Regulating Multilevel and Multiagency Governments in the Market Deregulation Process: Evidence from China’s National Business Environment Evaluation

In transitional countries, particularly those characterised by multilevel, multiagency bureaucratic structures, such as China, the success of deregulation is largely contingent upon the credible enforcement of effective bureaucratic control. Although a substantial body of literature examines central bureaucratic control and local compliance, relatively few studies investigate how such bureaucratic control is exercised when the central government seeks to regulate lower-level governments directly. This article addresses that gap by examining how China’s national business environment evaluation—a comprehensive regulatory reform assessment inspired by the World Bank’s Doing Business Project, particularly by its framework—has been initiated by the central government and implemented at the municipal level. Using case studies from two provinces, the article develops two theoretical propositions. First, the adoption of less restrictive measures towards intermediate-level governments reduces their inclination to compete with the central government in supervising the performance of lower-level governments. Second, leveraging the Doing Business Project, coupled with a third-party implementation plan, increases the costs of noncompliance for participating agencies and local governments, thereby increasing the likelihood that they will comply with the central government’s evaluation scheme.