Association for Public Policy Analysis & Management

The allocation and accomplishment of policy targets in governmental hierarchy has been extensively examined, but the current literature has little discussion on the adoption of target regimes at the nexus of public and private sectors. The Party-state regime in China is characterized by the top-down policy implementation process, in which the central government mandates local agents to execute its policy priorities. In this process, policy targets are disaggregated and allocated to local governments and selected private enterprises, whose performance is evaluated by the achievement of designated targets. In the setting of China’s mid-2000 energy policy reform, this study explores the institutional, political, and organizational factors that influence government’s target allocation and goal setting for businesses.

Committed to the international community’s agenda in combating climate change, China pledged to reduce its energy intensity (measured by energy consumption per unit of gross domestic product) by 20 percent by 2010. The reduction targets were mandated in the 11^th Five-Year Plan (2006-2010) and disaggregated to local governments and selected large-sized firms. As a key policy component, the Top-1000 Enterprises Energy-Saving Program was initiated in 2006 and targeted enterprises that consumed the most energy in industrial production. However, designated targets varied substantially across firms. This research aims to examine such variations. As local governments work with industrial enterprises to meet the targets, we expect that state-owned enterprises (SOEs) are more likely to accept stringent energy-saving targets than private and foreign enterprises. Nevertheless, central SOEs are less motivated to reduce energy consumption than local SOEs, which are more closely connected to local governments. We also anticipate that enterprises with more resources are assigned with higher targets, but in the meantime, they have stronger bargaining power and may resist policy burdens by lobbying local governments. Furthermore, we expect that provinces headed by leaders with stronger career incentive and with stringent energy-saving mandates are more likely to assign higher targets to firms.

To test our hypotheses, we develop a multilevel model analyzing firm- and province-level data from multiple sources from 2006 to 2010. The data cover more than 800 firms in the Top-1000 Program across 30 province-level jurisdictions (excluding Tibet). The dependent variable is the firm-specific target of energy conservation (in 10,000 tons of standard coal equivalent). Firm-level independent variables include dichotomous indicators for SOE and central affiliation, a factor score measuring organizational resources (e.g., employment and profit), and dummy variables of industrial sector. Province-level variables include career incentive of the administrative leadership (i.e., governor’s age, provincial historical representation in the Politburo, and Politburo incumbency) and government’s energy-saving targets. Results support some of our hypotheses. We then discuss the implications of our findings for public policy implementation and government-business relations in target-based performance regimes.