Politics, Markets, and Modes of Contract Governance: Regulating Social Services in Shanghai and Chongqing, China

• Published date: 01 September 2020
• Date: 01 September 2020
• Author: Bao Yang,Wei Li
• DOI: 10.1177/0002716220957286

957286ANN
The Annals of the American AcademyRegulating Social Services in China
research-article2020
Inspired by the concept of the regulatory welfare state,
this article identifies four primary modes of governance in
regulating contract processes and contract implementa-
tion (market-based, hierarchical, professional, and rela-
tional), and compares contract governance modes in
Shanghai and Chongqing. We find that the governments
in these two localities prioritize and integrate the hierar-
chical and relational modes, relying less on the market-
based and professional modes of governance. The
Politics,
emphasis on the hierarchical-relational mode advances
the values and mechanisms of trust, adaptation, and align-
Markets, and ment with top-down priorities, but may hinder public and
legal accountability. We argue that the dynamics of politi-
cal context and market condition affect the formation and
Modes of
effectiveness of hybrid modes of contract governance, and
we advise that regulators in different countries should fac-
Contract
tor in such dynamics when designing contract governance
modes in the regulation of social services.
Governance: Keywords: regulatory welfare state; hierarchical-
relational; contract governance; regulating
Regulating
social services; China; authoritarian;
transitional
Social Services
in Shanghai and The concept of the regulatory welfare state
(RWS) refers to the state pursuing social
objectives through regulations. It captures the
Chongqing, double expansion of welfare expenditure and
regulation to fulfill social objectives in demo-
China
cratic welfare states (e.g., the U K and Israel)
(Haber 2011; Levi-Faur 2014a). The purposes,
mechanisms, and forms of RWS can vary across
sectors and states (e.g. Benish, Haber, and
Eliahou 2017). With the global diffusion of
By
Wei Li is an assistant professor in the Department of
WEI LI
Government and Public Administration at Chinese
and
University of Hong Kong. Her research interests include
BAO YANG
politics of regulation, public sector reforms, social pol-
icy analysis, among others.
Bao Yang is an associate professor of public manage-
ment at Chongqing University of China. His research
interests are situated in the fields of government-NPO
relations, performance of public service, and civic
engagement.
Correspondence: yangbaoruc@163.com
DOI: 10.1177/0002716220957286
ANNALS, AAPSS, 691, September 2020 121

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122
THE ANNALS OF THE AMERICAN ACADEMY
privatization and the delegation of social services to the nonprofit and business
sectors, regulating social service contracts is one mechanism through which wel-
fare spending and regulation are expanded to meet social objectives (Levi-Faur
2005; Benish 2010).
Since the 1980s, driven by domestic problems and influenced by New Public
Management ideas,1 Chinese public sector reforms have sought to enhance the
efficiency, performance, and accountability of the state in the transition from a
planned economy to a market economy. In the 2000s, China witnessed a growing
number of social organizations (SOs)2 to which governments started to contract
social services (e.g., poverty alleviation) (Jing and Savas 2009). Chinese governments
have also issued an increasing number of documents to regulate social service con-
tracts (SSCs). Due to weak legal institutions, the regulatory style of governance in
China differs from that in many Western democratic countries, and the authoritar-
ian context in China presents challenges to integrating the values of new actors into
regulation (Lo, Yip, and Cheung 2000; Rooij, Stern, and Fürst 2016).
This article maps the modes of contract governance in regulating social ser-
vices by Chinese governments and identifies the mix of actors, values, and
accountability mechanisms involved. It begins with a review of the literature,
identifying four modes of contract governance in democratic welfare states. It
then introduces the authoritarian and transitional context of China, which affects
the implementation of these modes. Based on official documents, archives, semi-
structured interviews, and survey questionnaires, we then analyze and compare
the mode of contract governance implemented in two municipalities in China,
Shanghai and Chongqing. We then compare this mode with those in democratic
welfare states, and we propose policy for regulators.
Modes of Contract Governance in Regulating
Social Services
Regulating contracts in social services is important to ensure accountable and
effective service delivery (Braithwaite 1999). A governance perspective on con-
tract regulation goes beyond the legal conception of regulating contractual rela-
tions to focus more broadly on how institutions shape, reshape, and reflect the
preferences and choices of the actors involved through processes, mechanisms,
and strategies (Collins 2002; Levi-Faur 2014b). Considerable attention is paid in
NOTE: Wei Li presented this article at the “Regulation for Welfare?” workshop held at The
Hebrew University of Jerusalem, organized by David Levi-Faur and Avishai Benish in May
2019. Wei Li is grateful for the Israel Science Foundation’s support for her attendance at the
workshop and appreciates the workshop participants’ great company and comments. Wei Li is
also grateful for those who assisted with the fieldwork in Shanghai and the department stu-
dents who helped with the project despite unusual circumstances in Hong Kong. Wei Li’s
contribution to this study was funded by the Direct Grant of Social Science Faculty, Chinese
University of Hong Kong (Grant Number 4052202). Bao Yang’s contribution to this study was
funded by the Fundamental Research Funds for the Central Universities at Chongqing
University (Grant number 2019GGXY00).

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REGULATING SOCIAL SERvICES IN CHINA
123
TABLE 1
Modes of Contract Governance in Regulating Social Services
Regulating contracting processes
Regulating contract implementation
Market-based
Reduces service cost; meets ser-
Competition motivates contractors to
mode
vice needs through fair competi-
perform well and little monitoring is
tion; enhances transparency;
needed (Romzek and Johnston
lowers entry barriers; and ena-
2005).
bles objective evaluation of pro-
posals (Lane 2001).
Hierarchical
Contractors align services with
Close monitoring by government
mode
government funders’ require-
funders; frequent reporting by con-
ments (Gazley 2008); contract
tractors (Romzek and Johnston
officials follow political or mana-
2005).
gerial superiors’ preferences in
decision making (Brown, Potoski
and van Slyke 2006).
Professional
Evaluates proposals by profes-
Evaluates outcomes based on client
mode
sional criteria pertaining to social
and social impacts (Lynch-Cerrulo
values (i.e., improving people’s
and Cooney 2011); professional
lives) (Lynch-Cerrulo and
evaluation by contractors or inde-
Cooney 2011).
pendent inspectorates (Christensen
and Ebrahim 2006; Clarke 2008).
Relational
Negotiation before reaching a con- Ensuring contractors’ good perfor-
mode
tract agreement; trusted service
mance by nurturing long-term rela-
providers are preferred; lacking
tions; adaptation of service
contractual specificity and great
requirements is allowed in response
flexibility afforded to contractors
to contingencies (Bertelli and Smith
(van Slyke 2009).
2010).
the literature to four primary modes of contract governance in regulating social
services (see Table 1). Each mode represents a form of the regulatory welfare state
that advances different values and uses different accountability mechanisms.
The market-based mode relies on competition to place pressure on service
providers to lower their service costs and respond to the needs of users. This
mode, however, is often found to be ineffective in the social service sector
because of a lack of competition and difficulties in pre determining the service
needs, cost, and quality in the contracts (van Slyke 2009). The hierarchical mode
relies on the authority of the state and hierarchical accountability to influence
contract decisions and monitor contract implementation. This mode requires
considerable resources and capacity on the part of government funders and may
stifle service providers’ levels of innovation and responsiveness to users (Kim
2005). The professional mode defers to professional knowledge, standards, and
norms to ensure the accountability of contractors (Lynch-Cerrulo and Cooney
2011). The relational mode is built on repeated interactions, resource sharing,
and informal accountability mechanisms such as trust, reputation, and opportuni-
ties and gains for future collaboration (van Slyke 2009). To prevent this mode

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