[Directors of Boards]Nie Huihua: “The phenomenon of Hongmao Medicinal Liquor” is not a few. Why is it difficult to manage government-enterprise relations in remote areas?

Recently, the arrest of a Guangzhou doctor by police in Liangcheng County, Inner Mongolia, has aroused great concern from all walks of life. At the end of 2017, doctor Tan Qindong from Guangzhou posted on the Internet and questioned the “Hongmao Medicinal Liquor” in Liangcheng County, Inner Mongolia. The article had a hit rate of only 2,200 times. Inner Mongolia Hongmao State Drug Co., Ltd. reported to local police that Tan Qindong disseminated false information, leading to a sharp decline in company sales. In January 2018, the Liangcheng County police arrested Tan Qindong for criminal detention and arrested him for three months after he was arrested on suspicion of “damaging the reputation of the commodity”. The Supreme People’s Procuratorate, the Ministry of Public Security, and the Procuratorate of the Inner Mongolia Autonomous Region successively intervened. At present, Tan Qindong has been released on bail pending trial with restricted liberty of moving.

At present, there are two important points for this case: First, whether the police should treat an ordinary civil dispute as a criminal offense, which is suspected of abusing the police; second, even though “Hongmao Medicinal Liquor” has received more than 2,600 administrative penalties from relevant departments, it also sells well for decades. This may involve regulatory loopholes in food and drugs. However, perhaps we should pay more attention to the fact that this incident reflects the distortion of the government-enterprise relations in some remote areas.

In many remote and small areas, once a company becomes a “big” taxpayer, local governments may become “protective umbrellas” for enterprises, setting an green light to all kinds of legal or illegal activities of enterprises. Therefore, once the company has alerted the police and claimed to be stigmatized by opponents, the local government has immediately rushed out of the province and tried to hunt across provinces.

Do you remember the police from Xifeng County, Liaoning Province, came to Beijing in 2011 to catch a reporter? How the case is similar! Of course, after all, the Liangcheng incident was only an individual case, and local prosecutors were able to rationally handle and minimize judicial losses. The more serious cases were all forms of “government-enterprise collusion”.

In the process of collusion between the local government and the company, the local government acquiesces or connives at local companies to pursue short-term profit maximization in an illegal manner, and the local government obtains financial income, promotion opportunities, or rent-seeking income. These collusion actions may lead to serious environmental pollution, low production safety, illegal land, tax evasion, counterfeiting, zombie enterprises, and financial risks. For example, according to our team's research and media reports, behind every coal mine disaster, there is a shadow of collusion between officials and businessmen.

The conspiracy between government and enterprises is actually an extreme manifestation of the distorted government-enterprise relations.

On February 26th, the National Development and Strategy Research Institute of Renmin University of China released the ranking of government-enterprise relations in 285 cities in China. According to our research, the health index of government-business relationship (score) is highly positively related to the administrative level and economic development level of the city. In other words, the more remote and small places are, the more economically underdeveloped areas, the worse the political and business relations are. Why is this so? I think there are three main reasons

In remote and small areas, population mobility is low, social relations are relatively closed, and “rule of people” often overpowers the “rule of law”.

The smaller the area is, the more economically underdeveloped areas are, and the less migrants are. Even if government departments recruit civil servants, most of the college students enrolled are locals. The reason is very simple: small areas are relatively closed, and social relations are "simple." Everyone meets regularly or frequently. In such an "acquaintance society", the main factor dominated behavior of local people is often the traditional informal system. The typical manifestation is that everything needs to “find relationships”, and the rule of law tends to retreat second. Therefore, enterprises have a demand for the government, or the government has requirements for enterprises. The result of government-enterprise interaction is often not "government-enterprise cooperation" based on the principle of the rule of law, but "government-enterprise collusion" based on rule of people.

In remote and small local markets, small businesses make it difficult for entrepreneurs to vote with their feet.

The more developed the market economy, the higher the level of the rule of law. The logic behind this is that where the market economy is developed, the population flows quickly, and companies enter and exit more. Both residents and businesses can “vote with their feet”. As an entrepreneur, if you think that there are many places where "taxes are high," or if the company feels it has encountered unfair treatment, they can withdraw funds or move away. You will be cheated only once, but from now on, we will pay special attention to the reputation of a government-business relationship in one place. Therefore, competition among regions will, to a certain extent, promote the level of the rule of law and improve the health of the government-business relationship. On the contrary, in remote and small areas, the number of foreign migrants is small, and entrepreneurs are almost all local. Not only can they not constrain local governments by “voting with their feet”, and even some companies are forced to conspire with local governments. In this situation, the result of government-enterprise interaction is more likely to favor government-enterprise conspiracy.

There are few media in remote and remote areas and lack of strong external supervision

Many abuses of public rights by local governments are based on the “fixed model” of media exposure, intervention by higher authorities, and local government correction. This shows that in the general environment where the rule of law is not yet perfect and the system is not yet sound, media supervision is very important. The quality database of China's regional system constructed by our team shows that the media exposure and the level of economic development are also positively related. The more remote the small areas, the fewer the media, the fewer high-quality social elites, and it is difficult to form a normal supervision over the collusion between local governments and enterprises. Of course, in the era of the Internet and self-media, the gap in media exposure between regions is smaller than the gap in economic levels. This shows that the overall supervision of the media in remote and small places is being strengthened. This is a positive development trend.

Although the health index of the government-business relationship is relatively low in small and remote areas in general, we do find that some remote and underdeveloped areas have performed well in improving government-business relations. The typical case is Guizhou Province. Using big data and Internet+, office efficiency and transparency of government affairs have been greatly improved through the establishment of an e-government system, and bureaucratic procedures and corruption have been reduced. This shows that small places can also have great actions. The key is whether or not local governments want to act and how to act.

Good government-business relations are important factors in promoting economic development. In turn, economic development is also an important source of improving government-business relations.

I believe that local governments want to develop their economy, no matter if it is a remote place or a bustling metropolis. Since we want to develop the economy, we must focus on improving the relationship between government and business. Since we must improve the relationship between government and business, we must follow the rules of law, we must abide by the spirit of the contract, we must not be afraid of media exposure. Throughout the years, from the central government to the local governments, it can be said that each local government has sent people to participate in various types of training courses involving the maintenance of stability and crisis public relations. However, why are there so many places that have dealt harshly with normal public criticism? The basic reason is not that there is not enough learning, but that there are too few bitter lessons. Therefore, if this cross-provincial arrests can be taken for granted by local governments, it can be considered as a profound “out-of-class teaching”, which has promoted the improvement of local government-business relations from another perspective.

(The author is a researcher at the National Development and Strategy Institute of Renmin University of China)