In reality, upper-tier governments have strong incentives and strong control over lower-tier governments among hierarchies.
Therefore, in the monitoring and supervision of projects, even the problems of misuse of funds and low quality of products will not be punished by upper-tier governments.
Meanwhile, competition among lower-tier governments lends credibility to the upper-tier government.
The upper-tier government thus remains highly authoritative (Bendor et al. 1987).
Different from central-local relationships in other countries (Dixit and Londregan 1998), governments at the provincial and county level rely on the upper-tier government to expand project funds, while the upper-tier government relies on the local governments to strive for more fiscal budget from projects and gain more authority in these projects.
On the one hand, the subcontracting system in Chinese government hierarchies provides the opportunity for competition among contractors, through which the upper-tier government controls the lower-tier governments.
Thus, on the one hand, the central government empowers local governments with limited autonomy and appropriate incentives to utilize local advantages to fulfill the goals set by the upper-tier government.
In addition, China implicated regional development policy with regions differing in the policy priority, and the upper-tier government has the controlling power to orientate the regional function, index of land use, and credit policies.
Second, low-tier governments will seek extra opportunities and ask for protection from the upper-tier government and may even conspire or selectively execute decisions to avoid punishment (Kornai 1992; Walder 1986; Rong 1998; O'Brien and Li 1999; Zhou 2005a; 2008; Liu 2005) (see Table 2).
"The Organic Law of the People's Republic of China on the People's Congresses and People's Governments at All Local Levels" stipulates that local governments should execute resolutions and decisions of the People's Congress and the Standing Committee of the People's Congress at the local level, as well as decisions and orders from the upper-tier government.
Meanwhile the trio had politely damned everyone of consequence in the upper tier of government - except Vice President Bush whose name was overlooked until 11.53.
