UC Berkeley

Many scholars have analysed bargaining between supervisory bureaucracies and Chinese large and medium-sized factories. Walder identified a web of informal, semi-bureaucratic relationships that structures negotiations over revenues, payments and subsidies. Granick and Tidrick pointed out that divided bureaucratic control increases the parties to bargaining, while conflicting interests present opportunities to play supervisors off against each other. Huang found collusive behaviour that occurs when local government agencies and firms rob the state treasury by increasing central subsidies and reducing central exactions in exchange for fees that go directly to local coffers. Numerous authors have noted that the focus of bargaining has shifted from material to financial transfers and have used (or questioned using) Kornai's “soft budget constraint” to explain the persistence of bargaining since the onset of reform.