S2 2025 Individual Assignment 1 Topic B

Choose only one topic. You can choose either Topic A or Topic B.

Each topic is linked to two short articles that reflect different current media perspectives. In a first step, compare these two articles approach the topic and what solutions they propose. In a second step read the two articles in the broader context of the academic literature on interjurisdictional or local competition among Chinese local governments and the class lecture in Week 3 about local government autonomy. From this broader perspective, consider how these articles relate to the underlying institutional issue of interjurisdictional competition.

You must reference at least these two academic readings (see Canvas Reading List):

Xu, C. (2011). The fundamental institutions of China's reforms and development. Journal of economic literature, 49(4), 1076-1151.

(Focus on the section about interjurisdictional competition)

Oi, J. C., Luo, J. M., & Xu, Y. (2025). A Perfect Storm: Fiscal Discipline, COVID, and Local Government Debt in China. The China Journal, 93(1), 76-111.

https://www-journals-uchicago-edu.ap1.proxy.openathens.net/doi/full/10.1086/734005

The structure of your critical reflection

1.    Short introduction of one sentence or so, stating what the question is and why it is relevant.

2.   As a first step, students are asked to critically compare two media articles which represent different viewpoints, reflecting on questions such as the intent of the articles, the background, specific arguments and points of agreement and disagreement.

Students are encouraged to prompt Copilot or an equivalent approved AI software to compare the two articles by explaining their prompting and why the AI results were helpful or not.

3.    In a second step, consider the content of the media articles against the lecture content and the insights from the research articles cited above. For example, students may find that the two media articles, even with their different viewpoints, only cover limited or superficial aspects of a much larger issue. This part therefore relies on your own individual critical understanding of the subject matter acquired through your own study and research.

This second step is the main analytical part where students can show their intellectual understanding. AI will be of little use for this analytical part. AI use is not recommended here and is easily detected when marking.

4.   Short conclusion of a few sentences, summarising your answers to the question raised in the Introduction.

The total word length is 1,250 words. The word length for the individual sections is indicative.

1.    Short Introduction: (50 words)

China’s central government has little sympathy for what it regards as fiscal irresponsibility. It hopes that with better budgeting local governments can manage to cut waste at all levels (and so avoid dipping into the pension pot in order to make ends meet). That is why central authorities have been trying harder since 2024 to expand a reform known as “zero-based budgeting”. This requires officials to justify each item in their sprawling budgets (ie, to start from zero) every year. That is in contrast to the current approach, where spending is typically carried forward from a baseline that is set the year before.

In theory, zero-based budgeting should help clear up all sorts of problems. It might prevent companies from being subsidised by multiple agencies at once—a common result of splashy industrial policies—as duplicated spending would be more obvious. It could also help eliminate so- called zombie policies, which continue to be funded after the need for them has passed. And it should make it harder to swipe from government coffers without being noticed.

Pilot schemes have shown some promising results. In Zhengzhou, a city in central China, officials said they recovered 3bn yuan after implementing zero-based budgeting. In the southern region of Guangxi, officials said they found 18bn yuan of idle funds. In March Deqing, a county in Zhejiang on China’s eastern coast, claimed it had slashed its budget for government projects in half by ditching certain projects and merging others. Officials in one department realised that a propaganda campaign to praise the government’s agricultural policies duplicated another’s. They combined the two (no doubt to the relief of local farmers).

In Anhui province, in China’s east, bean-counters claim to have saved 21.6bn yuan since 2022 by nixing hundreds of projects. Before zero-based budgeting, different departments often implemented schemes without even trying to co-ordinate, admitted Zuo Zizhi, an official in Anhui’s finance department, in a report by state television last year. “The transport department might build roads in the west, the water department might dig canals in the east…then the housing department might build cities in the north...they all say that their tasks have been completed, but when you look at the reality, there is no result.” Mr Zuo and his colleagues were also “stunned” to find eight overlapping  schemes all trying to fund innovation, according to the report.

Cutting government spending across the board will be significantly harder—just look at the travails of the Department of Government Efficiency in America. So all this might sound rather too good to be true. Still, there is little doubt that China’s local governments could be less wasteful. In March, during his annual report to the country’s rubber-stamp parliament, the prime minister, Li Qiang, promised to support officials in their efforts to take zero-based budgeting nationwide.

The process could prove painful. Yang Zhiyong of the Chinese Academy of Fiscal Sciences, a think- tank under the finance ministry, has said it will require “turning the knife inward” and “biting the hard bones”. So it is not surprising that, whereas almost every province has promised to review its spending, so far only a handful have set proper plans for doing so all the way down to the county  level. Those that have, like Zhejiang, tend to be the ones with relatively healthy books already. Guizhou, a south-western province with fiscal woes so serious that staffers in the central government jokingly refer to it as “Greece”, is a laggard.

Given the scale of local governments’ difficulties, the central government may have to help out more at some point. In November, the finance ministry allowed them to issue extra bonds worth trillions of yuan to replace their riskier hidden debts. But so far China’s central authorities have been rather reluctant to offer further support, for fear of encouraging more irresponsible borrowing. In the long run, reforms are under way to shift tax revenues from the central government towards local ones, although the process is expected to take years. Until then, officials must budget better to balance the books.

Article 2

https://www.caixinglobal.com/2025-08-21/chinas-cities-offer-rent-free-industrial-parks-in-battle-to- lure-startups-102353797.html

China’s Cities Offer Rent-Free Industrial Parks in Battle to Lure Startups

By Wang Jing and Denise Jia

Published: Aug. 21, 2025  3:32 a.m.  GMT+8

China’s biggest cities are offering companies free rent in industrial parks as they compete to lure startups and advanced manufacturers, igniting what local officials are calling a “city war” for top-tier enterprises.

Since March, Shenzhen, Hangzhou, Guangzhou, Huizhou and Suzhou have all launched “zero-rent” policies, waiving lease costs for two to five years in selected state-owned industrial parks. The programs aim to cutting expenses for tech firms and fill empty space left after years of overbuilding.

The competition intensified on July 31, when Guangzhou’s Development Zone and Huangpu District announced 13 pilot sites covering 150,000 square meters. Companies signing three-year leases will get two years rental free, while six-year contracts qualify for three years.

Founded in 1984 as one of China’s first national-level economic zones, the Guangzhou Development Zone has long ranked just behind Suzhou Industrial Park in national performance evaluations.

“Zero-rent policies are the new battleground in local government investment campaigns,” a Guangzhou official told Caixin.

The trend gained momentum after a June 2024 State Council regulation banning older incentives such as cheap land, tax benefits and direct subsidies. At the same time, Beijing urged state-owned enterprises to channel venture capital into startups and critical supply chain sectors.

With traditional incentives outlawed, local governments sought fresh tactics. Shenzhen’s state asset regulator moved first in March, offering 100,000 square meters of space in city-owned parks under the slogan: “We only collect dreams, not rent.”

Other cities followed. Beijing’s Haidian District promised 100,000 square meters of free space for AI  companies. Suzhou and Chengdu offered 100,000 and 50,000 square meters, respectively, in April. By July, Hangzhou had unveiled its “Seedling Plan,” pledging at least 200,000 square meters of state- owned space rent-free for up to five years.