This morning I continued leafing through In the Midst of Things (《置身事内》), and I was deeply drawn in by Professor Lan Xiaohuan’s dissection of the operating mechanism of China’s government. The book’s second chapter, on “externalities and economies of scale” and “complex information,” gave me a fresh understanding of many phenomena around me that I’d always taken for granted.
Why Your Hometown Might Be a “No Man’s Land”
The book mentions an interesting phenomenon: regions located at administrative borders (especially provincial borders) generally have relatively backward economic development. Of the 592 national key counties for poverty alleviation and development in 2012, more than half were located at provincial borders.
This reminded me of my hometown — a small county town on the border between Anhui and Zhejiang. From childhood to adulthood, I could feel this “sense of the margin”: the highway always reached the provincial capital first before the border was even considered; good hospitals and good schools were concentrated in the city proper; even the dialect was somewhere between the two provinces, sounding like neither Anhui speech nor Zhejiang speech.
Lan Xiaohuan explains this phenomenon along three dimensions:
Geographic factors: Border counties are often located in mountainous areas, with an average slope 35% steeper than non-border counties. Examples include the Taihang Mountains on the border of Shanxi and Hebei, and the Wuyi Mountains on the border of Jiangxi and Fujian. These places are inherently unsuited to large-scale economic development.
Resource allocation: The provincial government will not prioritize allocating limited resources to border regions. After all, the input-to-output ratio is too low, and nobody wants to do work that amounts to “making a wedding dress for someone else.”
Cultural barriers: Border regions are often the non-mainstream cultural zones of their province. For example, the Hakka-speaking area on the border of Jiangxi, Fujian, and Guangdong is different from the mainstream Gan, Min, and Yue dialects of the three provinces. This “in-the-crack” cultural state makes it hard for border regions to integrate into the mainstream economic circle.
This “no man’s land” phenomenon also played a role in history — revolutionary base areas such as Jinggangshan and the Shaanxi-Gansu-Ningxia Border Region all chose mountainous areas at provincial borders, precisely exploiting the weak government control of the time.
The Economic Logic Behind Administrative Divisions
“Following the shape of mountains and rivers” and “jagged interlocking” are the two great principles of ancient Chinese administrative division, and both carry profound economic and political considerations.
“Following the shape of mountains and rivers” is relatively easy to understand — mountains, rivers, and streams are natural boundaries for management and are also convenient for public services. For example, Shanxi and Shaanxi are bounded by the Yellow River, and Sichuan and Yunnan by the Yangtze (Jinsha) River.
But “jagged interlocking” is more interesting. Simply put, it means deliberately breaking natural boundaries and not using natural barriers as the dividing line between administrative regions, in order to prevent local forces from using natural barriers to create division. The most typical example is Hanzhong being assigned to Shaanxi rather than Sichuan — geographically and culturally, Hanzhong is clearly closer to Sichuan. But if it had gone to Sichuan, the Sichuan Basin would have had a complete natural barrier, easy to defend and hard to attack. By assigning it to Shaanxi, Sichuan’s “north gate” is thrown wide open, and the center can control it more easily.
This logic of division continues to this day. Although we no longer need to worry about local separatism today, administrative divisions still profoundly shape resource allocation and economic development. The “abolishing counties to establish districts” phenomenon mentioned in the book is essentially about adjusting administrative boundaries so that cities gain more development space and land resources.
Information Is Power: Why the “Higher Level” Doesn’t Necessarily Have the Final Say
If the second section is about government operation in the spatial dimension, the third section, “complex information,” goes deep into the core mechanism of how power operates.
Lan Xiaohuan gets straight to the point: “There is an old Chinese saying, ‘the mountains are high and the emperor is far away,’ often used to describe local decision-makers acting willfully and without restraint, because the imperial court doesn’t know the facts and therefore cannot control them.”
The influence of information on power plays out on three levels:
1. Information Advantage Is Decision-Making Advantage
Within the system, the party that controls information often has the substantive power to decide. Even for a matter the higher level has explicitly instructed, if the lower level doesn’t want to do it, it can influence the decision’s outcome through “selective reporting.”
This reminds me of the classic scenes in Yes Minister: the permanent secretaries hold years of experience and information, and the newly appointed minister is spun in circles. In ancient China, the divide between the “guan” (scholar-officials who passed the examinations) and the “li” (local functionaries) was the same idea — the official rotated every few years, while the clerk was passed down through generations; the ones who really understood the work and controlled the information were the clerks.
2. Institutionalized Information Transmission
To cope with information asymmetry, the system developed a complex apparatus of official documents and meetings.
Official documents have strict categories: “decisions,” “orders,” “opinions,” “notices,” “letters,” “minutes”… Each type of document has clear stipulations about the issuing agency, the principal recipient, the degree of urgency, and the level of confidentiality. Meetings are also graded: the Standing Committee of the Political Bureau of the CPC Central Committee, the Politburo meeting, the Central Work Conference… which matters go to which meeting, who attends, whether it’s for discussion or decision — all have corresponding rules.
The essence of these institutions is to find a balance between the cost of transmitting information and the efficiency of decision-making.
3. The Game of Acquiring and Concealing Information
The book gives an interesting example: in the 1990s, the Ministry of Environmental Protection set up monitoring stations in various cities to monitor pollution. But a monitoring station could only monitor the water coming from upstream, not the water downstream of the station itself. So local governments focused on reducing the emissions of enterprises upstream of the monitoring station, and could still improve the pollution data they reported upward.
It was not until 2007, when the State Environmental Protection Administration required key polluting enterprises to install automatic monitoring systems and transmit real-time emission data directly to the national monitoring network, that data falsification was effectively curbed.
This example shows that technological means can partially solve the problem of information asymmetry, but can never completely eliminate it. Because information is complex, dynamic, and multi-layered, and any monitoring system has its blind spots.
The Collision of Theory and Reality
After reading these two sections, my biggest impression is: economic theory is not a lofty dogma but a powerful tool for understanding reality.
Concepts like “externality,” “economies of scale,” and “information asymmetry” are often presented in textbooks with simple formulas and charts. But when combined with China’s administrative divisions, government operation, and power games, they become vivid and powerful.
For example, why have concepts like the Yangtze River Delta and the Guangdong-Hong Kong-Macao Greater Bay Area become hotter and hotter in recent years? Because from the perspective of “economies of scale,” once economic activity and population concentrate to a certain degree, the original administrative divisions actually become an obstacle, and seamless public services need to be provided on a larger scale.
Another example: why has there been an emphasis in recent years on the “streamlining administration, delegating power, improving regulation, and upgrading services” reforms and on building a digital government? In essence, all of these are about tackling the governance problems brought by “information complexity.” When the center can directly monitor polluting enterprises and directly grasp large amounts of government data, the traditional model of layer-by-layer reporting and level-by-level approval must inevitably face change.
Conclusion
Lan Xiaohuan says in the book: “So-called power is, in essence, the question of who gets to make the final call when things are unclear.”
This sentence lays bare the core of how government operates. Whether it is the division of administrative regions or the game between higher and lower levels, it is essentially about handling the problem of allocating decision-making authority under conditions of imperfect information.
Understand this, and you can understand why many things “look unreasonable, but exist for a reason.” Next time you see the backwardness of a “no man’s land” region, the wave of “abolishing counties to establish districts,” or the layer-by-layer transmission of higher-level policy, perhaps you can think one layer deeper: what are the information structure and incentive structure behind this?
The greatest value of this book is not that it gives standard answers but that it provides a set of analytical frameworks, letting us observe and understand this complex politico-economic world with a more rational eye.
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