Local Political Elite, Partial Reform Symptoms, and the Business and Market Environment in Rural China

In this article we examine how Chinese local officials impact rural business environment and market development since the late 1990s. If their power is not effectively checked by village elections, local political elite are able to manipulate reform policies in a way to serve their economic and political interests at the cost of villagers' interests. In other words, local officials selectively implement reform policies not only to maximize economic rents available for extraction but also to minimize the risk that may challenge their rent-seeking capacity in the countryside. We draw on a survey data collected by the authors from rural China in 2003 and 2004 to test our hypothesis on the relationship between political control exercised by local officials over village elections and rural business environment & market development. Our analysis shows that if a local government can keep a village elections under its control, then local officials would charge more license application fees from self-employment business owners, put village land re-allocation process under government administrative control, restrict peasants from founding their own professional associations. Local officials' self-serving strategy inevitably deteriorates rural business & market environment and bodes an incomplete market-oriented reform for reformists in the central government.