THE ROLES OF LOCAL GOVERNMENTS IN CHINA S TOURISM INSTITUTIONAL EVOLUTION

Transcription

1 THE ROLES OF LOCAL GOVERNMENTS IN CHINA S TOURISM INSTITUTIONAL EVOLUTION Chunyu Yang School of Tourism Management Guizhou College of Finance and Economics Guiyang, China and Songshan (Sam) Huang Hailian Gao School of Management University of South Australia Adelaide, Australia ABSTRACT This paper reviews the roles of local governments in China s tourism development in comparison with the Central Government s roles of developing tourism. Major tourism policies and media reports regarding local governments actions of managing tourism were scrutinized. It was found that while the Central Government appeared to be more conservative and cautious on the trial-and error-correcting track of tourism policy change and evolution, local governments were more audacious and adventurous in their actions involved in tourism development. Key Words: China tourism; local government; institutional evolution

2 INTRODUCTION China s tourism industry has developed rapidly since its reform and opening-up in early 1980s. Such a rapid development has been supported evidently by the institutional change in China s government system in general and the tourism administration system, to be more specific. Along the reform process, the central government of China has been gradually decentralizing and sharing its power to local provincial and municipal governments. At the same time, local governments, with more power conceded from the central government, have been trying to gain more benefits in accelerating the growth of local tourism industries. To a certain degree, local governments have been playing a significant role in the development of tourism in China. However, such a role has yet to be investigated and analysed in the tourism literature. Existing tourism policy and institution studies tend to treat government as a unified entity in developing China s tourism (Kuang, 2001; Hao, 1999; Jia & Wu, 2002; Zhang & Yan, 2009; Zhang, 1998). However, without a clear demarcation of the roles of local governments from those of the central government, these studies have taken an unidentified government as the main subject in the policy making system. They tend to have overlooked the dynamics within the government system itself, which is represented by the dynamic relationship between the central government and local governments in the context of China. This study aims to critically review and analyse the roles of local governments in developing China s tourism industry. We take two perspectives in our analysis. A historic perspective was adopted to provide contextual understanding of China s institution change and enable the authors to review the evolution of both the central government s and local governments behaviours in tourism development in China. A comparative perspective was taken to examine the relationships between the central government and local governments over the years. The structure of the paper was arranged as follows: following this introduction, a brief literature review on tourism policy and tourism policy studies in China are provided in section two. Section three provides contextual information on China s economic policy and institutional transition and the evolution of the central government s policies in tourism. Section four, as the major part of this study, reviews the evolution of local governments roles in China s tourism development. Finally, section five provides discussions and recommendations.

3 LITERATURE REVIEW Political science is among the multiple disciplines that contribute to the development of tourism research (Matthews & Richter, 1991). Matthews and Richter (1991), in a comprehensive review of political science research in tourism, noted that political development is a significant research field highly relevant to tourism. Jenkins and Henry (1982) investigated government involvement in tourism in developing countries and claimed that government involvement in tourism in most developing countries is required not only to attain long-term objectives but to compensate for the absence of a strong and tourism-experienced private sector. In the western political system, local government is deemed important in tourism development and promotion (Wilson, Fesenmaier, Fesenmaier, & Van Es, 2001). Wilson et al (2001) found that in a local rural tourism development context in the US, local government s importance in tourism is embodied in areas of funding, creation and maintaining necessary infrastructure, zoning and maintenance of the community, and education and occupational support. Applying the network theory, Dredge (2006) examined and development formal and informal relationships between local government and the tourism industry in Australia and concluded that maintaining good public-private partnership between local government and the industry requires careful management because the interests and power allocations in a network is asymmetrical. Because China maintains a unique political and governmental structure distinct from western countries, research findings accumulated in the western political context may not be able to fully explain what has happened and is happening in China. China s emergence as a tourism power has attracted research attention from both indigenous and international researchers. Richter s (1983) early attempt on the political implications of Chinese tourism policies revealed that the earlier opening-up of China s tourism frontier by the Chinese authorities had actually enabled China to avoid many of the social and economic costs associated with tourism development elsewhere. Indeed, endowed with a political system different from most western countries and a political culture inherited from its long history of intellectual bureaucracy, China should be treated as a unique laboratory for tourism policy research. The early tourism development of China focused more

4 on its economic functions in bringing much needed foreign exchange to construct the country towards its modernization (Huang, 2010; Zhang, Pine, & Zhang, 2000). Thus inbound tourism was prioritized and preferred in its policy framework. However, with the country s economic boom and improved household income level, Chinese tourism policy-makers had to address issues in developing domestic tourism and outbound tourism (Wu, Zhu, & Xu, 2000; Tse & Hobson, 2008). A wide range of interest is evident in the Chinese tourism policy research. Zhang, Chong, and Jenkins (2002) studied China tourism policy implementation from an enterprise perspective. They found Chinese tourism policies had established a legal framework for the administration, management and operation of tourism enterprise while at the same time following a top-down and trial and error-correcting model. Zhang, Chong, and Ap (1999) analysed the tourism policy development in China and identified five roles of the government: operator, regulator, investment simulator, promoter, coordinator, and educator. Implicitly, these roles were attributed to the central government of China by the authors. Sofield and Li (1998) took a broader perspective to look into China tourism policies in its social context of modernization, socialism, conservatism of tradition, and economic development. Somewhat in correspondence to Richter s (1983) early revelation, Sofield and Li (1998) claimed that tourism in China had exerted a centripetal influence on its social tensions and helped ameliorate the country s economic and social transitions. Recently, more tourism policy practices in China tourism development were scrutinized. York and Zhang (2010) attempted to analyse the official documentation to identify the determinants of China s Golden Holiday system. Xu, Zhang, and Wu (2010) examined China s policies on foreign-invested travel agencies based on its World Trade Organisation (WTO) membership commitment. Red tourism, as a highly politicized term or tourism form in China, was also studied by some scholars (Li & Hu, 2008). While the policy research in China tourism covers different areas of policy practices and government roles in developing tourism, the term government is blurring. Although the institutional transition and decentralization of government economic management functions

5 have prompted a need to look into the relationships between the central government and local governments in China s tourism policy framework, little research has actually attempted to address such an issue. Thus, the current study could claim its originality in filling in the research gap. INSTITUTIONAL TRANSITION AND EVOLUTION OF THE CENTRAL GOVERNMENT S POLICIES IN TOURISM Transition of China's general administration system Since the reform and opening-up, restructuring the fiscal system has been the major driving force under the transition of China s general administration superstructure. Four major structural adjustments were attempted in 1980, 1985, 1988 and 1994 respectively (Hu, 2002). The fiscal system reform has redefined the relationship between the central government and local governments. Each adjustment was quite effective in generating more active economic involvement from local governments, while at the same time maintaining and strengthening the fiscal capacity of the central government. Over the years, local governments have gradually been allocated with more power in different areas of their jurisdictions. Changes in the macroeconomic environment have a profound impact on the development of China's tourism industry. Two different evolutionary paths in tourism administration can be identified consequently: decentralization of the central government and "concentration" of power to local governments. On one hand, the central government coordinates with all the stakeholders in the industry, promotes the nation's destination image and improves the business environment by promulgating necessary industry regulations and policies; on the other hand, local governments implement the government-led tourism development strategy, and consequently play more active roles in all aspects of tourism development. Evolution the Central Government s roles in tourism development During the process of China s tourism development, the central government has played

6 three different roles in different stages (Jiang, 2006). In the early stage, the central government acted as a pioneer to initiate China s tourism development. By assembling all the economic resources it can mobilize, the central government accelerated the nation s tourism development at an unprecedented speed and quickly formed a substantial industry scale and supply capacity. After the tourism industry gained its growth momentum, the central government changed its role to be a regulator. A series of regulations and policies were promulgated to ensure healthy operations in the industry. In addition, the central government has also played a coordinator role by coordinating different forces in the society, encouraging tourism business development, protecting consumer s rights, promoting the nation's image among international markets. In general, the Chinese central government has gradually transferred its power in tourism to local governments since the reform and opening-up. This gradual reform bears an innate nature of trial and error-correcting, mainly because the central government did not have necessary knowledge to manage a market economy. At each key stage of the economic reform, the central government needs to consolidate the achievement of its previous efforts and illuminate the next objective and path choice. To encourage local governments to be more active and creative in different stages of the reform, it is necessary to empower them with more freedom of decision making, and maintain a certain degree of tolerance towards local governments out-of-track behaviours (He, 2007). EVOLUTION OF LOCAL GOVERNMENTS ROLES IN TOURISM DEVELOPMENT As a new growth point in the national economy, tourism has demonstrated a strong capacity to lead a chain development of regional economy. From the mid 1990s, a majority of provincial-level governments started to recognize tourism as one of their key pillar industries and promulgated a series of regulations and policies facilitating tourism development. In 1995, Hainan province pioneered the first provincial level regulation on tourism administration. From 1995 to 2000, eighteen out of 31 provincial governments promulgated tourism administration regulations under their respective jurisdictions (Wang, 2005). By December 2005, except for the government of Tianjin, all provincial governments in China

7 had promulgated administrative regulations on tourism development. The pace of provincial legislation in tourism has been impressive. There are two reasons for the fast growth in provincial tourism legislation. First, the legislation acts were driven by the rapid development of tourism industry. Second, through their own legislation efforts, local governments hoped to strengthen their power base to control more relevant administrative and tourism resources. Local governments actually become a main force in tourism development in the new institutional arrangement. Their inherited capacity of directly running enterprises from the former planned economy system enabled them to seek more localized interests. Due to the lack of a national level Tourism Act, there seems to be much space for local governments to play their roles in tourism development. Specifically, the concentration of power to local governments has undergone two stages: operating tourism enterprises and managing tourism resources rights. Local government operating tourism enterprises In July 1984, the State Council approved the report formulated by the China National Tourism Administration (CNTA) on several issues regarding creating a new situation for tourism. The report proposed several guidelines for tourism development, including "speeding up the construction of tourism infrastructure by gathering resources at national, local, departmental, collective and individual levels, combining self reliance with foreign capital investment. This report marked the beginning of China s reform in its tourism administration system. The tourism power structure in the government system has since undergone fundamental changes. With the release of the report, local governments were activated as important actors in tourism development and began accumulating power through direct investment in tourism. In 1998, half of the star-rated hotels were owned by governments and their departments at different levels, with a considerable number of them as local level government bodies. The power of local governments could also be witnessed in running travel agencies. Almost every provincial government had its affiliated travel agencies.

8 The favourite policy environment stimulated rapid development in the hotel and travel agency sectors. However, the economic impact brought by the development in these sectors is not commensurate with the contributions from local governments. In effect, the increase of hotel supplies exceeded the growth of market demand in mid 1990s. Due to equity shortage, many hotels had to operate with heavy debts and burden of bank interest cost. Starting from 1996, the occupancy rate, operation revenue and profit decreased gradually. In 1998, an industry-wide deficit occurred for the first time with operating profit rate dropped to -5.84% (China Tourist Hotels Association, 2006). Although measures were taken to alleviate the deficit, losses in the whole industry were still as high as 2.6 billion Yuan at the end of Travel agencies faced a similar situation. In 2002, the total number of travel agencies reached 11,552, 9 times more than that in However, from 1991 to 2002, the average profit rates were gradually declining. During , average profit rates in the travel agencies industry dropped below 3%, in some years even less than 2%. Local government managing tourism resource properties Since the mid 1990s, there has been an apparent transition in local governments roles in tourism development. Local governments role of managing enterprises was shifted towards managing land and other types of tourism resources. This change has been accompanied by some contextual government initiatives such as transfer of natural resources property right, modern enterprise system reform in hotel and travel agencies sectors, and the transition of national tourism product development strategy from a sightseeing oriented to a holiday oriented one. The relationship between the central government and local governments in the process can be examined in two stages. The first stage (from mid 1990s to 2001) was marked by many cases of management rights transfer of large scale tourist scenic zones by local governments. The second stage (after 2002) saw the central government s intervention of management rights transfer of tourist scenic zones. In stage one, two patterns can be identified in local governments management of tourism resources: 1) Managing natural resources in tourism scenic zones

9 In 1997, Hunan Government transferred the management right of Zhangjiajie Huanglong Cave and Baofeng Lake scenic zones to China Datong Co. Ltd. (Beijing) through entrusted contract and lease. Since then, more local governments had started to explore new ways of managing tourism scenic zones. In 1998, Sichuan Wan guan Group signed an agreement with the Ya an municipal government to exclusively develop the Bifengxia Scenic Zone. In 2000, Shandong Confucius International Tourism Co. Ltd. purchased the management rights of nine large tourist attractions, including the world heritage sites the Temple of Confucius, the Family Mansion of Confucius, and the Cemetery of Confucius. Half of the shares of the Company were held by the Shenzhen Overseas Chinese Town Group. Other shareholders included Qufu Confucius Tourism Co. Ltd., Shandong Cable Shareholding Co. Ltd., and Shandong China International Travel Service Co. Ltd. In 2001, Sichuan Government announced transferring the management rights of ten large tourism attractions including the Sanxingdui Heritage Site, and the Jiuzhaigou Valley. In the same year, the German company Abbe Erle took over the management right of the Xingwen Stone Forest Scenic Zone for 50 years through acquiring 49% of the shares of Yibin Cast Tourism Development Co. Ltd. Abbe Erle thus became the first foreign company investing in China s tourist attraction development. Despite the public official opposition to transferring management rights of tourism scenic zones to the private sectors expressed by a variety of central government ministerial authorities, more provincial governments joined the squad to transfer the management rights of large tourist attractions under their jurisdictions. It is estimated that by the end of 2004, more than 300 tourism scenic zones and spots in over 20 provinces, municipalities, and autonomous regions had their management rights transferred in different forms. Management leases normally ranged from 25 to 30 years. Some might be as long as years (Lai, 2005). Contrary to the central government s stance, in such a period, many local governments introduced policies encouraging the transfer of management rights. For instance, in 2001, the Anji municipal government in Jiangxi Province indicated that they would further the management right transfer of the Jinggangshan Scenic Zone; the Yingtan government in Jiangxi province also declared that the management rights of its tourism attractions

10 including the famous Longhu Mountain could be transferred; Shandong Provincial Government issued an ordinance promoting the separation of ownership from management rights in tourism attractions, and attracting all types of investors to develop and manage tourism attractions through lease, contract and management right auction. This ordinance actually put the central government s regulation towards the reform of tourism resources property rights into an awkward situation (Tang, 2007). 2) Managing tourism real estate Another form of local governments pattern of managing tourism resources is the Tourism + Real Estate" development model, which was stimulated by the valuation of land resources in China s tourism scenic zones. Because a higher profit could be generated from the transactions of properties based on tourist accommodation, real estate developers could see a mutual reinforcement between tourism development and real estate development. This was exemplified through the business growth track of the Shenzhen-based Overseas Chinese Town Group. The Group accumulated its first-bucket gold through developing and managing large tourist attraction projects like Windows of the World, and Splendid China. Then it started to develop tourism-based real estate projects. After 2002, the Group s operation revenues were mainly from its real estate projects; real estate overpassed tourism to be its major business area. In the first 9 months of 2002, 2003, and 2004, the contribution from its real estate projects to the group s pre-tax gross profit was 71%, 99%, and 70%, respectively (Xu, 2005). Such a shift of business focus is also witnessed in other large tourism group companies in China such as Hangzhou Songcheng Group, and Zhejiang Nandu Group. These cases forebode a tourism business development pattern unique to China s political and socioeconomic situation. The aforementioned two patterns of local governments involvement in managing tourism attractions should be understood by the interest alliance formed between local governments and tourism enterprises. Such an alliance would enable tourism enterprises to seek potential benefits with the assistance from local governments by breaking the regulative

11 barriers regarding state ownership of tourism resources. In return, local governments share these benefits through non-tax government revenue generated from the management rights transfers. The second stage of local government involvement in tourism resources development marked its start in With increasing cases of tourism attraction property rights and management rights transfer exposed in media throughout the country, responsible central government agencies, such as the Ministry of Construction, the State Administration of Cultural Heritage, and the Ministry of Forest, expressed their opposition explicitly to local governments actions in this regard. In March 2002, the Ministry of Construction, in its reply letter regarding the issues of transferring management rights of tourism scenic zones in Sichuan Province, pointed out that no government body or department has the right to transfer the management rights of tourism scenic zones entirely or partially to business enterprises. In August 2002, the Ministry of Construction, in its National Urban and Rural Planning and Scenic Zones Protection Video Conference, stressed that any form of transferring tourism scenic resources and land is strictly forbidden. In the same year, the State Administration of Cultural Heritage stated that some regions and organisations transferred the management rights of cultural protection units without permission under the flag of separating ownership from management right; some even opened bids of contract to domestic and foreign companies for cultural heritage management. We firmly oppose such actions. In September 2005, the Ministry of Construction, in one of its working conferences, noted that no substantial transfer of tourism scenic zone tickets management rights should be allowed. In 2006, the Ministry publicized those organisations which had committed illegitimate transfer of tourism scenic zone management rights and requested them to rectify within a designed period (Tang, 2006). As mentioned above, the central government and local governments act as two different parties of interest in China s tourism development. The central government and its ministerial authorities showed a conservative attitude towards the management rights transfer of tourism scenic zone, which is commonly and arduously welcomed by many local governments. However, as China s economic reform and institutional change have been

12 following cautious steps to cross the river by feeling the stones, the future is less revealing. It should be acknowledged that some central government agencies like the Ministry of Construction are also exploring new measures of managing tourism resources property right by granting some provinces trial right for better institutional arrangement in tourism resources management. CONCLUSION Political science is one of the significant disciplines in which tourism research can nourish. Government roles in tourism development are an important research area. As China s tourism booms with its economic growth, there has been increasing attention to governmental functionalities in developing tourism in China (Kuang, 2001; Hao, 1999; Jia & Wu, 2002; Zhang & Yan, 2009; Zhang, 1998). Despite the efforts, the concept of government in most studies has not been clearly defined thus it is hard to note the differences between the Central Government and local governments in their roles of developing tourism. Neither is it clear that how the roles of local governments in China evolve along the generic institutional change of the country. This paper reviews the roles of local governments in China s tourism development. The evolution of local government roles in tourism development in past decades was examined. As a dyadic relationship may exist between the Central Government and local governments in China, the examination was conducted in comparison with the Central Government s roles in developing tourism. It was found that the Central Government held a conservative but tolerant attitude towards local government actions of developing tourism. In contrast, local governments in China were more audacious to take innovative measures in managing tourism resources under their jurisdictions, driven by a motivation to gain more direct benefits in tourism development. As China is still in a stage of institutional transition, the future is less unfolded. It is believed both the Central Government and local governments in China will keep playing their roles in China s tourism development. The dyadic relationship and mutual influence between the Central Government and local governments will further forge China s tourism policy framework. One of the associated critical issues is government attitudes

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