
Regressor Model
Mission Match 0.63***
(0.07)
Mission Match * Time (2000=”0” and 2014=”1”) 0.17*
(0.08)
Time (2000=”0” and 2014=”1”) -0.73*
(0.29)
Extrinsic Rewards 0.11***
(0.03)
Management Support 0.16***
(0.05)
Environmental Consciousness 0.09**
(0.04)
R
2
0.67
N 355
Note: *p<0.05, **p<0.01, ***p<0.005 (two-tailed). Since the appended dataset cannot guarantee that the same
individual units are observed over time, three control variables (age, gender, and educational level) are excluded
here
27
. Entries shown for the variables are regression coefficients from ordinary least squares (OLS) with robust SEs
in parentheses.

27
The exclusion of control variables is further justified as no significant increase in R
2
was detected when age,
gender, and education were incorporated into the model. The difference in the explanatory power (R
2
) between two
equations is infinitesimal (0.67 vs. 0.69)

- 74 -

Figure 3-1 Interaction Effect
Note: The figure above was constructed by plotting job satisfaction scores two standard deviations below the mean
(mission-mismatched officials) and two standard deviations above the mean (mission-matched officials) for the year
2000 (t=0) and the year 2014 (t=1).

- 75 -

Chapter 4
Old Problems and New Dilemmas:
The Conundrum of Environmental Management Reform in China
When describing China, one must mention pollution. Indeed, discussions of China’s
severe environmental degradation are much in vogue these days among political leaders,
academics, and even local citizens. What makes this topic particularly attention-getting is not
only the fact that China’s pollution problem has “no clear parallel in history” (Kahn and
Yardley 2007, p. 1) but also because China’s authoritarian system, though it has successfully
defended itself against threats to the ruling legitimacy of the Communist Party, has not yet
accomplished its goal of striking an ideal balance between economic development and
environmental protection over the past three decades.
In the past, researchers attributed China’s environmental predicament to the stubborn
“gap between environmental regulation and regulatory enforcement” (Lo and Fryxell 2005, p.
561) –which is more commonly referred to as an implementation failure (O’Toole 1986; Hill and
Hupe 2002). Specifically, although the central government has promulgated a broad spectrum of
environmental laws and regulations, the environmental protection bureaus have done little to
implement or enforce these policies at the local level (e.g., Ma and Ortolano 2000; Li and
Higgins 2013). There are three explanations for this phenomenon. 1) Local governments have
competing policy priorities in which environmental protection takes a backseat to pro-growth
initiatives as a result of path-dependency (e.g., O’ Brien and Li 1999; Xu 2011). 2) Given the
presence of information asymmetry and the accompanying high transaction costs, higher-level
governments are unable to effectively monitor and control subordinate bureaucracies (Tang and
Zhan 2008; also see: Moe 1984; Ferguson 2013). 3) In addition, external pressures are negligible

- 76 -

because regulatory influence exerted by industry stakeholders (associations) is merely symbolic
and the de-facto legitimacy of environmental nonprofits remains questionable in China (e.g., Li
and Chan 2009; Lo et al. 2010).
Due to the fact that researchers utilized data gathered prior to 2010, factors contributing
to the compromised effectiveness of local environmental enforcement from 2011 onward remain
largely unknown. Unfortunately, the few studies that focus on problems throughout
environmental management regimes after 2013 China (e.g., Ren and Lei 2016; Yang 2016) lean
heavily on secondary document analysis, which tends to lack a “real-world” flavor and is
inherently incapable of capturing the nuances of frontline officials’ enforcement styles,
experiences, and quandaries. This empirical weakness should not be overlooked because in
recent years, the prevailing institutions overseeing China’s environmental management practices
have experienced many frame-breaking transformations. These include a thorough separation of
investigation and decision-making entities (chachu fenli), a vertically integrated management
structure (chuizhi guanli), and a tightened political accountability system (gangxing wenzezhi).
These steps toward reform are designed to enhance the organizational capacity of local
environmental administrations and to motivate officials. The ultimate purpose is simply to
collectively combat enforcement issues commonly faced by frontline environmental officials.
We will discuss whether or not these reforms, although well-intentioned, have been effective at
the local level.
Specifically, capitalizing on the rare opportunity to interview leaders of environmental
enforcement teams in various districts of Guangzhou, we analyzed three main dilemmas
associated with the adoption of these reforms. We utilized abundant narrative data, not only in an
attempt to better understand the difficulties associated with environmental enforcement at the

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grassroots level, but also to establish a deeper analysis of the institutional contradictions
embedded in current environmental governance systems in general. Admittedly, relying on the
use of interviews as the primary form of data collection, our analysis was more or less shaped by
officials’ personal interpretations of issues and problems discussed. Yet, these highly
contextualized and vividly portrayed barriers to effective regulatory enforcement provided us
with a springboard for more fully analyzing the complexity and subtleties inherent in China’s
environmental governance system, particularly in this era of reform.
Based on interviewees’ perceptions of the difficulties and challenges they routinely
encounter, we have concluded that weak enforcement of environmental regulations at the local
level can be attributed to three shortcomings– a shortage of budgeted staff, an absence of
personal security, and a lack of motivation on the part of officials. To address these deficiencies,
executives at the Ministry of Environmental Protection established institutional reforms.
Unfortunately, our findings suggest that these changes have led to enforcement dilemmas –
tightened accountability vs. perceived trust, individual decision-making processes vs.
enforcement credibility, and vertical integration vs. mobilization of local resources – that plague
environmental officials daily.
The remainder of this paper is organized as follows. We first introduce a detailed account
of the data source and method used in our study. We then present our empirical findings with
regard to why environmental officials at the local level are unable to effectively perform their
duties. As suggested by contingency theorists such as Matland (1995), differing policy
implementation strategies and mentalities have been developed to cope with various conditions.
Following this line of reasoning, an updated analysis of the factors that currently facilitate or
impede the enforcement work of local EPBs is warranted and of paramount importance. The

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fourth part consists of three subsections, each of which is devoted to 1) a discussion of the
ramifications of the respective bureaucratic counterstrategy initially designed to solve enduring
problems of the local environmental management regimes, and 2) an attempt to make sense of
the inevitable emergence of the identified enforcement dilemma from a theoretical standpoint.
The paper concludes by offering several implications that not only advance our understanding of
the fundamental fallacies inherent in China’s governance ethos but also help future scholars to
seek “institutional solutions” to the problems discussed throughout this article.
Data and Method
Similar to other authoritarian countries, environmental issues in China are managed
predominantly through a top-down hierarchical system. The State Environmental Protection
Administration, which in 2008 was renamed the Ministry of Environmental Protection
(henceforth: MEP) in honor of the increasingly important role it has played in the country’s
overall strategic planning, serves as one of twenty-five integral departments within the State
Council. To regain China’s blue sky, green landscapes, and clean water, the MEP assumes
responsibility for the following elements: 1) the promulgation of environmental laws,
regulations, and guidelines; 2) the establishment of implementation branch offices at provincial,
city, and township levels; and 3) the institutionalization of an accountability system to monitor
the enforcement efforts of local environmental entities.
The multilayered structure of China’s environmental management system can be
visualized using the Environmental Protection Bureau (henceforth: EPB) in Guangzhou, our
primary locale of investigation, as an example. As can be seen from the figure below,
subordinate to MEP, each province has its own Department of Environmental Protection. Below

- 79 -

this level, each city has set up an Environmental Protection Bureau, underneath which are the
implementation branches in each district within the respective city boundaries.
Insert Figure 4-1 about Here
Our data consisted of in-depth interviews with enforcement team leaders serving in
various districts of the Guangzhou EPB. Ranked the third largest city in China, Guangzhou
serves as the country’s forerunner in launching economic reforms, which began in the early
1980s. Typical of other sizable metropolitan cities in developing countries, Guangzhou suffers
greatly from environmental degradation and epitomizes the painful tradeoff between economic
growth and environmental protection. According to a Bluebook report released by the Chinese
Academy of Sciences in 2016, Guangzhou is listed as one of the five “least” livable cities in the
country.
28

Interviews were conducted between December 2016 and March 2017. Compared to other
widely utilized survey formats, the interactive nature of interviews provides an edge for
collecting informative data as it gives interviewees an opportunity to comment freely on issues
that they consider most relevant instead of being rigidly limited by survey items (e.g., Krueger
1994; Morrison 1998). Among all 12 administrative districts in Guangzhou, we interviewed
representatives (the heads or the acting heads) of environmental law enforcement teams from 11
districts, yielding a coverage rate of 90%. A summary of the key features of these 11 districts is

28
This report uses the following five dimensions to measure a city’s overall level of livability: public safety,
accessibility of public infrastructure, social tolerance and inclusion, availability of public transportation services,
and quality of the environment. According to this report, China’s five “least” livable cities are Nanchang, Taiyuan,
Harbin, Guangzhou, and Beijing. Since these five cities are either the capital cities in their respective provinces or
the directly-controlled municipalities of China, they are unlikely to fall behind in the provision of public services or
the maintenance of city security. Poor environmental quality seems to be the only sensible explanation for these
cities’ rock-bottom positions on this list.

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provided in the table below. The only district that was not included embarked on an enforcement
reform in May 2013. A so-called “comprehensive” bureau of administrative enforcement, which
absorbs the enforcement arms of all government departments in the district, was created to
formalize and facilitate the implementation of decision-making processes across all policy
arenas. The exclusion of this district in the analysis is thus the result of much deliberation, given
that the bureaucratic apparatus of its environmental protection system differs somewhat from that
of the typical administrative districts.
Insert Table 4-1 about Here
Each interview, arranged by the Guangzhou Research Institute of Environmental Science,
lasted 80-120 minutes. It included 1) brief descriptions of the teams’ major duties and
responsibilities, 2) strategies employed to more effectively enforce regulations, 3) discussions of
major difficulties and challenges encountered during the enforcement process, 4) perceptions of
the reform initiatives proposed by the MEP 5) and sources of on-the-job stress. Interviews were
all semi-structured, meaning that interviewees were at liberty to discuss issues beyond the scope
of predetermined topics.
Long-Standing Hurdles to Local Environmental Enforcement
The complexity and difficulty inherent in the implementation of environmental policies
in China have been extensively studied (e.g., Schwartz 2003; Swanson et al. 2001; Lo and Tang
2006). Yet identified factors that prevented the local realization of the environmental protection
goals of the central government remain macro-based. Scholars led by Zhan et al. (2014) thus call
for analysis that generates “contextually valid knowledge” (p. 28) by which more tangible
obstacles to the effectiveness of environmental policy implementation can be understood and

- 81 -

overcome. In the remaining portion of this section, we classify the challenges Guangzhou EPB
officials face in their daily enforcement activities into three main categories –lack of budgeted
manpower, lack of personal security, and lack of morale on the job. A summary outlining these
key enforcement difficulties is summarized in Table 4-2. We wish to provide the reader with a
highly contextualized compass to travel into mundane, but cumulatively consequential, problems
surrounding grassroots-level enforcement of environmental policies in China.
Insert Table 4-2 about Here
Lack of Budgeted Manpower
When asked about the most prominent difficulty enforcement team leaders experience in
fulfilling their job duties, all pointed to the issue of severe understaffing. Due to plans to
streamline and downsize bureaucracy, the staff establishment of EPBs at all administrative levels
is under stringent control (see: Lo and Tang 2006; Yang 2004). The overarching principle is
“reduction only.” In fact, several interviewees admitted that their enforcement teams had not
been given the go-ahead to recruit new members for years. Unsurprisingly, shorthanded teams
have led to many enforcement predicaments. To begin with, the availability of equipment, such
as cars, is determined in accordance with the respective number of team members. Therefore, a
shortage of personnel is concomitantly accompanied by an inadequate supply of equipment. The
enforcement team in District H, for example, is still awaiting approval to purchase a seven-seat
vehicle for visits to inspection sites. In addition, a lack of staff has spurred employees to develop
suboptimal coping strategies, which have led to haphazard enforcement. In other words, instead
of arranging for systematic, routine inspections of all polluting firms, enforcement teams
concentrate only on investigating organizations that have had complaints lodged against them.

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Although less time-consuming, this complaint-driven strategy prevents enforcement teams from
taking any proactive measures against businesses that are on the brink of violating environmental
laws and regulations. Lastly, given the insufficient infusion of new blood, the average
enforcement team member is in his or her mid-40s. One leader lamented that no enforcers under
his wing were in their 30s. Since frontline regulatory work is physically demanding, the
enforcement capacity of these environmental teams has been further undermined by an aging
workforce.
Lack of Personal Security
Of the eleven interviewees, eight have worked in their field for over 15 years, which
helped them attain leadership positions in various administrative districts in Guangzhou. These
law enforcement officials at the grassroots level discussed the frequent occupational hazards of
extreme vigilance and paranoia resulting from their daily negotiations or confrontations with
polluters. Understanding that the nature of their job inevitably invites notoriety and scorn among
the public, leaders confided that they habitually looked over their shoulders. More than half of
the interviewees told of situations in which their personal safety was on the line during the
enforcement process.
Specifically, interviewees complained that environmental regulators in Guangzhou often
did not “dare” to employ a stern enforcement style, as playing hardball with small businesses that
pollute generates social repercussions. The owners are either low-income or migrant workers
who have invested all their resources hoping to escape from poverty. Closing down these small
business startups is perceived as no different than driving the underprivileged into a corner,
possibly leading to social unrest that is explicitly discouraged by the central government.
Similarly, tackling medium-sized industrial factories is far more challenging than one might

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expect. Due to the fact that security guards are hired to patrol around the neighborhoods, the firm
executives are commonly tipped off in advance about the environmental inspections. What’s
worse, when illegal activities are exposed, firm owners go to great lengths to escape punishment,
including verbally threatening inspectors’ lives and summoning guards to block off the exits and
further intimidate inspectors. When recollecting some of those chilling experiences, it is no
wonder that enforcement team leaders describe their work as “walking on eggshells.”
Lack of on- the-Job Morale
When asked about the methods used to boost the morale of subordinates, interviewees
rolled their eyes and shook their heads. According to the leader of District B, “Individuals who
pass the civil service admission exams are inherently brilliant and capable.” Nonetheless, the
vast majority of them earn a monthly salary of approximately RMB 6,000, which cannot even
remotely pay for one square meter of residential real estate in Guangzhou these days. In addition,
only four leadership positions are budgeted for the entire team of District D, which has 32 staff
members. Unless one of these four “leaders” reaches his or her mandatory retirement age, the
promotion prospects for junior team members are categorically zero. The leader of District F,
who faces similar bleak working conditions, has all but given up on boosting his fellow
teammates’ morale. In his opinion, the requisite condition for working hard is love for the job. If
this is absent, people are likely to lose motivation in the long run. It is not uncommon for
environmental officials to hold the lowest administrative rank even in their late 50s. In this
disappointing scenario, as he contended, any encouraging words would fall on deaf ears.

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Institutional Dilemmas Stemming from Recent Environmental Management
Reforms
In their article, Lo and Tang (2006) contend that China’s environmental regulatory
apparatus has undergone significant transformations since 2000 to cope with escalating
environmental challenges resulting primarily from the country’s miraculous economic growth
and vastly changing socioeconomic structures (see: Lewis and Xue 2003; Yang 2004). While
useful in addressing a plethora of current problems, these institutional innovations also have
brought about new sets of enforcement complications. The well-known practice of creating “two
separate lines for revenues and expenses” is a prominent example. To combat the incentive
distortion in which environmental officials look the other way regarding polluting behaviors so
that related charges can be billed (Ma and Ortolano 2000), local EPBs are required to relinquish
their power to retain a portion of the fees and fines collected from polluters (Tsui and Wang
2004). Unfortunately, although this approach does help dignify environmental regulatory actions,
it has seriously undermined the enforcement capacity of local environmental administrations by
crippling them financially.
Despite a ten-year interval since the publication of Lo and Tang’s paper, our interviews
in 2017 suggest that China has never slowed its pace in reforming governing institutions in the
domain of environmental protection over the past decade. In response to prevalent challenges
posed to enforcement officials at the local level, central government leaders have initiated
several changes since 2010. Three noteworthy reforms, which depart from the goal of stemming
the tide of the problems identified in the preceding section, are identified below. Paradoxically,
although these reforms could partially eradicate the pathology at the heart of China’s
environmental management practices, they have similarly given rise to fresh challenges,

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presently and in the near future. Awareness of these thorny dilemmas helps to mitigate them,
thus fundamentally elevating the levels of environmental management in China in the future.
Separation between Investigation and Decision Making vs. Regulatory Deterrence
In order to ensure that punitive decisions made against polluting firms are legally binding
and situationally consistent, environmental enforcement teams in China have recently been
tasked with investigative responsibilities only. Simply put, after conducting thorough
investigations, enforcement teams turn over all pertinent evidence to the Department of Policies,
Laws, and Regulations, which possesses the discretionary power to decide 1) whether legal
claims can be established against the accused polluters, and 2) what specific punishments should
be imposed. By separating investigative and juridical functions, institutional designers have
ensured the safety of enforcement officials given that no verdict will be made on the scene.
When ultimate decision makers and enforcers are two separate players, the classic
principal-agent (PA) relationship, in which the “agent” utilizes his or her time and expertise by
performing services on behalf of the principal, comes to mind (e.g., Shipan 2004; Bertelli and
Lynn 2006). To some extent, the dynamic between the environmental enforcement team and the
Department of Policies, Laws, and Regulations mirrors this very relationship. Put differently,
enforcement officials utilize their frontline experience, skillsets, and allocated inspection
equipment to collect evidence on businesses that illegally pollute. This data helps the regulatory
department to reach accurate conclusions and to make fair rulings accordingly. Although
theoretically appealing, the PA relationship is not always completely efficient. What is often
overlooked is the fact that interests between the principal and the agent are seldom aligned. As
public management scholars contend, the PA relationship is inherently contentious, which
increases the uncertainties associated with the application and interpretation of bureaucratic

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decisions (see: Beazer 2012). For example, the agents can capitalize on their information
advantages to thwart the initial expectations of the principals. Conversely, the principals can
behave in an extremely risk-averse manner and choose to let the agents’ efforts go to waste.
Zhang’s (2017) most recent study is a case in point. She places the problematic dyadic
relationship between the principal and the agent in the specific context of China’s environmental
enforcement and explores why regional supervision centers, though under the direct leadership
of the Ministry of Environmental Protection (MEP), fail to significantly curtail data falsification
among local EPBs. In accordance with her findings, “Not only does the principal distrust the
agent, the agent also distrusts the principal” (p. 23). That is, to justify their existence, regional
supervisors fixate on catching the minute errors of local EPBs, thus transforming a means into an
end. Local EPBs, who consider the verification process to be radically subjective and nitpicky,
respond by becoming antagonistic. They then devise coping strategies that help generate
desirable outcomes on paper only.
In our study, the principal-agent problem became externalized and clear in the
interviewees’ passive-aggressive attitude toward supervisors who ignore their opinions during
the decision-making process. Their responses to this question barely exceeded ten words,
conveying that enforcement teams are not encouraged to “stick their noses in where they are not
wanted.” After rounds of back-and-forth exchanges, they revealed the reasons for their
frustration in that not only do the enforcement teams (the “agents”) and the Department of
Policies, Laws, and Regulations (the “principal”) have distinct goals and interests, their
perceptions about risk are vastly different as well (see: Eisenhardt 1989). As a result,
misunderstandings are prevalent. Specifically, to guarantee its high success rate in regulatory
decision-making, calculated by the ratio of enforcement decisions that are undisputed or upheld

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by the Court of Appeals to all administrative penalty cases annually filed, the Department of
Policies, Laws, and Regulations normally “errs on the side of caution.” Upon discovering any
loopholes in the assembled evidence provided by the enforcement team, the department will
refuse to pursue cases, let alone consider punitive measures against accused polluters. As the
leader of District H recalled, the Department of Laws and Regulations in his home bureau acts
“conservatively” to a fault. In order to secure the department’s willingness to process cases, his
team must submit rock-solid evidence that firms’ operations unquestionably violated
environmental laws and regulations. This implicit requirement is nonetheless difficult to achieve
given that the collection of environmental evidence is circumstantial and requires a high degree
of both professionalism and improvisation. Seeing that some big polluters get away with their
wrongdoings scot-free, the interviewee lost all confidence in the enforcement credibility of his
entire team.
District H: I personally understand why the Department of Laws and Regulations “soft-
pedals” cases that we consider severe. After all, the department must make sure that the
majority of the ruled cases survives the scrutiny of administrative review/reconsideration.
Otherwise, the entire bureau’s authority and professional reputation will be at stake.
These days, the department declines our request to even pursue legal cases against those
big polluters, as long as it believes that there is a risk of doing so (namely, the fear that
the decisions would be overruled by the court if the firm owner applied for the
administrative review).
Tightened Accountability System vs. Employee Motivation
While the restrictions that civil service rules have imposed on public bureaucracies (e.g.,
highly standardized approaches for assigning job duties coupled with the rigidly structured pay
and reward system) arguably diminish the appeal of the public sector, civil service employees are
inclined to take their privileges, such as secure salaries and tenure, for granted. In order to
motivate environmental officials to do their best work and make them understand that job

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stability comes at a price, China’s central government established a more stringent accountability
system for all levels of environmental authorities in 2013 (Brettell 2013). In addition to
continuously utilizing the administrative responsibility system to ensure that local
administrations and cadres are motivated to achieve environmental missions due to the signing of
performance-based contracts in which indicators surrounding environmental quality take
precedence over other governance measures, the strengthened accountability framework is
bidirectional in nature, simultaneously embodying a bottom-up mechanism of bureaucratic
oversight. Specifically, given that the top-down accountability approach is only capable of
accounting for “macro” influences, namely a jurisdiction’s overall pollution level rather than
toxins caused by a particular firm (Lo et al. 2010), it is supplemented by a citizen advocate
component that compels local EPBs to remain attentive and react promptly to pollution from
individual factories. Local environmental bureaus, for instance, are required to properly respond
to and/or address citizens’ complaints and petitions within fifteen business days. In lieu of
societal groups whose legitimacy remains dubious in China, this petitioning system is considered
ideal for aligning the interests of citizens with those of local environmental officials –the former
lodge complaints for the sake of their personal welfare, whereas the latter address these issues to
avoid stains on their records.
Nonetheless, holding local bureaucrats stringently accountable for their behavior through
regulatory action carries a heavy price. In their book, Miller and Whitford (2016) term the
undesirable consequences resulting from the use of excessive rules and procedures the “control
paradox.” They believe that this intensive monitoring and supervision signals distrust, which
serves to alienate experienced, professional workers. Consequently, these seemingly brilliantly
devised monitoring mechanisms and rules merely “serve to clarify for employees the minimum

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efforts that would keep themselves from being fired” (p. 140). To avoid falling into the trap of
this paradox, the authors conclude that a suite of civil service safeguards should also be created
to 1) discourage public employees from being myopic, and 2) convince public officials that they
are indeed trusted and will not be scapegoated to “affix blame in the case of external hostility”
(p. 137). This idea is further contextualized by Ran (2017), who explores the primary reason that
the Chinese government has insisted on adopting a highly decentralized environmental
governance system over the years. She suggests that in order to preserve its positive public
image, the national government has purposefully established a decentralized environmental
administrative system so that any criticism can be easily directed at the local governments. More
interestingly, this blame-avoidance behavior can be observed among intergovernmental
relationships at the subnational level. In other words, government officials at each administrative
rank assume the dual roles of blame-taker and blame-maker –accepting the blame from their
immediate higher-level entities and transferring it to those in subordinate administrations. As a
result, Ran (2017) alleges that, given their most vulnerable position in the power structure, local
EPBs and their officials become “prominent targets of blame” (p. 11). Due to the fact that they
are unable to shift the blame downward through the administrative hierarchy, they instead turn to
“blaming local residents and society” (p. 13).
Indeed, problems with the control paradox, coupled with the attendant negative
behavioral patterns predicted by Ran (2017), are mirrored in the interviewees’ obvious
discontent with the current accountability system that requires them to respond to every single
complaint or petition in a timely manner. From a technical perspective, to minimize the risk of
being held personally accountable and shouldering the consequences, most of the interviewees
indicated that their time, which should ideally be used to explore methods for preventing

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pollution, has been wasted on addressing citizens’ complaints, the majority of which are either
inherently unsolvable in a short time or colored by ulterior motives (e.g., false allegations driven
by “malignant” competitions between firms). Additionally, from an emotional perspective, these
enforcement team leaders view themselves as both “suitable” scapegoats used by higher-level
officials to deflect criticisms of regulatory underperformance and as “inconsequential” punching
bags upon which citizens can vent their anger. Interestingly, quite a few interviewees jokingly
suggested that sliding by might be the best strategy for survival. While this response was perhaps
hyperbole for comic effect, it seamlessly mirrors the paradoxical outcomes of the control
dilemma –it is the lack, rather than the presence, of bureaucratic autonomy, that opens the
gateway for laxity and stifles motivation. As indicated by the leader of District E:
District E: I think what citizens often lack is common sense. First, for industrial districts
in which factories are concentrated, a certain stench will be generated for sure. If you
choose to live near an industrial district, you must understand that your neighborhood can
never be odorless. Second, emitting within certain legal limits doesn’t equate to zero
emissions. Our enforcement team can only punish firms that emit beyond their granted
legal limits. In other words, even if a firm is considered “a heavy polluter” in the eyes of
citizens, we cannot possibly do anything if it complies with all the respective emission
standards. However, when we explain our enforcement criteria to those citizens, they
aren’t satisfied. They think we are either patronizing them or didn’t act promptly to catch
polluting firms red-handed. We have begun to realize that it is inevitable that we will be
blamed. The more we do, the more likely we will be reprimanded. In all honesty, we
might be better off doing nothing at all!
Vertical Integration vs. Local Cooperation
Vertical integration denotes the tactic through which local environmental administrations
are held accountable solely to their higher-level departments. For example, the EPBs at the
district level are no longer considered to be an integral department within their respective district
governments; rather, they are perceived as dispatched agents of the EPB at the municipal level
who have been given the power to decide the budgetary allocations and personnel assignments of

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all subordinate bureaus. The adoption of vertical integration in environmental systems, which
was officially instituted this year
29
, is expected to eliminate the undue influence of local
governments on environmental protection at the grassroots level. It has been suggested in prior
studies that government leaders commonly prioritize the goal of fostering economic growth,
given its strong visibility (e.g., Xu 2011). Hence, this pro-growth mentality is believed to be the
reason that China’s environmental problems have been improving at a snail’s pace.
On the surface, liberating local EPBs from the jurisdiction of their respective territorial
governments is justifiable. In our interviews, when asked to name a top-performing
environmental enforcement team among all regions in Guangzhou, the interviewees
unhesitatingly referred to the one in District C. When encouraged to comment on an
underperforming team, they frequently mentioned one that serves District D. The reason the
former is so highly respected while the latter is disregarded becomes clear when we view this
phenomenon through the lens of (perceived) government support. The enforcement team leader
of District C regarded the government leaders’ policy emphasis on environmental protection as
genuine, whereas the interviewee from District D interpreted the support as egocentric, believing
that they [government officials] backed pro-environmental policies to avoid blotting their
copybooks rather than displaying an intrinsic care for the planet. This difference in attitude is
unfortunately reflected in the staffing of both teams. Specifically, the ratio of frontline

29
Piloted in a number of selected cities over the past three years, vertical integration is slated to be adopted
nationwide later this year. Admittedly, in her most recent article, Ran (2017) contends that the central government
might not genuinely hope to recentralize environmental enforcement authorities. Simply put, vertical integration is
merely a window-dressing move. A decentralized system of environmental governance, according to Ran, is in the
best interest of the central government, as it acts as a shield for the top-level leadership from being blamed for any
environmental-related problems. In her exact words, “When environmental policies fail, local governments and their
officials are often blamed for local protectionism and unfaithful implementation. Such dominant media discourse
that blames local governments includes, for example, the blind pursuit of GDP, GDP idolatry, and protectionism” (p.
16). As appealing as Ran’s arguments sound, most of them remain speculative, as they are not backed up with
supporting evidence. For the time being, we are not considering the possibility that the plan of vertical integration
might be aborted down the road.

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environmental enforcement officials to the jurisdictional population is approximately 0.24 per
10,000 people in District C, but only around 0.08 per 10,000 people in District D. Moreover,
according to the interviewee, although the designated number of members on the environmental
enforcement team in District D is 32 people, no more than 20 people are actually employed
there. The remaining personnel are somehow “borrowed” by other shorthanded departments
within the EPB of that district. While understaffing is indisputably ubiquitous across all
enforcement teams, none of them reaches the level at which more than one third of the budgeted
officials are not performing their primary duty. Table 4-3 summarizes the interviewees’ opinions
on government support and the precise staffing situations of their respective teams.
Insert Table 4-3 about Here
Nonetheless, the pragmatic usefulness of vertical integration has been contested both in a
general sense and in the specific context of environmental protection. Given increasing
coordination and monitoring costs, Mazmanian and Sabatier (1989) indicate that organizational
leaders could be chasing their tails by initiating hierarchical (vertical) integration. According to
van Rooij et al., (2017), “adding a recentralized layer on top of a localized system adds to
coordination problems” (p. 5). Particularly when these recentralization efforts are not well
matched with sufficient resources
30
, including “adequate personnel allocations” (also see:
Kostka and Nahm 2017, p. 11), they contend that utilizing recentralization to overcome the deep-
seated hurdles plaguing the current environmental governance system is tantamount to wishful
thinking. On the contrary, when excused from fulfilling environmental protection

30
According to Wong and Karplus (2017), in quest of effective approaches to combating air pollution, “Beijing may
be less efficient in deploying funds where they are needed, relative to governments at the provincial and lower
levels” (p. 20).

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responsibilities, local government officials are no longer likely to lend their strong support to
EPBs, which will negatively affect their enforcement capacity.
Not surprisingly, interviewees’ views about vertical integration in this context were
universally negative. The majority of team leaders considered this approach either meaningless –
as local leaders could not stress enough the importance of environmental governance, or
counterproductive – as it tends to drive a wedge between local EPBs and their territorial
governments. As vividly articulated by the leader of District K:
District K: The Environmental Protection Bureau currently serves as one of the integral
departments of the district government. No matter how well or badly we behave, our
bureau is still considered the government’s own child. Sometimes we get scolded, but we
know that we will not be abandoned. After all, under no circumstances will parents
abandon their children. When the environmental protection system is vertically
integrated, we will take orders solely from higher-level environmental institutions. When
structurally independent from our district government, we won’t be perceived as a
“child” by local government leaders anymore. We are outsiders. It is a no-brainer that
parents lend support to their children more often than to outsiders. I am afraid that we
will be implicitly sidelined by local administrators in the future.
Indeed, the ramifications of vertical integration are most likely inevitable. Environmental
enforcement officials in China are not legally able to directly halt the operations of businesses
that violate the law. In lieu of temporary operational shutdowns, they impose fines on polluters.
Nevertheless, based on penalty clauses in the environmental protection law, the fines ultimately
issued are often too trivial to deter polluting firms from curbing their illegal activities (Wang
2012). Faced with such noncompliance, enforcement teams could ostensibly petition local courts
for a legally binding order to forcibly close down the polluting firms. Unfortunately, due to the
fact that courts have a complex internal review process, a writ of execution takes up to six
months to process. In this scenario, the only viable avenue through which enforcement teams can
do their job and maintain their authority is to enlist assistance from other city departments, such

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as the Department of Water and Power (DWP) that can cut off the water and electricity supply of
firms under investigation. This strategy, nonetheless, will become difficult to employ when the
local EPBs are “upgraded” to centrally controlled bureaus, which are unfortunately “in danger of
being more pressed for resources than local unit” (van Rooij et al. 2017, p. 5).
More notably, a high percentage of interviewees expressed concerns that vertical
integration has tended to hinder their promotion prospects. In other words, the perceived
unavailability of promotion-based incentives is what stands out as a potentially demoralizing,
albeit unintended, consequence of vertical integration. According to the leader of District F, the
entire Environmental Protection Bureau is already filled with countless rank-and-file members,
although leaders can be counted on one hand. On this note, a vertically streamlined system tends
to exacerbate co-workers’ frustrations in that the number of budgeted leadership EPB positions
will be further reduced at the district level. Particularly for junior members who consider their
job on the enforcement team as a springboard that can eventually help them land on a bigger
platform, vertical integration is likely to deal a permanent blow to their work motivation.
Discussion and Conclusion
In his frequently-referenced paper, Performance Legitimacy and China’s Political
Adaptation Strategy, Zhu (2011) explains the reasons China has been peacefully governed by the
Chinese Communist Party (CCP), a monopolistic force in which leaders have circumvented
nationwide elections to assume and maintain political power, for the past 60 years. He points out
that China’s size alone precludes the use of terror and oppression to legitimize the CCP’s
leadership role in government. Instead, it is the “performance-based strategy” that has enabled
the CCP to establish and continuously consolidate its unparalleled authority. Specifically, by
virtue of accomplishing a wide spectrum of governance goals that improve the living standards

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of the people, the CCP has won over the hearts and minds of typical Chinese citizens. This
resultant societal support has helped to “construct a constitutive perception that the government
is doing things right” (Zhu 2011, p. 128), which in turn, has justified the CCP’s status.
Unfortunately, since citizens’ demands are constantly changing and rapid economic growth
cannot be indefinitely sustained, Zhu subsequently states, “Performance legitimacy is very
fragile” (p. 139), as there is no room for error and it is maintained at the expense of increasing
governance costs at the local level.
To a certain degree, our findings support Zhu’s argument. Chinese leaders are aware that
bettering the environmental quality is an important governance task that 1) has not yet been
fulfilled, and 2) has caused widespread societal discontent. Based on these pressing concerns, the
central government has exerted effort in different areas. Vertical integration, for example, is
designed to reinforce the authority of local EPBs by lessening their reliance on the respective
jurisdictional governments. The adoption of the heavy-handed political accountability system,
the ultimate goal of which is to ensure the answerability of local environmental administrations
to citizens’ complaints and petitions, similarly exemplifies the government’s determination to
garner social support and understanding. Unfortunately, our findings suggest that while state
legitimacy might be temporarily enhanced in light of restructuring and increasing the stringency
of environmental management regimes, this comes at a heavy price for the employees. Vertical
integration threatens the promotion prospects of street-level environmental workers and, in
reality, the accountability regulations are nothing more than a blame-shifting and anger-venting
mechanism. Future researchers may wish to study the extent to which the demoralization of
environmental officials will provide a counterweight to China’s improvement of environmental
performance in the long term.

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The contributions of this study are primarily threefold. First, utilizing qualitative
methodologies, mainly in the form of in-depth, semi-structured interviews, we dug deep into the
work-related beliefs, attitudes, behaviors, and reactions of leaders in environmental enforcement
teams. This contextualized approach revealed universal factors that contribute to the current
ineffectiveness of local environmental enforcement. In sum, the current suboptimal enforcement
at the local level can be attributed mainly to the teams’ institutionally limited organizational
capacity and to the understandably low morale of these officials. Since street-level employees are
“the key to successful implementation and that the top downers ignore them at their peril”
(DeLeon and DeLeon 2002, p. 470), an appreciation for their situation and empathy with their
frustration are indeed necessary for filling in the implementation gap that has plagued China for
years. Additionally, we have made a first attempt to examine the inter-district differences across
environmental enforcement teams in Guangzhou. We found two main systematic disparities: 1)
while enforcement teams in all districts are understaffed, the severity of this problem varies
across districts. Remarkably, the top-performing team, widely extolled among the interviewees,
suffers the least from understaffing; 2) enforcement team leaders’ understanding of government
support for environmental protection is uniformly consistent with their teams’ staffing capacity.
Leaders who believe that such support is insincere, superficial, or self-serving suffer to the worst
degree from under-staffing issues. Lastly, drawing on insights from classic models including
implementation theory, control paradox, and principal-agent conflict, we have described the
rationale behind the coping strategies utilized by the central administration to alleviate the
“household” challenges confronted by local environmental enforcers, and more importantly,
made sense of three resultant/anticipated dilemmas posed not only to enforcement team officials
but also to the entire think-tank of institutional reformers. These dilemmas can be labeled as: a)

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the unintended consequences associated with the (re)centralization of environmental authority, b)
the low morale as an outcome of the drastic expansion of political responsiveness and
accountability, and c) the weakened ability to credibly enforce regulations resulting from the
complete separation of the investigation and decision-making units.
In the final analysis, it is worth noting that the issues presented throughout this paper are
too complicated to be solved overnight
31
. The usefulness of our study lies in the fact that
correctly identifying and disclosing enforcement difficulties and reform dilemmas against the
background of a variety of political and bureaucratic issues is the only viable avenue for keeping
central policymakers informed. Such disclosures, in theory, could also pique the interest of like-
minded scholars who may come up with their own theories about how to more effectively
enforce local environmental regulations. Several thought-provoking pointers offered by the
interviewees merit mentioning here. To begin with, environmental laws and regulations should
be revised to reduce their mutual inconsistencies and further developed to cater to local
conditions. According to Zhan, Lo, and Tang (2014), current environmental regulations are
“adopted without due consideration as to how they are going to be implemented at the local
level” (p. 24-25). Moreover, the authority and responsibilities of local EPBs must be clearly
delineated. In other words, administrative overlap and duplication across public bureaucracies
must be avoided at all costs. Finally, to prevent regulatory inaction, which poses dangers that are
far-reaching yet are not immediately apparent, fault-tolerant mechanisms must be established to
provide individual environmental enforcers with breathing room. In a similar vein, compensation
reforms must proceed at a rapid pace; a reasonable system for handling complainants ought to be

31
Scholars led by van Rooij et al. (2017) pessimistically contend that these problems will always be around unless
“the fundamental conflict of interest between pollution control and economic growth” (p. 18) can be overcome.

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imposed, which will ensure that a “sledgehammer,” namely precious enforcement resources, will
not be used to crack a walnut.
Out study is not immune to limitations. As Creswell (2009) points out, qualitative
research is a “form of interpretative inquiry” (p. 176), meaning that essential conclusions are
derived based on researchers’ assessments of what they (choose to) see, hear, and understand.
Unfortunately, as Hindmoor (2011) suggests, individuals are frequently 1) “vulnerable to
framing, anchoring, and prime effort” (p. 196), and are 2) influenced by their cultural and social
“baggage.” In other words, it is an undeniable fact that researchers’ interpretations of qualitative
data will be unconsciously swayed by their personal background, history, and prior perceptions.
This subjectivity could call into question the reliability of the research findings. Further, Odell
(2011) states that qualitative approaches per se “are weaker than statistical methods for testing a
theory” (p. 171). Given the small number of available cases, he fears that any attempts to
generalize the essentially context-contingent qualitative results to scenarios outside the scope of
the targeted studies cannot survive closer scrutiny. These concerns are legitimate and
exceedingly difficult to counter. Guangzhou, the study site, serves as a mere microcosm of
struggles for environmental protection elsewhere. The extent to which it mirrors reality in other
parts of China remains largely unknown. In this paper, for example, we criticize the utility of
vertical integration primarily because the issue of local protectionism it purports to solve is
almost nonexistent according to most interviewees, whereas the problem of incentive
misalignment between the central and local governments seems imminent. In light of
governmental statistics, however, van Rooij et al. (2017) observe an “uneven environmental
enforcement” pattern and assert that an economic logic still prevails. Specifically, strict and
frequent environmental enforcement is witnessed only in coastal provinces or richer regions, as

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governments in these areas “have more opportunities to diversify their economies away from
polluting industry” (p. 19-20). In economically underdeveloped areas, unfortunately, local
protectionism continues given that jurisdictional governments depend heavily on tax revenues
generated from polluting firms and development projects. Likewise, interviewees were very
vocal about the negative aspects of their profession. The positive elements, however, were
seldom discussed. The primary analysis of this paper is thus susceptible to pessimism bias, i.e.,
the fact that individuals are naturally inclined to blow negative factors out of proportion.
Following this rationale, well-designed quantitative or experimental components should be
incorporated by future researchers to either complement or supplement our findings.
In conclusion, China’s top-level leadership unwaveringly believes that satisfactory
governmental performance guarantees legitimacy. To ensure that their authority is not challenged
in this increasingly globalized and turbulent era, China’s central government leaders (dominated
by the CCP in the current party-state polity) prioritize visible performance over other aspects of
governance. Externally, committing itself to “openness,” China has become the world’s largest
trade and manufacturing center. Internally, the state leadership has decided to forge an
accountable and competent administrative system, which is manifested by a variety of
governance reforms occurring across various domains and policy arenas, so that top-down
policies can be effectively implemented at all subnational levels. Indeed, institutional reforms
pervade every sector of Chinese society. The adoption of vertical integration in the medical
system is a case in point. State-owned hospitals at and below the city level are to be merged by
mandate into the management system of their provincial-level counterparts (e.g., Fan 2013). Yet,
as demonstrated in this paper, the pursuit of utilitarian legitimacy is doomed to be rocky. At least
in the context of environmental protection, the compromised enforcement credibility, the decline

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of employee morale, and the possible estrangement between local EPBs and their respective
territorial governments all provide a detailed look into the inherent vulnerability of the prevailing
governmental logic that equates visible, if not immediate, performance with ruling legitimacy.
While the country’s miraculous economic growth and rapidly transforming socioeconomic
landscapes necessitate innovative governance approaches, we hope to underscore the importance
of moving forward meticulously and incrementally –i.e., with the aid of supporting institutions
and sufficient human resources.

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Appendices
Table 4-1 Basic Geographic and Socioeconomic Information of Guangzhou Administrative Districts
Administrative District
of Guangzhou
GDP Per Capita (in
U.S. Dollars)
Area (in Square
Kilometers)
Major Polluting Sources
District A 36594.59 137.38 Hospitals; Car dealerships; Printing houses
District B 14274.41 90.40 Restaurants; Food processing firms
District C 17601.19 529.94 Electricity, furniture, and garment factories; Big-
sized chemical firms
District D 10788.37 795.79 Unlicensed food stalls and workshops
District E 17862.24 970.04 Miscellaneous types of medium-sized factories.
District F 37738.87 33.8 Service-oriented industries (e.g., hospitals,
restaurants, and entertainment venues).
District G 52506.06 486 Sizable petroleum firms; Logistic companies
District H 28635.28 783.86 Construction sites
District I N/A 39.3 Sewage treatment companies; Power plants
District J 14192.83 1616.47 Unlicensed workshops providing subcontracted
services to large-scale enterprises
District K 9063.67 1985.26 Restaurants; Tourism and entertainment industries
developed around national parks

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Table 4-2 Summary of Interviews on Major Difficulties/Challenges Faced by Local Environmental Enforcement Teams
Lack of Budgeted Personnel Lack of Personal Security Lack of Career Motivation
District A 11 members of law enforcement are on loan to
other integral departments, some of which are
budgeted with only one civil service position,
within the EPB.

Due to understaffing issues, it is impossible for
us to effectively fulfill our enforcement duties.
No specific examples Average employees in the EPB earn a monthly salary of
only RMB 7,000

The subsidized housing program was halted nationwide
in early 2000.

Motivating and cheering up my fellow teammates seems
pointless because I, as the team leader, have nothing
concrete to offer or to promise.
District B Local EPBs are currently experiencing a hiring
freeze.

Temporary workers, though professionally less
qualified, are hired to deal with daily tasks.
It is always a headache to enforce environmental
regulations on small household workshops, as the
livelihood of entire families might be at stake. Any
inconsiderate, albeit legally spot-on, enforcement
decisions will be ill interpreted and trigger social
contradictions.
Our monthly salary cannot even pay for one square
meter of residential real estate.

Pay raises are an attention-getting rumor only. My
salary last year was only 31 bucks more than what I
earned in 2008.
District C

Understaffing is the primary reason that
regulations are rarely enforced in restaurant
businesses.
When investigating a local firm that provides lard to
customers, we were surrounded and later stalked by
8 workers holding butcher knives.
Over the past 15 years, our salary was increased only
once.
District D

As a result of staff shortages, adopting a
proactive enforcement strategy –conducting
frequent or unannounced environmental
inspections –has become a far-fetched goal.
Heads of big corporations are good friends of many
governmental leaders and therefore are politically
very resourceful. Displeasing the powerful –an
inevitable outcome of environmental enforcement –
makes everyone in our team feel that he or she is
walking on eggshells.
Our team has an official staff establishment of 32
people, in which merely 4 leadership positions are
created and budgeted. Unless one of these four “leaders”
reaches his or her mandatory retirement age, the
prospects of promotions for junior team members are
categorically zero.
District E

Given the impossibility of additional hires,
burdens associated with environmental
enforcement fall completely on existing team
members who consequently work until 2 am on
certain days.
Some regulated firms hire rogues or even gang
members to frighten enforcement officials.

Request for the creation of police stations, housed
within local EPBs, was denied.
Due to the unlikelihood of receiving promotions within
a reasonable time frame, most people don’t want to
continuously work for the environmental protection
system, particularly its enforcement arm. Even if they
don’t resign, they will find a way to be transferred to
another government department.
District F

Facing a huge gap in hiring, each member in
our enforcement team has to be responsible for
overseeing the operations of over 200 polluting
firms.
It is not an urban legend that we sometimes get
beaten up by confrontational firm owners.
It is not uncommon in our team that environmental
officials hold the lowest administrative rank even in
their late 50’s.
District G

Only 11 people, with an average age of 50, are
currently working in the frontline for our
enforcement team.
No specific examples Pay raises in the past were unexceptionally symbolic.
Relying on my income to purchase property is not a
realistic shot in the present day.

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Lack of Budgeted Personnel Lack of Personal Security Lack of Career Motivation
District H Many visionary enforcement plans and
blueprints cannot be carried out due to the
shortage of employees.
When reason fails, we have to try force. After all,
no business owner is willing to voluntarily part with
RMB 300,000 in the form of fines. Some of them
were short-tempered and threatened to attack us.
If I could choose, I would leave the enforcement team.
We are powerless in many aspects, we are understaffed,
and we are undercompensated.

The employee turnover rate in the environmental
protection system is higher than that in other public
sectors.
District I

Although the budgeted size of the staff
establishment is 15 people, only 11 people are
actually working on the enforcement team.
Small-sized firm owners are particularly dangerous.
After investing all they have in starting and running
the businesses, they possess a “sink or swim”
mentality. When we explained that their operations
were environmentally illegal, they threatened to
hurt themselves or cut us to pieces.
It is a pervasive phenomenon in our system these days
that government employees, even those in leadership
positions, resign and seek private employment.

Subjects relating to pay raises have been put on ice for
years.
District J Among all 27,000 enterprises formally
registered in our district, nearly 60% of them
are industrial firms that are subject to
periodical inspections. However, I cannot even
fathom how our team, consisting of less than
20 people, manages to oversee the activities of
over 10,000 polluting firms.

Government leaders, fully aware of our
understaffing situation, believe that we are
“ants lifting hundreds of times our own
weight.”
No specific example No one stays in the enforcement team by choice. Our
chances of receiving promotions are infinitesimal. This
is basically why individuals with high educational
credentials never linger long in our bureau.

We always deceive ourselves that opportunities will turn
up. Holding onto a false hope helps us live through all
the rough patches.
District K Our district covers an area of 2,000 square
kilometers. On average, each enforcement team
member is responsible for regulating the
activities of all firms within a radius of 200
km
2
. We consider ourselves to be firefighters,
who are always “on the road.”
A business owner, who ached to overturn our
enforcement decisions, once organized his
employees to demonstrate in front of our office
building. We were attacked with red paint.
Our pay levels fail to keep pace with the cost of living,
particularly when escalating housing prices are taken
into account. While we are unlikely to resign from our
positions on a whim, we definitely complain about our
job all the time.

As frontline enforcers, we are burning the candle at both
ends. In fact, I have many more grey hairs than I used
to.

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Table 4-3 Correlation between Interviewees’ Interpretation of the Received Government support and Their Respective Teams’ Precise Staffing
Situation
Administrative
District of
Guangzhou
Resident
Population
(10,000)
Size of the Staff
Establishment for its
Environmental
Enforcement Team
Actual Number of
Environmental
Enforcement Team
Members with Official
Civil Service Posts
Do You Consider Government Leaders (in Your District) Supportive of
Environmental Protection?
District A 154.57 25 14 Government leaders strongly emphasize environmental protection. More
importantly, they understand that talk is cheap and action is the only way to
improve the situation.
District B 161.37 23 14 The government leaders in my district give the appearance of being
environmentally conscious, but in fact, they are swinging for the fences to strike a
nice balance between environmental protection and economic development.
District C 154.41 37 37 Government takes issues relating to environmental protection seriously. We are
provided with a tremendous amount of support, both financially and
administratively.
District D 240.34 32 20 It seems that the government pays slightly more attention to environmental matters
these days.
District E 101.58 24 17 Government leaders in our district are definitely doers. They not only inquire about
the progress of our work, but also assume a supervisory role in our dealings with
big polluters.
District F 115.68 25 21 It goes beyond dispute that environmental protection is a high policy priority on the
agenda of the district government.
District G 89.85 18 11 Government leaders are not interested in what we’re doing on a daily basis, nor the
difficulties we’ve encountered. They only care if those quantifiable,
environmentally-related targets are hit or accomplished.
District H 65.58 20 20 Our government strongly emphasizes economic growth. Speaking of environmental
protection, government leaders behave reactively instead of proactively. They won’t
bother even talking about it as long as there are no major environmental mishaps
or clear signs of backsliding.
District I N/A 15 11 Our district government is quite forward-thinking. It provides us with a great deal
of financial support. To minimize pollution at its root cause, our government
proposes preferential policies that are deemed attractive solely to high-tech
businesses with low-polluting potential.
District J 87.25 24 18 Environmental protection is high on our district government’s agenda. Government
leaders are aware of all the enforcement difficulties I just mentioned. It just takes
time to make institutional breakthroughs.
District K 62.29 16 7 I am not at liberty to comment on this question. For the time being, let’s stick to the
official line that our district government fully supports all efforts pertaining to
environmental protection.
Note: descriptive data (i.e., population size) for the above districts are as of 2015. The rest is based on the information provided by interviewees.

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Figure 4-1 The Hierarchical Structure of China’s Environmental Management Regime
(Entities are not Exhaustively Listed)

Ministry of
Environmental
Protection
Department of
Environmental
Protection of Henan
Province
Department of
Environmental
Protection of
Guangdong Province
Shenzhen
Environmental
Protection Bureau
Guangzhou
Environmental
Protection Bureau
Environmental
Protection Bureau in
Baiyun District of
Guangzhou
Environmental Law
Enforcement Teams
Environmental
Protection Bureau in
Huangpu District of
Guangzhou
Environmental Law
Enforcement Teams
Environmental
Protection Bureau in
Tianhe District of
Guangzhou
Environmental Law
Enforcement Teams
Huizhou
Environmental
Protection Bureau
Department of
Environmental
Protection of Sichuan
Province
Department of
Environmental
Protection of Shaanxi
Province
Data Source

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Chapter 5
Concluding Remarks
Ray Huang, a world-renowned historian, once suggested that the purpose of conducting
research in the social sciences ought to go beyond simple discovery and critique of the absurdity
of certain phenomena; instead, social scientists should attempt to make sense of symptomatic
absurdities by exploring and revealing the underlying logic behind the phenomenon of interest.
This belief can be applied to the specific field of public administration and management, which
seeks to identify institutional approaches that may counteract, or at least slow down, the
emergence of undesirable tendencies that compromise the delivery of public goods and services.
My dissertation, indeed, fulfills the threefold goals of summarizing the challenges inherent in
China’s central-local governance structure, exposing the logics underpinning the appearance of
those consequential dilemmas, and envisioning remedial solutions from an institutional
perspective.
Although China’s economy has experienced miraculous growth over the past three
decades, certain governance issues stubbornly persist and have proven difficult to resolve. At the
state level, the central government still struggles to strike a delicate balance between
centralization and decentralization with regard to the distribution of administrative power. At the
local level, centrally promulgated mandates and policies are often weakly, if not ineffectively,
implemented, yielding repercussions of various kinds. Both phenomena, according to Zhou
(2017), can be traced to the manifestation of a shared logic, that is, the tension between the needs
to simultaneously maintain the core of the authoritarian state and achieve effective policy
implementation at all subnational levels. On the one hand, managing the most populated country
in the world through a highly centralized and unitary form of government is a losing proposition

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(Qian and Xu 1993), evidenced by the dissolution of the Soviet Union in 1991. On the other
hand, if the local authorities are given excessive autonomy, they are likely to turn into a “de-
facto national government within their jurisdictions” (Weingast 2009, p. 281), which will
fundamentally discredit the ruling legitimacy of the central government. To address this urgent
governance dilemma, two coping mechanisms are currently employed: 1) “uniformity in policy
making but flexibility in implementation” (Zhou 2010, 55), through which local administrations
are given reasonable prerogatives to accommodate local requests and concerns; and 2)
rectification campaigns whose deterrence effect will help do away with costly top-down
monitoring.
Nonetheless, I consider it pertinent to view the utility of these two coping strategies with
a critical eye. Two of my dissertation chapters, titled Beyond Governance for Economic Growth:
Fiscal and Personnel Incentive Distortions in China and Old Problems and New Dilemmas: The
Conundrum of Environmental Management Reform in China, are cases in point. The former
empirically analyzes the attendant consequences associated with the main incentive mechanisms
utilized by China’s central authorities. While a blended governance system of fiscal
decentralization (i.e., vertical subcontracting) and political centralization (i.e., promotion-based
tournaments) undeniably provides local cadres with strong incentives to both foster local
economic prosperity through innovative means and conform faithfully to central directives (e.g.,
Xu 2011; Zhou 2016), my coauthor and I depict a plethora of distortionary behaviors exhibited
by local administrations and officials that result from the presence of these embedded
bureaucratic incentives. The latter, which departs from the attention-getting topic of China’s
environmental pollution, discusses the reasons for the apparent gap between policy intent and
local implementation. More notably, in light of interviews with enforcement team leaders of

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environmental protection bureaus (EPBs), this piece demonstrates the serious shortcomings of
adopting rectification campaigns to ensure/regain political conformity and compliance from local
agencies. When the political accountability system is strictly and indiscriminately enforced
against the background of disciplinary inspections initiated by the central government, local
officials confess that enforcing environmental laws and regulations has ironically become more
difficult in large part because the vast majority of time is spent on responding to citizens’
petitions and complaints instead of conducting routine patrols around neighborhoods where
sizable polluting firms are located.
With advances in technology, increasing numbers of scholars have begun to argue that
most of the governance conundrums stemming from information asymmetry can be effortlessly
solved in time (e.g., Huang 2010). Unfortunately, these technocrats fail to realize that whether
thriving technologies can be put to appropriate use hinges primarily on human beings with
multifaceted emotions such as fear, insecurity, and resistance. Another chapter of my
dissertation, titled Reforming Civil Service While Employees Are Unhappy, serves as an example.
It quantitatively shows that job satisfaction among China’s public employees, represented by law
enforcement officials working in different administrative districts of the Guangzhou
Environmental Protection Bureau (GEPB), noticeably declined from 2000 to 2014,
notwithstanding the fact that China’s civil service became more professionalized during this very
period. Professionalization thus functions as a double-edged sword in the sense that it increases
the organizational capacity of public bureaucracies at the expense of exposing their inherent
weaknesses, ranging from ambiguous goals, an inability to provide performance-contingent
rewards, to an overemphasis on following procedural rules, which are least likely to be tolerated
by an increasingly professionalized public workforce.

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Overall, China’s rapidly changing socioeconomic landscapes have endowed scholars,
myself included, with a rare opportunity to observe different designs of administrative apparatus
and to ponder their respective pros and cons. Of greatest concern is the fact that my personal,
perhaps blinkered, point of view will render such observations subjective. To liberate myself
from the confines of my existing knowledge, I exploit three key analytical tools: theory, history,
and comparison. Specifically, Weingast’s theory of market-preserving federalism (2009) posits
that China is a unique example of a polity in which development-enhancing federalism does not
necessarily depend on a stable and reliable institutional framework. Does this argument stand up
to closer scrutiny? My first essay contextualizes precisely how the absence of fully
institutionalized intergovernmental co-operation, though it has helped “diversify” the tools
through which the central authority augments its fiscal capacity and dominance over personnel
assignment at the parochial level, becomes the very origin of bureaucratic incompetence in
tackling finer-governance issues key to sustaining the nation’s social development and economic
competitiveness. Likewise, capitalizing on individual-level survey data collected for the years
2000 and 2014, my second study examines and subsequently showcases with empirical evidence
the declining job satisfaction of Chinese public employees as an unexpected outcome of the civil
service reforms undertaken within the last 15-year time frame. Finally, cognizant of the fact that
the insufficiency of regulatory capacity at the organizational level and dwindling work
motivation at the individual level are major roadblocks to effective environmental enforcement, I
delve deeper into the interview transcripts, ultimately detecting that the severity of these
discernable impediments varies across regions with idiosyncratic levels of perceived support
from their respective territorial governments.

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In short, I sincerely hope that, in addition to systematically describing miscellaneous,
covert problems and challenges pertaining to local governance in the current context of China,
this dissertation has offered constructive insights that can help future policymakers advance
governance reforms without simultaneously demoralizing rank-and-file officials or encouraging
opportunism among those wielding power.

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Abstract (if available)

Abstract This dissertation dissects the causes and consequences of China’s governance reforms subsequent to the 1990s. Its three core chapters describe and reflect on the paradigmatic shift in China’s fiscal, civil service, and environmental management regimes, respectively. ❧ The first study reviews the fiscal and personnel incentive setups used in China’s current governance system. While successfully spurring local administrations and officials to comply with central directives and to improve the economic development level of their respective jurisdictions, these incentive-oriented arrangements are found to elicit distorted behavior patterns among local cadres, including bureaucratic entrepreneurship, reliance on extra-budgetary revenues, excessive borrowing, high performance numbers regardless of outcomes, and short-sightedness. In the absence of fully institutionalized intergovernmental relationships and the addition of horizontal accountability mechanisms, many of the incentive-driven features that once favored economic growth are becoming the very factors that hamper the central authority’s ability to tackle finer governance issues in the long term. ❧ Based on interviews and questionnaire surveys with Guangzhou environmental enforcement officials, the second study not only traces the changes in job satisfaction levels of Chinese street-level bureaucrats over the past fifteen years (2000-2014), but also examines the contextual changes that accompanied the variation in job satisfaction over this period. The empirical results demonstrate that the overall job satisfaction, particularly the satisfaction associated with the extrinsic rewards, noticeably declined within this population. In addition, as the officials became more highly educated and professionalized, mission match concomitantly served as a stronger antecedent to their job satisfaction. This finding highlights the paramount importance for administrative agencies to take appropriate action to meet the motivational needs of an increasingly professionalized workforce. ❧ The third study offers a textured description of factors contributing to the compromised effectiveness of China’s environmental enforcement at the local level. Drawing on semi-structured interviews with leaders of environmental enforcement teams from all administrative districts in Guangzhou, this study unfolds three dilemmas created by the ongoing environmental management reforms initially designed to address the predicaments and the challenges routinely faced by grassroots enforcers. These dilemmas can be encapsulated as: 1) envisioned difficulties in mobilizing local resources brought about by vertical integration, 2) the low employee morale as an outcome of the tightened accountability requirements, and 3) the weakened ability to credibly enforce regulations resulting from the complete separation of the investigation and decision-making units. ❧ In summary, this dissertation applauds the resolve of the Chinese top leadership in breaking the dogged status quo in governance. At the same time, it unveils the multifaceted, personnel-based ramifications that various top-down government measures might trigger. Laying bare these reform-related conundrums, in theory, could keep central policymakers informed, engender their greater responsiveness to the wellness of public employees at the bottom of the party-state power structure, and ultimately help sustain China’s political and economic stability.

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Asset Metadata

Creator Wen, Bo (author)

Core Title Three essays on the causes and consequences of China’s governance reforms

School School of Policy, Planning and Development

Degree Doctor of Philosophy

Degree Program Public Policy and Management

Publication Date 07/11/2018

Defense Date 04/02/2018

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag civil service reform,environmental management reforms,extrinsic rewards,finer governance issues,fiscal decentralization,incentive distortions,institutional dilemmas,institutional prerequisites,job satisfaction,local environmental enforcement,market-preserving federalism,mission match,OAI-PMH Harvest,performance legitimacy,personnel subcontracting,regional variations,regulatory challenges,tax assignment reform,work motivation,workforce professionalism

Format application/pdf (imt)

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Tang, Shui-Yan (committee chair), Cooper, Terry L. (committee member), Resh, William G. (committee member)

Creator Email wenb@usc.edu,wenbowenbo88@gmail.com

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c89-15235

Unique identifier UC11669109

Identifier etd-WenBo-6390.pdf (filename),usctheses-c89-15235 (legacy record id)

Legacy Identifier etd-WenBo-6390.pdf

Dmrecord 15235

Document Type Dissertation

Format application/pdf (imt)

Rights Wen, Bo

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA