A Summary of Recent Literature on China`s Development

Transcription

A Summary of Recent
Literature on China’s
Development
A Joint Bibliography
Prepared for Collaboration Workshop Entitled: “China as a Global Power, Middle-Income
Country, and Low-Income Country: Implications for Social Science Research.” Held in Beijing,
July 19-20, 2010. Organized by the School of Social Development and Public Policy (SSDPP)
Beijing Normal University, China and the Institute of Social Science, the Hague, the
Netherlands. The Workshop and preparation of this bibliography have been made possible
by a grant under the NWO-KNAW Joint Scientific Programme.
This bibliography was prepared by Ward Warmerdam, who covered the international
literature and Dr Wang Jingzhi, who covered the Chinese literature, the two bibliographies
are presented separately in this paper.
Table of Contents
Bibliography of Western Sources ___________________________________ 5
Introduction ______________________________________________________________ 6
Section 1 – Political Reforms and Changes ______________________________________ 7
1. Narratives of Chinese Economic Reforms: How Does China Cross the River? - Zhang,
X. B., de Haan, A. & Fan, S. G. ___________________________________________ 7
2. Sixty Years of the People’s Republic: Local Perspectives on the Evolution of the
State in China - Goodman, D. S. G. _______________________________________ 9
3. China and India: The Institutional Roots of Differential Performance - Saith, A. ___ 10
4. China: From Democracy Wall to the Shopping Mall and Back – Fall 2007 - Gardels,
N. ________________________________________________________________ 13
5. “Made in China” Label Won’t Survive Without Rule of Law - Pei, M. X. _________ 14
6. Corruption in China’s Economic Reform: A Review of Recent Observations and
Explanations - Yu, O. _________________________________________________ 15
7. Long-term Outlook for China’s Political Reform - Zhang, W. W.________________ 16
8. Political and Social Trends in Post-Deng Urban China: Crisis or Stability? - Tang, W.
F. ________________________________________________________________ 18
9. China’s Trapped Transition: The Limits of Developmental Autocracy - Pei, M. X. __ 20
10. From Local Experiments to National Policy: The Origins of China’s Distinctive Policy
Process - Heilmann, S. ________________________________________________ 21
Section 2 – Economic Reforms and Their Effects ________________________________ 23
11. Narratives of Chinese Economic Reforms: How Does China Cross the River? - Zhang,
X. B., de Haan, A. & Fan, S. G. __________________________________________ 23
12. How Reform Worked in China - Qian, Y. Y. ________________________________ 23
13. Capitalism with Chinese Characteristics: Entrepreneurship and the State - Huang, Y.
S. ________________________________________________________________ 27
14. China’s State Enterprise Reform: From Marx to the Market - Hassard, J., Sheehan,
J., Zhou, M. X., Terpestra-Tong, J., & Morris, J. _____________________________ 28
15. Economic Development and Transition: Thought, Strategy, and Viability - Lin, Y. F. 29
16. Township and Village Enterprises in China - Fu, X. L. & Balasubramanyam, V. N. __ 30
17. The Transformation of Collectively Owned Enterprises and Its Outcomes in China,
2001-2005 - Xia, J., Li, S. M. & Long, C. ___________________________________ 31
18. Fiscal Decentralization and Economic Growth in China - Lin, Y. F. & Liu, Z. Q. _____ 32
19. Decentralizing China: Analysis of Central Strategies in China’s Fiscal Reforms Vivian Zhan, J. ______________________________________________________ 33
20. A Chinese Economic Revolution: Rural Entrepreneurship in the Twentieth Century Grove, L.___________________________________________________________ 35
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DISCLAIMER: This bibliography contains summaries of the presented articles. It does not represent the views of
the author or any of the institutions involved in its preparation.
21. Remaking the World of Chinese Labour Relations: A 30-Year Retrospective Friedman, E. & Lee, C. K. ______________________________________________ 36
22. Fiscal Reform and the Economic Foundations of Local State Corporatism in China Oi, J. C. ____________________________________________________________ 38
23. Export Performance and Enterprise Reform in China’s Coastal Provinces - Perkins, F.
C. ________________________________________________________________ 41
24. IMF Working Paper: An Empirical Analysis of China’s Export Behavior - Cerra, V. &
Saxena, S. C. ________________________________________________________ 42
Section 3 – Poverty Alleviation ______________________________________________ 43
25. Two Decades of Rural Reform in China: An Overview and Assessment - Oi, J. C.___ 43
26. Poverty Alleviation in China: Successes and Lessons - Zhang, L. X., Rozelle, S. &
Huang, J. K. ________________________________________________________ 45
27. Reforms, Investment, and Poverty in Rural China - Fan, S. G., Zhang, L. X. & Zhang,
X. B. ______________________________________________________________ 47
Section 4 – Impacts on Society ______________________________________________ 49
28. 30 Years’ Reform in China’s Mass Media - Li, L. R. & Liu, L. ___________________ 49
29. Regulatory Changes in China Against Evolving Media Freedoms - Egan, A. _______ 51
30. Post-Earthquake Relief and Reconstruction Efforts: The Emergence of Civil Society
in China? - Teets, J. C. ________________________________________________ 52
31. The People’s Court in Transition: The Prospects of the Chinese Judicial Reform Zhang, Q. F. ________________________________________________________ 53
32. Chinese Society and Its New Emerging Culture - Faure, G. O. _________________ 54
33. Non-Evidence-Based Policy: How Effective is China’s New Cooperative Medical
Scheme in Reducing Medical Impoverishment? - Yip, W. & Hsiao, W. C. _________ 56
34. Privatising Health Care in China: Problems and Reforms - Tam, W. _____________ 58
Conclusion_______________________________________________________________ 60
35. Bibliography________________________________________________________ 61
Bibliography of Chinese Sources ___________________________________ 64
Introduction _____________________________________________________________ 65
Section 1 – Chinese Path in Global Perspectives_________________________________ 66
36. The Emerging Chinese Model of Development (1949-2009): From the Global
Perspective Adhering to the Right Direction and Exploring New Paths: Reflections
on Sixty Years of Socialist Practice in China - Wang, S. G. _____________________ 66
37. The Chinese Model of Development: An International Perspective - Zheng, Y. N.__ 66
38. The Implications of the Chinese Model of Development in the Context of
Globalization - Zhou, H. _______________________________________________ 67
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39. Reflections on China's Peaceful Development and Its Significance for World History
- Wu, X. M. _________________________________________________________ 67
Section 2 – Political Development ____________________________________________ 68
40. Reflections on the Thirty Years of Political System Reforms in China and Its
Prospects - Wang, G. X., Cai, D. J., Gao, F., Ren, J. T. & Wang, C. J.______________ 68
41. China's Political Reform towards Good Governance from 1978 to 2008 - Yu, K. P. _ 68
42. Social Mobilization, Autonomous Participation and Political Integration: Sixty Years
of Basic-Level Democracy and Political Development in China - Xu, Y. __________ 69
43. Effective Politics and the Growth of Great Nation: A Discussion on China 30 Years’
Political Development - Lin, S. L. ________________________________________ 69
44. From Macromanagement to Micromanagement: Reflections on Thirty Years of
Reform from the Sociological Perspective - Qu, J. D., Zhou, F. Z. & Ying, X. _______ 70
45. Elite Exchange and In-group Reproduction in Urban China - Zheng, H. & Li, L. L.___ 70
46. The Social Functions of China’s Think Tanks - Xue, L. & Zhu, X. F. ______________ 71
47. Interactions between Government and Different Types of NGOs: A Comparative
Case Study from Perspectives of Corporatism and Civil Society Theory - Fan, M. L. 71
Section 4 – Social Policies and Welfare Programs _______________________________ 72
48. Diversification and Characteristics: the Living Arrangements and Housing of the
Elderly in China - Li, B. ________________________________________________ 72
49. Impact of Minimum Living Standard Guarantee on Income Distribution and
Poverty Reduction in Urban China - Li, S. & Yang, H. ________________________ 72
50. Population Flow And Its Effects Upon the Rural Poverty and Inequality - Tan, S. __ 73
51. Prospering the National Welfare System by Central Government: Significant
Experience and Its Implications of the Medical Reforms in Shenmu County - Zhang,
X. L. ______________________________________________________________ 73
Conclusion_______________________________________________________________ 74
52. Bibliography________________________________________________________ 75
53. References _________________________________________________________ 76
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30 Years Reform in
China
A Select Bibliography
Bibliography of Western Sources
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Introduction
It has been almost a century since the revolution that ended the Qing dynasty in
China in 1911-1912. What followed was nearly four decades of internal conflicts, foreign
invasion and civil war, until in 1949 “New China” was established by the Communist,
marking what is now known in China as “Liberation.” The ensuing period of stronger
government, genuine efforts to improve the lives of its citizens, and political misjudgments
culminated in 1978 when the influential leader Deng Xiaoping announced the “Reform and
Opening up” program of economic reforms that would help bring China out of poverty,
and take its place on the world stage.
The successes of the reforms in terms of economic growth, but also of vastly
reducing poverty, while maintaining relative political and social stability, have drawn the
attention of academics and politicians alike. China’s successes have allowed it to play an
increasingly important role in the world economy and world politics, and to become an
important player in Africa through its own unique combination of aid, trade and
investment. As a result of its own developmental successes and perceived successes of its
development in Africa, the field of Development Studies has recently started to pay more
attention to China and its development strategies.
In order to understand China’s current condition, and its external development
practices, it is first necessary to understand the reforms and developments that have
made it so successful. BNU and ISS are organizing a workshop in Beijing to explore those
issues, and to develop ideas about future research collaboration that may enhance the
understanding of China, as developing country, as middle-income country, and as
emerging global economic and political power. For that purpose, we prepared a
bibliography, primarily to inform our western audience about some of the main literature
on China’s reforms over the last 30 years. This is not meant to be exhaustive, far from it,
but to give non-specialists an insight into the significant and complex changes in China, and
what the growing literature (in the English language) can tell us.
What follows are brief summaries of selected articles that describe some of the
components of China’s success, and the consequences thereof. Section 1 is concerned with
some of the political reforms and changes. The second section summarizes articles
outlining some of the economic reforms and their effects. Section 3 describes China’s
progress in poverty reduction since 1949, and especially since the reforms in 1978. The
final section consists of articles describing some of the social changes that have resulted
from the reform process.
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Section 1 – Political Reforms and Changes
Zhang, X. B., de Haan, A. & Fan, S. G. (2010), “Introduction: Policy Reforms as a Process
of Learning,” in Narratives of Chinese Economic Reforms: How Does China Cross the
River?, Singapore: World Scientific Publishing.
China has sustained record levels of poverty reduction and economic growth, though
many western observers have often commented that China’s growth has been limited by
its institutional constraints. The authors cite Summers (2007) who notes that China has
seen the same level of industrialization within three decades that it took Europe two
centuries to achieve. Zhang et al state that most studies of China’s success provide an
after-event analysis. What the authors do in this introduction, and the book as a whole, is
provide a very insightful description of the internal political processes of reform, through a
collection first hand narratives written by individuals deeply involved in China’s
development process, and their own careful analysis.
Although some of China’s reform measures might be very China-specific, there are a
number of measures and strategies that could be transferred to other nations. The authors
believe that the successes of the reforms in China might provide a challenge to the
dominant neo-classical economic theory and the Washington consensus, and therefore
warrant efforts to draw out lessons from them for the broader development community.
Zhang et al follow the economic change process developed by North (2005), who states
that development arises from gradual steps taken by decentralized agents who mould the
formal rules and informal norms, and thus the economies as a whole. The authors assert
that China’s successes of the past three decades showcase the virtues of this incremental
reform strategy. Although reforms are used to move away from existing less desirable
equilibriums between different interest groups towards a more desirable equilibrium, they
often entail a degree of insecurity for those involved. The authors argue that for these
reasons, successful reform strategies reduce perceived risks, increase the understanding of
potential gains of different policy options, and improve the choice sets for reforms.
There are a number of key ingredients in China’s policy development successes. The
first of these is the use of crises as opportunities for policy development. Zhang et al argue
that it is often in crises that perceived risks and potential pay offs are re-evaluated. This
allows new approaches to be developed which address previous failures. One of the
examples the authors give is how the Cultural Revolution highlighted the inadequacies of
the planned economy, which provided reformers and top-leadership with the opportunity
to institute their reform agenda. As the inadequacies of the planned economy had also
become apparent to the general public, reforms away from it were more readily accepted.
The second key ingredient in China’s policy development success was the move away
from ideology-based policymaking, towards an evidence-based approach under the slogan
“seeking truths from facts,” which placed a high premium on demonstrated evidence on
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the ground. Experimentation with different policy options in isolated areas provided the
evidence needed for developing nationwide policies. The insulated nature of these
experiments also protected the wider society from the potential negative effects of
experiment failures. Zhang et al also describe how the implementation of policies on a
larger scale, after successful experimentation and policy development, is also a gradual
process in which there is continuous reflection and adjustment.
The third key ingredient described by the authors is the importance of the correct
sequencing of policy reforms. Zhang et al argue that beginning with agricultural reforms
meant that the majority of the population benefited from the initial developments, which
helped to generate support for later reforms. The development of rural economies also
fostered urban reforms as the Township and Village Enterprises became more competitive
and productive than State Owned Enterprises. These successes then led to further
macroeconomic reforms and the opening up of the economy.
Another key ingredient in the successful development of policy reforms is the
information channels that connect the policymakers with the people on the ground. Due
to China’s huge size, and centralized governance structure, there is great informational
asymmetry between the top and the bottom. In the initial periods of the reforms, think
tanks were an important intermediary between the central government and local
populations. They managed pilot policy experiments, searched for best practices, and
provided analysis and recommendations to the government. Due to China’s size, and the
many differences in geographical and social situations, a one-size-fits-all strategy is difficult
to find. Local governments were thus given more autonomy in order to experiment with
methods to find the best solutions. An advantage of such a big country is the increased
likelihood of finding the best solution.
The fifth key ingredient is to find ways of reducing resistance to reforms. The
opponent’s risks should be reduced and his interests should be protected, at least in the
short-term. Zhang et al give the example of the household responsibility system (HRS)
reforms. This was at first met by resistance from some provincial governors for ideological
reasons. Reformers suggested that they first conduct experimental projects in the most
remote provinces, which the governors agreed to. The results of pilot projects provided
the information on pay offs and risks that convinced almost all governors to implement it
in their provinces. The HRS allowed peasants to sell their surplus produce, after they had
provided the state and collective with their grain quota. This greatly increased their
productivity and fully utilized the government’s long term investments in agricultural R&D,
irrigation and infrastructure.
The final key ingredient in China’s policy development success described by Zhang et al
is the importance of building reforms on existing institutions and capacity. They authors
cite Ravallion (2007) who argued that the implementation of various reforms in China was
ensured by a strong civil service. China’s speed and ability in implementing reforms
exceeds that of many democratic countries, likely due to its strong top-down
governmental structure.
The authors conclude that China’s policy reform successes, as described in their book,
have relied heavily on experimentation, pragmatism and a focus on innovation from the
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ground up. They believe that this methodology is the best way to meet potential future
challenges.
Goodman, D. S. G. (2009), “Sixty Years of the People’s Republic: Local Perspectives on
the Evolution of the State in China,” in The Pacific Review, Vol. 22, No. 4, pp. 429-450,
Routledge.
David Goodman states that although the Third Plenum of the 11th Central Committee of
the Chinese Communist Party in December 1978, at which the Party-state announced its
commitment to ‘reform and openness’, is widely recognized as the most important turning
point in the 60 years history of China as it was the starting point for 30 years of increasing
prosperity, he believes that it is possible to see the foundations of the reform era
successes in the pre-1978 economy. The author makes this claim based on the fact that
the modernizing regime of the PRC was already delivering economic and social benefits to
its citizens, establishing a basic - though somewhat inefficient - state infrastructure. In the
period 1952-1978, fluctuations considered, the average GDP growth per annum over was
4.39%, higher than that of both the US and Europe. The economic reforms after 1978 have
only helped to accelerate the process of economic growth.
With this rapid economic growth, and its facilitative economic reforms, political and
social changes have also occurred. One notable socio-political change is that the capitalist
class was publicly reincorporated into the concept of the political nation by Jiang Zemin in
his theory of the ‘Three Represents’ in which they were considered among the ‘most
advanced’ elements in Chinese society, which Jiang Zemin claimed were vital for China’s
development.
Goodman also emphasizes another important change in the reform era, namely that of
decentralization. Whereas pre-1978 the central government exercised control over lower
levels of the state structure through leadership appointments and the brandishing of
localism as a political crime, in the current reform period the number of positions that are
centrally appointed have been reduced, and localism has been encouraged as a means for
economic development as localities endeavor to find ways in which they can develop their
own economies. The author asserts that the government of China is possibly one of the
most decentralized governments in the world, using the fact that 70% of government
expenditures originate from sub-national levels as proof of this. He also observes that this
decentralization has also had some negatives effects.
Although central government control has gradually been withdrawn, the level of power
concentrated in these lower level state structures has remained the same. Low levels of
accountability and transparency remain, one of the effects of which has been increased
levels of corruption, and increased popular discontent. Due to central pressure for local
economic development, local state power is now exerted through the close community of
interest of local government officials and entrepreneurs, which has likely exacerbated
corruption and discontent. Another effect of localism and decentralization of decision-
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making is the variations in policy implementation. It has also left different levels of the
state, e.g. county, township, and village, in competition to control a limited resource base.
As the state has progressively withdrawn itself from the micromanagement of society
and the economy, the delineations and responsibilities of state and society have gradually
become clearer. As a result of this withdrawal and other socio-economic changes, civil
society organizations have moved in to take over the roles of the state in different areas
and to address issues that the state has deemed not under their direct control. These
organizations, including NGOS and rights groups, are not operating in opposition to the
government, many of their activities are government sanctioned in the interests of
increasing the efficiency of socialism.
Saith, A. (2008), “China and India: The Institutional Roots of Differential Performance,” in
Development and Change, Vol. 39, No. 5, pp. 723-757, Oxford: Blackwell Publishing.
Ashwani Saith states that since India’s independence in 1947 and China’s liberation in
1949 the economic performance of these two Asian giants has often been compared. At
the outset of this so-called ‘development race’ both countries had similar economic
structures and levels of development. However, they differed in their cultural cohesion,
institutional flexibility and political orientation, the one a revolutionary socialist country,
the other a bureaucratic democracy. Saith analyses the different economic and social
institutional configurations to understand the divergent economic performances of these
two countries. He highlights the difference between India’s institutional rigidity and
obstacles, and China’s mass mobilization mode of transformation.
China and India both inherited nations afflicted by mass rural poverty administered by
feudal modes of production. Both societies were strongly patriarchal, with the negative
effects of child marriage, gender violence, oppressions, female infanticide, foot binding
and so on. However, both systems also had maturing non-agricultural economies. There
were also some important differences, though. Approximately 90% of China is Han, thus
only one language is accepted as the lingua franca. India, on the other hand, is much more
culturally heterogeneous, with around 4,600 communities and more than 150 languages,
of which 42 are spoken by more than one million people each. Out of the 28 states, only
10 accept Hindi as their official language. Saith argues that China’s cultural homogeneity
has allowed for higher levels of state legitimacy and acceptance, facilitating the mass
mobilization mode of transformation, whereas India’s cultural heterogeneity has made
change more contested and difficult.
Another important difference between the two systems, their perceived legitimacy and
their ability to initiate change, lay in their different constitutions of state power. In China
the revolutionary communist party, with its foundations among peasants and workers,
represented and gave power to the poor. In India, where colonial penetration had been
deeper, remnants of the old colonial structure took power. An important part of the British
colonial administrative structure was their use of well-educated Indians. This new
bureaucratic middle class formed a large part of the Indian Congress Party which later
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became the Indian state. Moreover, whereas the landowning class had essentially been
eliminated in the socialist revolution in China, in India they remained powerful and were
protected by the ruling party. The independence movement in India was firmly in the
hands of the middle and upper classes and castes.
In terms of economic structures there were many similarities. The author cites figures
from Weisskopf (1980). In 1950 China’s per capita GDP was USD$65 where India’s was
USD$62. 77% of China’s labor force was engaged in agriculture, compared with 72% in
India. 7% of the labor force in China worked in industry, in India 11% did. The agricultural
share of output in China in 1952 was 48%, while it was 51% in India. Large-scale
manufacturing and utilities accounted for 9% of China’s total output and 6% of India’s.
Small-scale manufacturing and construction generated 9% of China’s total output and 10%
of India’s. From this it can be seen that economically these two countries were quite
similar, their major differences lay in their political and institutional situations, Saith states
that the outcomes of the development race, and the margin of difference, highlight the
importance of these aspects.
By 2003, China’s per capita income was twice that of India. Regardless of which
measure of poverty was used, China had a much lower incidence of head count poverty.
Adult literacy was 91%, whereas India’s was 65%. Only 8% of under fives in China were
moderately underweight, and none was severely so. While in India 47% of under fives
were moderately or severely underweight. Although China has less arable land per capita,
it cultivated this more intensively and with higher yields, making its per capita output
similar to India’s. Furthermore, Saith lists many crops where China’s per hectare
agricultural output is around double that of India’s. 53% of China’s GDP is generated by
industry whereas 26% of India’s is. However, 52% of India’s GDP is generated by services,
and only 32% of China’s is. This is likely due to the comparative advantages of each country.
China has large numbers of workers with low levels of education receiving low wages,
while India has large numbers of highly trained workers receiving low wages. The high
growth rates in the non-agricultural sector in China are largely due to the focus on
manufacturing and construction, which are both labor intensive and can provide
employment to the surplus rural workforce. Saith states that the performance gap was
already observable by 1978 before the economic reforms were implemented in China.
In the development of both economies the key component was the public sector-based
industrialization led by the state. Neither government invested very much in rural
development, Saith states. He adds that while in India the rural elite were protected and
subsidized, in China surplus from agriculture and peasantry was used for modern
industrialization. However, due to China’s collectivist structure, rural surplus remained
within the national framework. Rural collectives in China integrated agriculture and rural
industry, were self-financing, accumulated labor and developed a generically skilled
workforce. The rural population benefitted from their own hard work as they were also
owners of their own collectives.
Saith argues that it is in the rural sector that one of the greatest differences between
China and India’s institutions, growth and distributional outcomes can be seen. In India the
institutional framework provided the rigid constraints in which policy could be developed,
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whereas in China the institutional framework was a variable that could be adjusted,
experimented with, and replaced to suit the needs of development. Saith describes the
land reforms in China from its liberation to 1978 in order to emphasize this point. He
states that the first reforms between 1949 and 1952 still left some asset inequalities, these
were addressed through the staged development of producer cooperatives into large
people’s communes which covered 98% of the countryside by 1958. From 1962 until
decollectivization in 1978 smaller, three-tiered re-modeled communes became the
standard models.
The author states that there were two engines for rural development in China. The first
was labor accumulation projects, such as infrastructure development projects, which had a
great impact on agricultural productivity. Laborers were paid in work points, but they also
benefitted from the gains of the projects. Moreover, it meant that cultivators had no idle
time. The second engine of rural development was rural industrialization within the
communes. This also used surplus labor, but it generated finances which, Saith says, were
put to four different uses: 1) Further diversification of the commune’s non-farm portfolio.
2) Investment in agricultural development projects. 3) Strengthening the capacity of the
local government. 4) Providing a social consumption floor to all members of the unit. The
author asserts that this kind of investment in rural areas would have been very unlikely in
an open market and an inegalitarian agrarian structure. Profitable rural enterprises in India
tend to channel their investments into urban trade and property, rather than rural
development, infrastructure, poverty reduction or further accumulation within the rural
sector. This leads to a decline in the rural sector and an increase in urban migration.
Saith quotes Mao to explain how mass mobilization is achieved in order to carry out a
transformation, namely through “releasing the enthusiasm of the masses.” Though some
might claim that mass mobilization is achieved through coercion, the author cites the
reflections of an Indian delegation which visited China who observed that the enthusiasm
they saw in China could not have come through coercion.
The author argues that there were several preconditions that have facilitated China’s
use of the mass mobilization mode of transformation: 1) Near national-scale cultural
homogeneity. 2) The masses strongly identify with the state and have a powerful sense of
ownership over it. 3) Rural policy interventions, such as land reforms, rural industries, and
rural socio-economic policies, enjoy mass appeal. 4) An efficient organizational framework
that allows two-way flows of information. 5) A powerful and unified command structure. 6)
The effective use of media and other instruments of ideological motivation. 7) The benefits
of economic achievements were widely shared, which sustained the motivation for
continued efforts in the process of transformation.
However, there are some causes for concern. The author describes an increasing
“pervergence” between the economies of China and India. This, he explains, is the
convergence of each other’s negative aspects. These include: growing corruption in China,
though not new to India; increasing socio-economic vulnerability of rural populations due
to their inability to access the increasingly expensive health care and educations systems;
growing inequalities, which had previously not been a problem in China, though was
inherent in India; the declining status of women; and the poor state of the environment.
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Saith concludes by stating that China has made tremendous progress since its
liberalization in 1949. Although recently more negative issues have started to emerge,
Saith believes that, due to its institutional framework, socio-cultural cohesiveness, and
fiscal strength, China is in a good position to implement further socially progressive
corrections.
Gardels, N. (2008), “China: From Democracy Wall to the Shopping Mall and Back – Fall
2007,” in New Perspectives Quarterly, Vol. 25, No. 1, pp. 86-90, The Center for the Study
of Democratic Institutions.
Nathan Gardels is of the view that, although the government of China might have
gotten away with suppressing its own citizens in the name of sovereignty, and ignoring
rampant corruption in the absence of rule of law, globalization and China’s export reliance
on the American market have brought the political demands of the American consumer
into the sphere of Chinese politics and governance. The author claims that “Americans
won’t hesitate one moment to cut the import lifeline and shift their allegiance from
Chinese products that might poison their children or kill their pets.” (Gardels 2008: 86)
With this statement it seems that Gardels has confused political considerations with those
of health and safety, which might play a greater role in the American consumers’ purchase
decisions [authors comment]. However, the article does present an interesting discussion.
He states that the shopping chains like Wal-Mart, Target and Toys “R” Us, are much
more effective in promoting reform than organizations like Amnesty International, due to
their financial power. Gardels believes that due to the close connection between China’s
future and the American consumer, the government will of necessity have to curb
corruption and increase regulation through rule of law, in order to survive, and maintain
its export-led growth. The author believes that in order for the American consumer to
trust Chinese products there must be regulation, and for this regulation to be trusted there
must be rule of law. He claims that globalization has created a coalition of the Chinese
middle-class and the American consumer, who both demand rule of law in China.
Gardels, reporting on an interview with the former Chairman of China’s National
People’s Congress’ Standing Committee, Qiao Shi, shows that there are also those in the
Communist Party who believe in the development of rule of law in China. He states that
Qiao’s competitors stressed economic growth and party control, whereas Qiao urged for
the strengthening of the legal system and the need for rule of law. It is only through the
development of the National People’s Congress and local people’s congresses that the
people of China could exercise their constitutional right, which states that all power in the
country belongs to them. Gardels further reports that Qiao believes that no organization
or individual is above the law or the constitution.
The author concludes by stating that though rule of law is not democracy, he believes
that it is a step in that direction.
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Pei, M. X. (2007), “Made in China” Label Won’t Survive Without Rule of Law” in Global
Viewpoint, June 16, 2007.
Minxin Pei believes that a number of issues have facilitated China’s rapid economic
growth, but have at the same time hindered the development of the rule of law, press
freedom and civil society. Foremost among these is the party’s reading of the collapse of
the Soviet Union. The author claims that the Chinese Communist Party (CCP) did not want
to repeat the two mistakes that led to the fall of the Soviet Union, namely, economic
failure and democratic reforms. As a result, the party has kept a firm hold on politics while
at the same time loosening its grip on economic activities. Pei argues that the CCP engaged
single-mindedly in strategies of rapid economic growth in order to maintain its political
power and legitimacy. He asserts that the party bases its political legitimacy on its
economic performance.
The author claims that the unfinished reform process has left many irregularities that
have obstructed the imposition of the rule of law. Although China’s regulatory agencies
nominally have formidable power and mandate, and there are numerous laws and
regulations developed to make the country’s consumer products, drugs and food safer,
they are all ineffective. This is due to the party-state governance structure. In this
structure the party maintains a parallel organization in all state institutions. Higher ranking
employees in these institutions are directly appointed by the party. Therefore the interests
of these institutions, and the enforcement of regulations, are all subordinate to the local
party chief’s pursuit of economic growth upon which his progress up the party ladder
depends. The result is crony capitalism and an environment that allows antisocial behavior.
Pei argues that were China to have an independent judiciary, media freedom, and an
active civil society, problems such as those of crony capitalism could have been contained.
He states that the best way to fight systemic corruption is through an impartial third-party
enforcing authority, transparency, and the voice of the public. He believes that these
institutions and social groups are not present in China because the party sees them as a
danger.
Minxin Pei like Nathan Gardels (2008) believes that market pressure and fear for their
reputations will force Western firms to move their investments to countries with a better
and more trustworthy regulatory system. However, he doesn’t go as far as Gardels who
claimed that market pressure could bring about political change, in the form of rule of law,
which might be the first step towards democracy. Pei argues, as mentioned above, that
the implementation and development of the rule of law are impeded by the party-state
governance model, the party’s focus on economic growth to maintain its legitimacy as the
ruling party and its unwillingness to loosen its control in the political domain for fear of the
kind of collapse that the Soviet Union suffered.
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Yu, O. (2008), “Corruption in China’s Economic Reform: A Review of Recent Observations
and Explanations,” in Crime, Law and Social Change, Vol. 50, No. 3, pp. 161-176, Springer
Netherlands.
In this article Olivia Yu reviews literature from the last 15 years regarding Chinese
corruption. This literature ranges from theoretical to empirical, and made use of
qualitative and quantitative research methods. She claims that as corruption is more
pervasive in developing and transitional countries there is an interest in understanding its
occurrence in China as it is a rising economic power with socialist roots. One of the
problems of data about corruption is that, of what is available, it is an underrepresentation
of the reality due to its covert nature.
Yu states that corruption in the public sector in China is widespread and while the
country has been enjoying rapid economic growth corruption has, over the last 20 years,
increasingly become a source of discontent, especially considering the growing inequality
between rich and poor. She observes that the mechanisms to monitor and prevent
corruption are only effective for lower level officials. The more powerful the official is the
less likely he is to be exposed. This is in part due to the organizational structure. All officers
of the supervisory/anti-corruption agencies are party members therefore they must show
loyalty towards the party, but as anti-corruption officers they must also fulfill their duty to
fight corruption. This problem is exacerbated by the fact that local party officials are more
powerful than non-party state officials. The most powerful person is usually the local party
secretary, who also appoints officials working for the anti-corruption agencies and has, the
author claims, an over concentration of power. In addition, some forms of corruption, such
as misuse of power, are not always treated as criminal acts rather they are treated as
ethics violations and are dealt with administratively. These are known as “unhealthy
tendencies.” In China’s current code, corruption consists of three offenses: bribe-taking,
embezzlement and graft.
There are three bodies that deal with corruption: 1). The Central Commission for
Discipline (Zhongyang Jilü Jiancha Weiyuanhui), which is the party’s disciplinary
mechanism. 2). The Ministry of Supervision (Jiancha Bu), which deals with the behavior of
government agencies and employees. 3). The General Bureau of Anti-Corruption which is
within an arm of the judiciary known as the Supreme People’s Procuratorate (Zuigao
Renmin Jiancha Yuan). Allegations of corruption concerning party members are referred to
the Commission for Discipline, and those concerning government officials are referred to
the Ministry of Supervision. These are able to implement various forms of punishment like
demotion, dismissal, or reprimand. They are further able to refer the case on to the
Procuratorate for criminal prosecution. Yu provides evidence that shows that only 19% of
the cases referred to the Procuratorate are prosecuted.
One of the most interesting observations the author makes is the changes in forms of
corruption during the course of the reform period. The author summarizes corruption in
modern China as “the product of interactions between changing conditions in social
control as market activities were increasing, structural opportunities for office holders in
the public sector to generate personal gains, and instrumental roles of cultural practices.”
(Yu 2008: 174) Although corruption is a universal problem, its evolution in modern China
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reflected the transformations the country went through, as well as particular
characteristics of Chinese society. Yu notes that in the first period of reform, 1978-1992,
profiteering was the most common form of corruption due to the price fixing role and
procurement mechanisms of the state, and the ties with new middle-men. With
subsequent market reforms dual-pricing systems were removed and the opportunity for
public organizations and their employees to exploit their distributive function for
speculative activities was gradually eliminated. After 1992 bribery became the more
common form of corruption. Although bribery did exist prior to 1992, it was however
focused in government agencies that had administrative authority over regulated
industries. Due to market and regulatory pressure the net organizational bribery increased
involving employees at all levels, in organizations of all ownership forms, and performing a
large range of functions. By the end of the 1990s 80% of bribery cases and 90% of the total
bribe money were related to organizational bribery. Company financed bribery (Gongkuan
Huilü) had, by the 1990s, become a distinct corruption offense. The aims of this form of
bribery are often to get contracts, below market price supplies, credit, or receive a
favorable interpretation or judgment concerning legislation.
The social regulation of corruption has changed over the 60 years history of China. Once
seen as a detestable bourgeois activity, within the new era where getting rich is
commendable, and due to the reduced ideological control of the party, the normative
deregulation has allowed for a more permissive attitude towards corruption. Another
peculiarity in the Chinese is system is the role that relationships (Guanxi) play. Yu believes
that this system was developed to create a trustworthy system in response to irrational
institutions, she quotes from Hsu who terms this a form of “capitalism without contracts.”
Guanxi and power have also been of benefit to many of the families of officials. Yu
draws attention to a study which revealed that 98% of senior officials in China have
relatives in senior business or government positions, earning on average more 120 times
more than the average Chinese salary. The author emphasizes that this system of guanxi
and corruption actually undermines the economy and free market. She states that this has
become an increasing source of instability and is putting the legitimacy of the party-state
at stake.
Zhang, W. W. (2006), “Long-term Outlook for China’s Political Reform,” in Asia Europe
Journal, Vol. 4, No. 2, pp. 151-175, Heidelberg: Springer Berlin.
Weiwei Zhang argues that, contrary to popular Western opinion, economic reform in
China has brought about political reform, though this political reform might fall short of
Western hopes and standards. He describes this situation as “great economic reform with
lesser political reforms” in contrast to the Western description of Chinese reform,
“economic reform without political reform.” These lesser political reforms have made
China’s economic success possible. However, Zhang warns that these lesser political
reforms might have reduced the chances for greater political change, though they have
helped to prevent economic and social upheavals that might have resulted from
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transforming the economic and political system too quickly. The author also states that
though full democracy might be far off, the growing middle class and civil society are
pressing for more accountability and a more democratic society. The Chinese government
is likely to carefully continue the current pattern of political reforms facilitating economic
growth and economic growth pressing for more political reform.
In his article Zhang lists a number of lesser political reforms: 1) Nearly all of Mao’s
political victims, tens of millions, were rehabilitated, and the doctrine of class struggle was
repudiated. This allowed people to pursue material interests and lead a normal life. 2) The
people’s commune system was abolished freeing millions of peasants from impoverishing
political, economic and administrative control. 3) Village level elections were introduced in
the countryside, a first democratic experiment. Although results are mixed, 60% is said to
be functioning properly according to government reports, it is already a relatively
successful breakthrough. 4) Rule of law has made important progress in response to the
demands of the market economy. 5) There has been a rapid increase in the number of
think tanks in China, who are engaged in relatively open policy debates. Policy decisions
are no longer made according to the will of one leader as was the case with Mao. 6) What
Zhang terms “the party’s zone of indifference” (2006: 153) has increased, allowing for
greater freedom for Chinese citizens with regard to popular behavior and cultural
expression, and a more informal form of liberalization is also occurring. The author does,
however, believe that the relationship between state and civil society is still confusing for
those involved. 7) Mandatory retirement has been introduced, and a new exam based
recruitment system has been instituted. Through this system veteran cadres are being
replaced by younger, better educated, technocrats. 8) A large number of political reform
experiments have been implemented, the cadre rotating system, for example, designed to
break guanxi networks. Also the practice of “small government and big society” is being
experimented with. 9) Subsequent to China’s entry into the WTO a lot of energy has been
focused on building a clean, efficient and transparent state, and developing the rule of law.
Guiding principles like “harmonious society,” “political civilization” and “socialist
democracy” have also been developed to prepare the way to China’s next stage in its
political development.
The loosening up of the hukou (household registration) and dang’an (personal dossier)
systems, the lesser dependence on the danwei (workplace) due to the private sector
providing more jobs and wealth, as well as the removal of the rationing system for
consumer goods, have provided ordinary citizens with ever increasing freedoms.
Reformers within the party have initiated a process of self-transformation within the
current institutional structure, as new institutions have yet to be established to deal with
further reforms. The competence of the party-state structure has improved greatly, and
according to a Newsweek survey international investors regard the Chinese state capacity
as “probably the most impressive.” However, some issues to remain, for example, weak
legal institutions, crony capitalism, the lack of an institutional framework to mediate social
tensions, an increasingly stratified society, and increasing socio-political issues.
A survey conducted by the Chinese Academy of Social Sciences of ranking cadres at the
Central School of the Chinese Communist Party, had some interesting findings, Zhang
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reports. The cadres saw the following as challenging issues (in order of urgency): rising
corruption, income gaps, economic and social problem in rural areas, regional gaps, reform
of State Owned Enterprises, and rising crime and unemployment. 20.2% of those surveyed
believed that there was no chance of a major crisis within the next 5-10 years, 46.2%
believed there was a small chance, and 13.5% believed there was a large chance. Many
believed that the lack of political reform could exacerbate the problems. 39.4% in 2004, an
increase from the 33.9% in 2003, believed that the growing gap between economic and
political reform could lead to a major social crisis.
Zhang says that it is as yet unclear what form the Chinese polity will take, however, it is
more likely that it will draw on examples from Singapore (rule of law, good governance
and controlled democracy) and Hong Kong (rule of law, good governance, basic freedoms,
and free economy) than from the US mass democracy model. The careful approach has
helped to gradually ease social tensions avoiding the systemic paralysis that afflicted
Russia and Indonesia after they implemented radical political changes. It is therefore likely,
according to the author, that the Chinese government will focus on developing rule of law,
intra-party democracy, good governance, and grassroots elections.
Tang, W. F. (2001), “Political and Social Trends in Post-Deng Urban China: Crisis or
Stability?” in The China Quarterly, No. 168, December 2001, pp. 890-909, Cambridge
University Press on behalf of the School of Oriental and African Studies.
Wenfang Tang describes some potential causes of social discontent: the closing of
inefficient State Owned Enterprises (SOEs) making many workers unemployed; the
increasing income gap between those who benefit from the reforms and those who don’t;
and reduced social welfare and increasing reliance on market forces and family support for
welfare provision, resulting in decreased living standards especially among the poorer
groups and regions. Perceived failures of the China’s reform policy have resulted in
increased public disobedience, notably growing labor disputes throughout the country in
reaction to unemployment and the rising income gap.
The author conducted a survey, in cooperation with the Research Centre for
Contemporary China at Peking University, which analyzed the political and social trends
after the Deng Xiaoping implemented reforms, to see if these trends were leading towards
a socio-political crisis, or towards increased stability. Tang also made use of semi-annual
surveys on reform satisfaction conducted by the Economic System Reform Institute of
China. In this article he reports his findings.
In 1999 jobs and income were the areas of most dissatisfaction. Tang argues that this
reflects the increasing unemployment and decreasing income opportunities resulting from
reform induced streamlining of SOEs. Overall satisfaction with reform was lower in 1999
than in 1987. Satisfaction with freedom of speech, income and wealth, and job
opportunities were also lower than in 1987, though satisfaction with housing and personal
health remained the same.
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12% of the respondents felt that reform was going too slow, the same levels as 1989,
and the lowest since 1987. Members of the Communist party were more satisfied with
reform, but did not have any particular opinion towards its speed. High earners were also
more satisfied, and didn’t believe that reform was too fast. The higher the education of
the respondents the less satisfied they were with reform, as they believed that the process
was not going fast enough. Manual laborers and the unemployed were dissatisfied
because they believed that reform was going too fast, whereas professionals and workers
from the private sector were dissatisfied because they believed it wasn’t going fast enough.
Analyzed according to generation (age at which the respondent turned 20), the 1949-1965
generation and the post-1984 generation were most satisfied with the reform and its
speed, Tang asserts that this is because they are both the current power holders and direct
beneficiaries of the reforms. The Cultural Revolution generation was least satisfied, this is
likely because they were most economically affected by the new free market in which it is
more difficult for that generation to find income opportunities in part due to the effects
the Cultural Revolution had on the access to and quality of their education.
Tang also reported results regarding the political aspects of reform. In the 1999 survey
18% of the respondents felt that the communist led multiparty system should be changed,
44% did not want any change, 31% did not care about change as long as livelihoods could
be improved, and 6% wanted only minor changes. 58% believed that political stability was
more important than democratization, compared to the 26% who disagreed. The least
conservative groups (those who most felt that change was needed) were the reform and
post-reform generations. Findings showed that political conservatism was linked to socioeconomic status, those with lower incomes, lesser levels of education, and lowers levels
on the occupational scale were more likely to be conservative.
The final aspect analyzed by Tang was political efficacy. He found that overall, in the
period from 1992 to 1999, political efficacy decreased. Fewer respondents felt that they
could affect social development or government decision making. However, in the same
period, the amount of urban residents who believed that the government should decided
public affairs doubled. The number of respondents who replied that they would complain
to the government if they were dissatisfied dropped to 15% from 24%. Interestingly,
Shanghai residents felt more political efficacy than respondents from other cities.
Tang concluded that political dissatisfaction was not growing in parallel with economic
dislocations. Respondents showed fairly strong support of the political system, a growing
nationalism, and an unwillingness to challenge authorities. The measure of political
efficacy only measured the likelihood of challenging authority through institutional means.
There was no measure of likelihood of challenging authority through non-institutional
means.
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Pei, M. X. (2006), China’s Trapped Transition: The Limits of Developmental Autocracy,
Cambridge, Massachusetts: Harvard University Press.
Reviewed by Gilley, B. (2007), “Is China Stuck?” in Journal of Democracy, Vol. 18, No.
1, pp. 171-174.
Bruce Gilley, in his review of Pei’s book, provides a good summary of its main concepts
and additional insights and discussions. He summarizes Pei’s argument by stating that Pei
believes that after the Tiananmen Square massacre of June 4th 1989 China’s transition
away from a state controlled economy and totalitarian politics lost momentum and has
essentially stopped. Hence the title, China’s Trapped Transition, refers to the current
situation, as perceived by Pei, of mismanaged growth and non-functioning governance,
not transitioning or developing further. He argues that instead of preparing the way for a
gentle transition from communism to a market democracy and a free market economy,
partial liberalization has in effect obstructed it.
Gilley discusses the three propositions Pei makes in his book. The first proposition is
that of post-Mao China beginning as a transitional state moving towards a market-based
liberal democracy from the then Stalinist authoritarian model. Gilley believes that this
proposition doesn’t necessarily reflect the intended or unintended destination of the
transition. He asserts that many academics, both inside and outside of China, have been
discussing ways in which China can improve its legitimacy and become less repressive,
without becoming a liberal democracy or fully liberalizing the economy which, Gilley states
is also the official program of the CCP. He adds that there is evidence from empirical
scholars who see that this scenario is being realized. If this is the case then, he suggests,
China’s transition is not stuck, but is continuing rather successfully.
As refuting this first proposition in effect refutes Pei’s whole book, Gilley chooses to
take Pei’s proposition as true in order to continue his review. Pei’s second proposition is
that the transition is stalled or “trapped”. Pei posits that the moment at which China’s
transition got stuck was when the government crushed the democratic movement in 1989.
He explains that this is because the succeeding economic and political reforms were wholly
regime managed and this led to deformed structures. The private sector’s size was
inhibited, legislative bodies and village level governments lacked true power, and
corruption and inefficiency resulted. Under these circumstances society could not develop
as any pressure emanating from society was either suppressed or co-opted.
Pei’s third proposition is that without a massive rupture, or possibly even a collapse of
the state, it will be impossible for China to move out of its current trapped state. He argues
that this impasse may last for a long time as the party is unlikely to reform in any way
which could jeopardize its position. Pei does accept the possibility that high levels of public
dissatisfaction might instigate regime change, but he believes this is only likely as the
outcome of a sudden crisis.
Regarding Pei’s second proposition, Gilley agrees that the current structure is exacting
high costs due to its deformed economy and weakened state, resulting from the actions of
a corrupt CCP elite. However, as noted above, he does not believe that China is trapped in
its transition, rather that the end result of this transition is not the liberal market
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democracy envisioned by Pei, but a partially liberalized market economy governed by a
semi-authoritarian state.
Heilmann, S. (2008), “From Local Experiments to National Policy: The Origins of China’s
Distinctive Policy Process,” in The China Journal, Vol. 59, January 2008, pp. 1-30.
In China local officials are encouraged to develop their own problem solving methods,
the results of which are then relayed to the central government which then analyzes these
experiences when formulating new policies. This process was evident in the promotion of
private business, state sector restructuring, rural decentralization, stock market regulation,
and foreign economic opening up. Reformists in the government used the results of these
experiments to convince government conservatives of the options and efficacy of policy
changes.
Heilmann states that the Chinese government terminology for this policymaking
methodology is the “point to surface” approach. Local experimentation “points,” if
successful are then promoted as model experiences, which are then further developed and
revised by top-level officials. The focus of this experimental process is on developing
instruments for the implementation of policies rather than policy objectives which are still
determined by the party.
The “point to surface” approach has its roots in the revolutionary experience of the
party, Heilmann argues. One of these practical experiences was in the pre-liberation (pre1949) land reforms where local policies were experimented with under central guidance.
“Model units” were then promoted in “emulation campaigns,” receiving further revision.
This was being done as early as 1928 and 1930 in Minxi under Deng Zihui, while Mao
Zedong’s efforts at land reform in Jinggangshan were hindered by military threats and
political instability. In 1943 “point to surface” methodology was intensively discussed in
Yan’an, and later became integrated as the official policymaking approach of the
communist party leadership. Mao even went so far as to issue a statement to the party in
1948 proclaiming that “model experiences” produced much more effective results and
were closer to reality than policies developed by party leadership and the party should,
therefore, use these to experiences to prevent “commandism.” The party, however,
always maintained the power of continuation, promotion, or cancellation of local
experiments. The “point to surface” approach evolved out of the circumstances of the
early phases of CCP authority. Many localities under CCP control were scattered both due
to civil war and Japanese invasion. Furthermore, the party lacked the institutional
apparatus and human resources to enforce and monitor a centrally defined policy.
By 1951 six steps were made into party guidelines for land reform experimentation, of
which steps 2 and 6 are still used today: 1) Train work team cadres and send them to
localities. 2) Carry out model experiment. 3) Accomplish breakthrough. 4) Broaden
campaign from point to surface. 5) Integrate point and surface with regard to applied
measures. 6) Develop implementation campaign in steady phases. The terminology used in
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the 1950s: “model experiment,” “experimental point,” “proceeding from point to surface,”
and “integrating point and surface,” is still being widely used today.
Later, during the Great Leap Forward and the Cultural Revolution, a problem of the
“point to surface” approach became apparent. It could be either top-down or bottom-up
depending on general political and ideological situation. It might have negative
repercussions if an experiment goes too much against the ideological grain, as occurred in
the anti-rightist campaign in 1957, Heilmann states. This resulted in more standardized
implementation, and standardization terminology evolved, using terms like “the whole
country as one chessboard,” and the use of “national templates.”
Heilmann argues that many of the early Chinese political activists were influenced by
John Dewey’s statements on experimentation. Dewey had given speeches in 1919 and
1920 in Chinese cities and universities. It was his concept of using the experimental
method to develop modern science and obtain scientific knowledge that, Heilmann states,
had an influence on Mao and other founding members of the Chinese Communist Party
(CCP). They were attracted to the idea that knowledge about and change in the world
could come about through a well-thought out process of experimentation. Dewey’s
experimentalism was also supported by the Guomindang (GMD). In the 1930s, when they
were the ruling party, there were more than 1,000 experimental rural reform sites run by
600 paragovernmental and non-governmental groups. Dominant social experiments at the
time included the Mass Education Movement (MEM) and the Rural Reconstruction
Movement (RRM), which already used terms like “experimental zone” and “experimental
county” in the late 1920s. Communists also had close ties and personal friendships with
non-communist groups involved in these experiments. The CCP often used efforts by these
groups as references in developing their own policies. However, the communists believed
that Deweyan experiments by liberal reformers, GMD and others had failed because they
ignored the issue of political power and had tried to operate in the adverse political
environment without changing it. In addition, their experiments were also never expanded
to become more general programs. In the 1940s the CCP already had the political power to
successfully develop spots into surface in some areas.
In the post-Mao era of reforms initiated in the late 1970s, the party leadership reverted
to the open-ended policy-generating experimentation used and developed from the 1920s
to the 1950s, to find ways of facilitating economic modernization. The importance of
experimentation to find new methods to solve new problems in order to develop Marxist
practice, was written into the constitution in 1992. The post-Mao “point to surface” is
different from previous context of mass mobilization, in that its current context is the
administrative and entrepreneurial state. In most other aspects these approaches are
largely similar.
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Section 2 – Economic Reforms and Their Effects
Zhang, X. B., de Haan, A. & Fan, S. G. (2010), Narratives of Chinese Economic Reforms:
How Does China Cross the River?, Singapore: World Scientific Publishing.
This book starts from the observation that rapid growth in the Chinese economy over
the past three decades has posed puzzles and challenges to neo-classical economic theory.
Policies implemented during the reform process were often unorthodox, and while the
Chinese experience has been widely studied, myths and questions about these reforms
remain. To fill a knowledge gap, and to inform a process of learning from China's
development successes, this book presents a series of case studies on the policy process of
different initiatives, including rural industrialization, dual-track price reform, migration
policy, village elections and fiscal reform. The case studies are prepared by and presented
from the viewpoint of people who were deeply involved in these reforms, either through
direct policymaking or through providing analytical and technical support that led to these
policy changes. They thus provide first-hand accounts of the political processes, how social
and political entrepreneurs shaped the choices and sequences of various reforms, and how
the rigidities and sometimes erroneous beliefs were overcome. Some of the most
interesting contributions include:
“The Course of China's Rural Reform,” – Du, R. S.
“Theoretical Reflections on the Dual-Track System of Price Reform Process,” – Luo, X. P.
“The Formation and Evolution of China's Migrant Labor Policy,” – Cai, F.
“The Process of Establishing and Extending Direct Elections in Rural China,” – Wang, Z. Y.
“The Historical Opportunity of the Fiscal Reform,” – Liu, Z. L.
“Fiscal Reform: The Zhejiang Experience,” – Weng, L. H.
Qian, Y. Y. (2003), “How Reform Worked in China,” in Rodrik, D. (ed.) In Search of
Prosperity: Analytic Narratives on Economic Growth, Princeton & Oxford: Princeton
University Press.
Yingyi Qian first describes how remarkable reform in China has been since 1978. It has
moved from having a poor centrally planned economy, to a lower-middle income market
economy. Absolute poverty has been decreased from over 250 million to 50 million. GDP
has quadrupled and grown at an average pace of 9%. Transitions from planned economy
to market economy aren’t new, but China’s size makes it the biggest transition, it is three
times larger than all other transition economies combined. In ten years China moved from
having half the GDP of Russia, to Russia having half the GDP of China. In terms of
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Purchasing Power Parity (PPP), Qian states, China is likely to overtake the US by 2015,
making China the largest economy in the world.
All these developments occurred counter to experts’ expectations. Experts in the 1990s
all agreed on a menu of measures that would facilitate moves from a planned economy to
a market economy, the prerequisite was political democratization followed by stabilization,
liberalization, and privatization. However, China since 1978 has largely succeeded without
complete liberalization, privatization or democratization.
Qian states that there are many misperceptions concerning China’s economic success.
One such misperception is the belief that it was foreign direct investment (FDI) and
exports that provided the energy behind China’s success. Interestingly, during the 1980s
FDI was negligible, it was only in the 1990s that it increased significantly, however, at its
peak it was still only 10% of total investment. FDI and exports were concentrated in coastal
regions, nevertheless, China’s inland provinces also experienced great economic growth,
evidenced by such cities as Xi’an, Guiyang, Chengdu, and Changsha, even without large
amounts of foreign investments.
Qian describes another misperception, namely, that agricultural reform was exclusively
responsible for China’s success. He argues that in the 1970s over 70% of China’s labor
force worked in agriculture, by 2000 this had dropped to below 50%, without development
in other sectors of the economy this would have been impossible. In fact, that China is not
a poor agricultural economy anymore indicates that its most successful reforms are in
other sectors.
In addition to the above mentioned menu of measures that would facilitate transitions
from planned to market economies, Qian also describes another menu devised by
advocates of institutional economics. They hold that a good market economy is not only
based on “getting the right prices” but also on “getting property rights right” and “getting
the institutions right.” These institutions would secure property rights, provide impartial
enforcement of contracts through an independent legal system, devise regulations that
would encourage market competition, provide transparent financial systems, and so on.
Qian states that this is useful as a benchmark of best-practice, but is not useful as an
analytical tool to study the successes and failures of reforms in developing and transition
economies. He argues that though best-practice institutions are desirable, it is more
important to develop these institutions through continuous changes in response to actual
conditions. Developing countries need to allow for the fact that they are not developed yet,
and lack certain institutions and certain conditions, and to use this comparative
disadvantage to their own advantage.
Qian argues that China has managed to make institutional changes that created great
economic growth, even though the initial conditions contained many distortions, through
the use of transition institutions. These should be flexible institutions. In China these
institutions were not purely created to “increase the size of the pie” but also to take into
account how the pie is distributed, and respond to the political concerns of those in power.
The author gives four examples of reforms in China that have made use of transitional
institutions.
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The first example Qian gives is that of the dual-track approach to market liberalization.
He states that it is well known that free market pricing is the founding stone of the free
market economy. In this dual track approach the first track, plan track, was the rights and
obligations of economic agents towards the state. Specific quantities of good were sold to
the government at fixed prices. The second track was the market track in which economic
agents sold their surplus at free market prices. The political implication of this was that the
government could implement free market reform without creating losers. The economic
implication of this approach is that it improves efficiency, because it is in the interests of
the economic agent to be more efficient. Qian states that the dual-track approach used
existing institutions. It used the information from the planned economy, and the plan track
was enforced for the existing plan institutions. Agricultural market liberalization used this
approach, as did industrial market liberalization,
Qian’s second example is that of developing new firms. He states evidence that new
entry privates firms, not privatized state firms, were the driving force for economic
recovery and growth in the post-1990 Eastern Europe. The author asserts that in China
new entry firms have also been the driving force for economic growth and recovery,
however, they were neither private nor state. In 1993 private firms only accounted for 15%
of China’s national industrial output. It was local government firms, known as Township
Village Enterprises (TVEs), which were the driving force, contributing 42% of the national
total industrial output. It was only in the late 1990s, when great economic progress had
already been achieved, that TVEs started to privatize. TVEs evolved out the special
circumstances in China. Lack of rule of law to protect property rights and a socialist antiprivate enterprise ideology, made the TVEs, which were protected by the local
governments, useful institutions to protect the interests of the collective, compared to
private enterprises. The national government required that after-tax profits be used for
reinvestment and to provide local public goods. Nationally, in 1985, 46% of after-tax
profits were reinvested and 49% was used for local public expenditures. By 1992, 59% was
reinvested, and 40% was used for local expenditures. TVEs also benefited the national
government, as they provided higher revenues. It is also a cheaper and more efficient way
for local governments to get revenues. Qian argues that TVEs are, again, an example of
existing institutions being used for a new purpose since TVEs developed out of the
commune system.
The third example Qian gives is that of fiscal federalism. Before these reforms took
place local governments had no control over the structure of their expenditures, however,
after the reforms, local governments were able to control their fiscal arrangements within
the guidelines stipulated by the central government. Not only did they gain more control
of their finances, certain taxes could be collected by the local government without
transferring them to the central government, and local revenue was divided according to
prearranged schemes between central and provincial governments. These systems
maintain a flow of funds to the central government, but also provided incentives for local
governments to build up their economies. Again, existing institutions were adapted to
serve their new functions.
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Qian’s last example concerns a method to constrain the government in order to protect
private incentives in the absence of rule of law, namely, anonymous banking. Originally the
Chinese government had very tight control over cash used in business transactions.
Transactions that exceeded 30RMB needed to go through a state bank. In 1978 the ratio of
cash in circulation was less than 6% of GDP, however, due to more relaxed banking
controls, 15% of GDP in the 1990s was circulating as cash. In China it was not necessary to
show identification or even provide real names when opening bank accounts. The
advantage of hidden wealth is that individuals, or even income groups, cannot be targets
of higher tax percentages. Everyone is taxed the same. Money is then accrued and spent
more freely, stimulating the economy. However, this does not necessarily harm the
government as it still extracts revenues from banks. Household bank deposits were only 6%
of GDP in 1978, but had reached 65% in 1998. As the Chinese government has been able to
control inflation it has also been able to collect large amounts of seigniorage revenue.
The author then describes the move from transition institutions to best-practice
institutions. Qian argues that these transition organizations have bigger costs and smaller
benefits than their alternative institutions, were they to exist. They are thus best regarded
as stepping stones, rather than final destinations. He again uses the four examples listed
above to illustrate this. The dual-track system has the extra cost of enforcing the plan track,
and as the market track developed much faster, the plan track was gradually phased out.
TVEs began to be privatized during the 1990s due to the high costs of government
interventions, and poor managerial incentives compared to private firms. Furthermore, a
1998 constitutional amendment recognized the importance of the private sector, thereby
also providing them governmental protection and political legitimacy. As the local
governments are now also able to extract revenue, they have an added incentive to foster
private enterprises in their regions. In 1994 China established a national tax bureau to
collect taxes separately from the local tax bureaus. Each institution was allocated certain
taxes, maintaining a flow of funds to the central government, as well as providing a degree
of fiscal autonomy to local governments. In 2000 a dual-track bank registration system was
introduced. New accounts were to be opened with personal identification, whereas old
accounts could remain. Due to these measures there was little opposition to the reforms.
These more recent developments show how moves towards more conventional
institutions can be made relatively smoothly from transition institutions.
Qian concludes with an example of failed reforms, namely that of State Owned
Enterprises (SOEs). Though there have been some successful SOE reforms, namely the
privatization of smaller SOEs, most remaining SOEs are large, capital intensive, heavy
industries, or are in sensitive sectors. At the end of the 1990s, more than 30% of SOEs
were making losses. Some SOEs were corporatized, however, Qian states that one of the
major issues is that of party control exercised in these companies and the role of party
secretaries in opposition to the role of the CEOs, and the party selection of managers.
SOEs are the mainstay of the economy, but poorly performing SOEs have had a deep
impact on the banking sector with nonperforming loans reaching 50% of GDP in 1990. In
1999 a new policy regarding SOEs was launched that tried to limit the scope of SOEs, which
were then operating in nearly every sector of the economy. A further reform called for the
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diversification of ownership, creating joint stock companies out of nearly all SOEs, with
only a select few still 100% under government control. The government has also shown its
intentions to follow international best practice related to employment selection of
managers, but the party will still be involved in the process of management selection in
SOEs.
Huang, Y. S. (2008), Capitalism with Chinese Characteristics: Entrepreneurship and the
State, New York: Cambridge University Press.
Reviewed by Brown, K. (2009), “Chinese Capitalism at the Crossroads?” in
International Affairs, Vol. 85, No. 4, pp. 857-861, Blackwell Publishing.
Brown’s review of “Capitalism with Chinese Characteristics” is useful for its insights and
well-written summary of the contents of Huang’s book. In his review Brown states that
Pudong district in Shanghai symbolizes the Chinese government’s perception of its own
economic accomplishment. Brown draws attention to Huang’s observation that Pudong
actually symbolizes many of the problems of the current Chinese system, and embodies
the ideological paradoxes at its core. Most importantly, the development of Pudong was
facilitated by a large-scale government supported land grab, similar to land grabs occurring
throughout China in the name of development. This demonstrates the ‘pro-urban, antientrepreneurial, anti-poor’ and pro-big business attitude of the new system. Focusing on
Shanghai and Pudong as epitomes of China’s development neglects the more important
role played by the rural communities in the rapid economic progress.
Huang claims that the 1980s were the golden age of China’s innovation and
development, the Gini coefficient indicated an almost equal society and the social contract
between the citizens and the central state created a fairly harmonious balance. In this time
leaders like Hu Yaobang and Zhao Ziyang not only gradually removed state control, but
introduced economic space for innovative development and enterprises in the rural areas
through township and village enterprises. These enterprises could easily access bank credit
and were relatively free from central government control. Huang believes that it was these
enterprises and not foreign investment, which was very minimal in the 1980s only entering
China in large amounts in the 1990s, that were really the ‘engines of growth’. Were it not
for these rural enterprises modern China would not exist now. It was these enterprises, in
his account, that pushed up the GDP. However, this relatively equal society, and these
rural engines of the country’s economic, started to disappear by the 1990s when increased
state intervention in the form more restraints on enterprise, increased bureaucratic
regulations, and a shift of focus towards State Owned Enterprises (SOEs), which were
considered more economically and politically reliable, became the new development trend.
This shift away from rural industry caused massive rural-urban migration, as the rural
workforce went in search of more lucrative employment in cities. The result is a migrant
workforce of approximately 200 million, falling standards of health and education, and
increasing adult illiteracy (30 million more in 2003 than in 1993).
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Huang points out that this dominant role of the state is not representative of the East
Asian models of economic where, in countries like South Korea, Japan and Hong Kong,
small private businesses are the main engines of growth, with 98% of businesses
employing fewer than 10 people in those countries. Only Singapore also allows the state to
play a greater role. Even apparently ‘non-state’ companies like Lenovo and Huawei, are
only considered ‘non-state’ because the government doesn’t own the majority shares.
Hassard, J., Sheehan, J., Zhou, M. X., Terpestra-Tong, J., & Morris, J. (2007), China’s State
Enterprise Reform: From Marx to the Market, London: Routledge.
Reviewed by Imai, K. (2009), “China’s State Enterprise Reform: From Marx
to the Market,” in China Journal, Vol. 61, January 2009, pp. 223-225.
Imai provides a good insight into the analysis of State Owned Enterprise (SOE) reform
written by Hassard et al. SOEs, regardless of their economic performance and productivity,
were once the providers of livelihood and social welfare for a large portion of the Chinese
population. Economic and market reforms, launched in 1978, have increasingly put
pressure on SOEs to also undergo reform in order to boost productivity and remove the
financial burden on the national government and economy of unproductive enterprises.
However, what happens to the SOEs is likely to have a great impact on China’s social,
economic, and political development. In some of the more highly regulated or capital
intensive industries, such as oil and gas, SOEs are still dominant, and are in some cases
monopolies.
Most SOEs, in the process of reform, have listed their subsidiaries on the stock market
and incorporated their assets. However, in many instances the state still demands to be
the largest shareholder.
Hassard et al argue that ownership plays an important role in improving the
performance of SOEs, but the enhancement of competition and the reform of managerial
systems is also vital. They state that China’s gradual approach to economic transitions and
enterprise reform has had a positive impact both on improving the performance of SOEs
and in maintaining social stability. However, they warn that China’s corporatization
(known as the “modern enterprise system”) has had a deep impact on employment and
social welfare. The authors describe the coming and going of contract responsibility, which
was the first step in the SOE reform process. They then analyze the development of the
next state in the process, namely the introduction of the modern enterprise and group
company systems, and their aforementioned role in causing employment and social
welfare problems, and how this has in turn hindered the progress of reform.
Hassard et al describe how the SOEs are caught in a dilemma of having to improve
productivity on the one hand, and not being able to implement drastic labor restructuring
for political reasons on the other. One method used to get round this is to transfer the
surplus workforce to other subsidiary companies within the company group. Despite the
gradual approach, employees are starting to realize that they have different interests to
those of their employers. These workers are becoming aware of their need for
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independent organizations that represent their interests, which are also not controlled or
influenced by either the party or the government. Increasing labor unrest in China might
indicate the possible threat to political stability that such organizations might present.
The authors argue that given the political and institutional constraints that SOEs are
faced with, reform has greatly changed the state-management relationship, and the labor
issue has not gotten out of control. They warn, however, that further reform of larger SOEs
might increase workers’ demands for independent organizations that represent their
collective rights at odds with state and the companies in which the state is the major
shareholder. What is clear from this is the interrelation between economics and politics in
China’s economic transition.
Lin, Y. F. (2009), Economic Development and Transition: Thought, Strategy, and Viability,
New York: Cambridge University Press.
Reviewed by Dorn, J. A. (2009), “Review of ‘Economic and Development
and Transition: Thought, Strategy, and Viability’ by Justin Yifu Lin,” in Cato
Journal, Fall 2009, pp. 599-607.
Dorn’s review provides a detailed account of the main concepts of Yifu Lin’s, possibly,
most important book. Lin is the chief economist and senior vice president of the World
Bank, he is the first Chinese to have reached such a high position in the organization. In his
book Lin argues, that it is not natural resources or capital investment that are the basic
determinants of development, but rather the institutions chosen in the government’s
development, and thereby also the dominant social thought.
Lin describes two development strategies: 1) “comparative-advantage-defying (CAD)
strategy” and 2) “comparative-advantage-following”. He argues that the CAD development
model was widely used in 1950s and 60s. This strategy diverted resources towards capitalintensive industries, heavy industry, in the hope of quickly catching up to the developed
countries, disregarding or “defying” their own “endowment structure.” Underdeveloped
countries were rich in labor, but poor in capital, and in many instances, poor in natural
resources. Investing in capital and resource intensive industries was wasteful, and, due to
trade barrier protectionism, hindered development of the market and the people.
Lin argues that capital poor labor rich countries have the comparative advantage of
lower of opportunity costs of labor intensive production. To make the most of this, to
“follow” this comparative advantage, government officials need to allow market prices,
profits, trade and competition to freely guide resources to where they are can create the
highest value for the consumer. Doing so will help develop capable companies, and
provide opportunities for people to come out of poverty. The author believes that this
model is what made East Asia so successful. He argues that in countries using the CAD
strategy economic growth is slower, less stable, with higher income inequalities, than in
countries using the CAF strategy. Economies that are making the transition to a market
system benefit greatly from government efforts that develop labor-intensive industries,
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like China has done. However, he also cautions that a dual-track approach should be taken,
that encourages privatization, but manages non-productive State Owned Enterprises.
The author promotes the concept of a “facilitating state” and opposes the idea of a
“blueprint” for development. The facilitating state ought to help create the institutional
infrastructure for the market economy, to coordinate investment, and to collect and
publish information as industrial policy. He adds that companies that are judged to have
good potential should be granted small subsidies. Lin states that this approach was used
for Toyota and Nissan in Japan, although other firms like Honda that were not supported
by the government have also become successful.
In analyzing China’s reforms towards a market economy, Yifu Lin finds that many of
them occurred first as experiments at the grassroots level, as Deng Xiaoping permitted
experimentation from the bottom. Those that were successful were then sanctioned by
the party. Lin gives the example of farmers first being allowed to sell off their surplus crops
after they had made their obligatory contribution to the state, and claims that even the
township and village enterprises weren’t originally centrally planned. Further reforms have
also resulted from these changes. State sector reforms were more gradual and top down,
in order to avoid political instability that might have resulted from “shock therapy.”
The crux of Lin’s message is that economic freedom, facilitated by governmental policy
initiatives, is an important antecedent for development.
Fu, X. L. & Balasubramanyam, V. N. (2003), “Township and Village Enterprises in China,”
in Journal of Development Studies, Vol. 39, No. 4, pp. 27-46, Routledge.
In the process of economic reforms in China, Township and Village Enterprises (TVEs)
have been very important in creating growth in the economy. In 2001, TVEs made up
almost half of the total industrial output, and achieved an average annual real growth rate
of 19% between 1988 and 1999. TVE exports accounted 48% of China’s total exports, at a
value of US$94 billion. Between 1988 and 1999 they achieved an average annual real
export growth rate of 28%, China’s total export growth rate was only 13% by comparison.
TVEs are economic units owned either collectively by local residents in rural areas, or
mainly owned and controlled by peasants, however, the rights of ownership are exercised
on their behalf by the local governments, hence the name Township and Village
Enterprises. Management is exercised either by local government officials in the role of
entrepreneurs or, increasingly, by hired professional managers. TVEs are generally small in
size, have a high degree of autonomy (especially compared to SOEs), and have severe
budget constraints due to lack of access to central government and bank loans. Profits
from these TVEs are generally a major source of revenue for local governments.
Management receives performance related pay, whereas workers are paid per unit
produced. Freer employment regulations allow managers to hire and lay off workers
depending on production demands. Workers are not as highly skilled as workers in SOEs
are, as they are generally from the local community and have received little training.
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However, TVEs attract highly skilled engineers due to the policy of performance related
remuneration.
TVEs positioned themselves in areas that lacked output or where there has not been a
strong SOE presence. They have made full use of China’s cheap labor asset, and focused
production in areas that are either labor intensive or resource intensive, such as toys, food
processing, clothing and textiles. As the economy opened up, TVEs received large amounts
of export oriented Foreign Direct Investment (FDI), especially for the production of toys,
clothes, textiles, electronic parts, and complete electronic products.
Research findings, presented by Fu and Balasubramanyam, show that these enterprises
are much more efficient than State Owned Enterprises (SOEs) in similar industries. They
argue that it is not so much the nature of the ownership of these manufacturing
enterprises that ensure their efficiency and success, but the nature of the management.
TVEs are found to more frequently have management that responds to market forces, and
they are more market-oriented than SOEs. In their evolution their exports have gradually
shifted from unskilled labor intensive products, to skilled labor intensive products. The
authors argue that TVEs had enjoyed faster productivity growth than SOEs due to their
lower starting point. Fu and Balasubramanyam state that capital productivity, labor
productivity, and social efficiency indicators, all show the greater efficiency of TVEs
compared to SOEs. They found that the average technical efficiency score for TVEs was 85%
higher than those of SOEs in similar industries in 1995.
The management style of TVEs is very different from that of SOEs. They will not be
bailed out when they run into financial difficulties. Due to their accountability structures
and their sensitivity to market forces, managers of TVEs are compelled to maximize
efficiency and minimize costs. The nature of the employment policies also facilitates this.
The authors conclude that for these reasons TVEs are not only more efficient than SOEs,
but are possibly as efficient as private firms, due to their similarities.
Xia, J., Li, S. M. & Long, C. (2009), “The Transformation of Collectively Owned Enterprises
and Its Outcomes in China, 2001-2005,” in World Development, Vol. 37, No. 10, pp. 16511662, Elsevier.
Xia et al observe that government initiated corporatization and privatization typify the
transformation of public enterprises in China since the mid-1990s. The authors argue that
the agency problems, which are conflicts of interest between owners of Collectively
Owned Enterprises (COEs, known elsewhere are TVEs – Township Village Enterprises) who
are the local government and the agent who are usually the TVE managers, make it hard
for those TVEs that have not undergone transformation to perform better than those that
have. TVEs initially performed very well in the early years of reform. The authors use
agency theory and privatization studies to examine the relationship between
organizational transformation and firm performance.
Prior to reforms only two types of ownership, State Owned Enterprises (SOEs) and COEs,
existed. Privately Owned Enterprises were only starting to be developed in the 1980s, but
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they lacked political legitimacy. Only in the 1990s did POEs and more diverse ownership
structures, like hybrids, shareholding firms and limited liability corporations, appear. COEs
flourished under partial reform due to their budget constraints and market vulnerability
which encouraged them to be more efficient, and local government ownership and
support that facilitated resources allocation, producing revenues which were then
reinvested and used for public expenditures that expedited further development. The
authors describe how COEs became increasingly bureaucratized and thus similar to SOEs
which were underperforming and inefficient. For this reason, and increased economic
reforms, POEs which are more efficient due to their market pressures and budget
constraints, and had gained political legitimacy started to grow and play a more dynamic
role in the national economy.
Through their comprehensive empirical analysis the authors found that a close
connection to the local government, which they term lishu relationship, is an obstacle for
increasing performance. Using agency theory the authors find that privatization is effective
because it aligns the interests of the owner with the agent, namely to maximize profit. In
non-transformed COEs, the agent is concerned with maximizing profit while the owner
(the local government) is more concerned with the provision of social welfare. The authors
found that management incentives to maximize profitability were curtailed in nontransformed COEs, but were increased after organizational transformation, for example,
through managers becoming owners, and thus performance was improved.
Lin, Y. F. & Liu, Z. Q. (2000), “Fiscal Decentralization and Economic Growth in China,” in
Economic Development and Cultural Change, Vol. 49, No. 1, pp. 1-21, The University of
Chicago Press.
Lin and Liu assert that the role fiscal decentralization in China’s economic growth has
not been examined adequately. Fiscal decentralization is largely the same in China as it is
in the rest of the world with its delegation of fiscal power and responsibility in order to
foster efficiency through using the local government’s informational advantages. Local
governments are under closer scrutiny by their constituencies when providing public
services, which encourages practices which are more in the interest of the general public.
Local enterprise efficiency might also be increased by government fiscal decentralization
because of firmer budget constraints.
The authors used a production-function-based regression analysis to examine the
effects of fiscal decentralization between 1970 and 1993, and found that fiscal
decentralization had a positive effect on economic growth. Rural reform, development of
the non-state sector, and capital accumulation also played important roles in China’s rapid
growth.
The authors describe three factors that led to fiscal reforms: 1) The government was
forced to seek others sources of revenue when dominant State Owned Enterprises (SOEs)
started to lose their dominance when faced with the growth of more efficient non-state
enterprises (TVEs, joint ventures, and POEs). 2) The balance of political power and
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autonomy had already moved to local governments, therefore local governments
demanded that they also have more fiscal autonomy. 3) In order to promote economic
growth and revenue collection, it was found that local governments had more incentive if
their economic interests were also served.
In 1980 saw the first step of fiscal decentralization. Revenue and expenditure measures
divided into three categories were introduced: central fixed revenue, including SOE
remittances and customs tax; local fixed revenue, including agricultural tax and TVE
remittances), and central-local shared revenues, including industrial and commercial tax,
and turnover tax. In 1985, in response to the different conditions of different local
governments, new types of revenue sharing were introduced: 1) Lump sum of revenues to
be given to central government. 2) Specific shares of local and shared revenues to be
transferred to the central government. 3) A lump sum was transferred from the central
government. 4) Central government subsidies to increase by 10% annually. Different
methods were used for different provinces, regions, and municipalities. As local
governments could still keep a share of the revenues, they had more incentives to increase
the revenues.
In 1988 six new forms of revenue sharing replaced the earlier ones: 1) A share of local
revenue to be remitted. 2) A share of local revenue to be remitted in a base year, after
which remittances increased at predetermined rates. 3) Fixed amount to be transferred to
central government. 4) Fixed amount to be remitted in base year, after which the amount
increases at predetermined rates. 5) Local government receives a fixed subsidy for the
base year which then increases at predetermined rate. 6) The local government receives a
fixed subsidy.
Lin and Liu state that fiscal decentralization was not limited to the central-provincial
level, but also affected the provincial-county level. They state that there is evidence to
suggest that fiscal decentralization had a positive effect on the development of TVEs as
local governments retained a larger share of revenues and invested this in the highly
productive rural industry sector.
After a thorough econometric analysis of the effects of fiscal decentralization on
economic growth Lin and Liu found that it indeed had a significant effect, as did rural
reforms, capital accumulation and non-state sector development. They also found that
fiscal decentralization raised the growth rate due to more efficient resource allocation,
rather than encouraging more investment.
Vivian Zhan, J. (2009), “Decentralizing China: Analysis of Central Strategies in China’s
Fiscal Reforms,” in Journal of Contemporary China, Vol. 18, No. 60, pp. 445-462,
Routledge.
Vivian Zhan argues that the Soviet Union’s organizational reforms led to the collective
defection of its ministerial bureaucrats and regional governments, which led to the fall of
the Soviet Union, because the reforms had undermined the authority of superiors over
their subordinates. China has managed to keep the country together while decentralizing
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and at the same generating local economic development. She states that it is the
combination of the central government’s political and fiscal system agenda setting power
and its shrewd strategic bargaining with local government resistance that have allowed it
to preserve and strengthen its central control of fiscal power.
Zhan states that many have already observed that China’s central-local relationship is
like a principal-agent relationship. In such relationships there are often conflicts of interest.
In China one of these conflicts of interest concerns competition for the fiscal resources
necessary for the provision of public goods and the functioning of institutions. In the 1980s
local governments gained an increased fiscal responsibility and authority. Local
governments are also responsible for implementing central government policy. The central
government, however, often doesn’t provide sufficient funds for their implementation
therefore local governments have to exploit all their available resources. Another problem
of this principal-agent relationship in governmental structures is that the lower the level of
government the more concerned they are with local interests, and the less concerned they
are with the interests of the central government. Also, as local officials are rewarded
according to the economic and social performance of their localities, they are not
concerned about whether or not their activities have a negative impact on those outside
their locality, or even the nation as a whole. Zhan gives the example of competition with
other local governments in reducing tax rebates intended to attract investments to the
regions, which put a fiscal strain on the central government. As the pay and welfare
provisions for local officials are determined by the economic strength of their locality, they
maintain good relations with local businesses, which in turn provide them and their
families with better opportunities, in various forms, than the government could, again
putting local government and officials’ interests in opposition to the central government.
There is a great informational asymmetry in the government structure of China due to
its many layers from top to bottom. It is difficult for the central government to verify
information from townships and villages for example. These are also likely to have a
tendency to hid problems and exaggerate achievements. Zhan also describes the difficulty
for the central government to get information about local tax revenues, in order to get its
share of the taxes, before it set up the local offices of the national tax bureau and other
institutional reforms. This makes it difficult for the government to monitor local behavior.
However, one monitoring system in China is the use of local citizen reporting in the form of
the petition system. At all levels of government there are petition departments that
receive complaints either by mail or in person, which are then intended to be investigated
and redressed. Usually these petition departments are used by peasants and workers. In
2002 8.6 million complaints were filed. However, due to the large number of complaints
and the small size and weak power of authority of these offices, many complaints are not
properly addressed, only 0.2% were. A level of corruption also obstructs the investigation
of some cases. However, the media is increasingly playing a monitoring role, as is the
internet, Zhan states.
The first fiscal transition period, 1980-1993, was marked by decentralization which gave
a share of tax revenues to local governments who were responsible for generating more
revenues. They also had the incentive of a larger amount of tax revenue, and were
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responsible for their own expenditures, which were often used to improve infrastructure,
housing and other public services. Arrangements were made in the form of fiscal contracts
negotiated between the center and the provinces, deciding what taxes were to be shared
and how they were to shred, this system was known as ‘fiscal contracting’. Zhan shows
that fiscal decentralization actually increased revenues rather than decreased them. In
addition, as fiscal responsibilities were delegated the central government’s own budgetary
expenditure also dropped. The central government also used its authority to make the
necessary adaptations to the fiscal system for its own benefit.
The more recent fiscal transition was initiated in 1994. This new tax sharing system
meant that taxes were to be shared at fixed rate between the center and the province. The
system increased the central share of budgetary revenue. Large volume taxes and easy to
collect taxes were shared, whereas more difficult to collect taxes remained with localities.
The central government’s share of fiscal revenue increased from 22% in 1993 to 55.7% in
1994, and remained over 50% thereafter, the author states. To improve informational
symmetry the government established two tax bureaus (local tax bureau and local offices
of the national tax bureau) and separated the collection of local and central taxes. The
government still continued to make adjustments to the fiscal system for its own benefit,
and to constrain excessive or illicit local tax extractions, Zhan observes. As the central
government now takes a larger share of revenue from industrial enterprises, local
governments have started to pay more attention to a previously ignored tax, namely,
business tax. This has become an incentive to develop the China’s local service industries.
The government’s agenda setting power allowed it to initiate reforms and adjustments
that met new problems, sometimes as experiments, before they developed into threats to
political and economic stability. The central governments bargaining tactics include:
“divide and conquer” in which individual provinces were negotiated with individually so as
to prevent alliance formation; implementing adjustments in such a way that they did not
have a negative effect on local governments if the changes were accepted; and allowing
provincial governments to make their own subprovincial arrangements. These have all
helped to reduce opposition to recentralization.
Grove, L. (2006), A Chinese Economic Revolution: Rural Entrepreneurship in the
Twentieth Century, Lanham: Rowman & Littlefield.
Reviewed by Ong, L. (2008), “A Chinese Economic Revolution: Rural
Entrepreneurship in the Twentieth Century [Book Review],” in The China
Journal, Vol. 60, July 2008, pp. 181-182.
Ong provides a comprehensive review of the main aspects of Grove’s book, as well as
providing additional insights. “A Chinese Economic Revolution” describes the development
of rural industry in Gaoyang in Hebei province, focusing specifically on the textile weaving
industry. The author states that development occurred in three stages. The first stage
started in the late 1930s and ended with the Japanese invasion [this likely refers to the
invasion of Gaoyang rather than China as a whole because the Japanese invasion of China
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began in 1931]. The second stage, according to Grove, started after the war and lasted
until large-scale investment in State Owned Enterprises by the central government pushed
out smaller rural industries. The third and final stage began in 1978 with the economic
reforms.
Ong states that Grove’s book is more an ethnographic study than a wider analysis of the
process of rural industrialization. The book is enriched with the oral histories of rural
factory workers. Grove shows that in Gaoyang entrepreneurship developed through
private initiatives and informal finance, in addition to the subversion of discriminatory
state policies that were in opposition to private enterprise. Ong argues that this resembles
the entrepreneurial development model in Wenzhou, which has been the subject of many
studies. In Wenzhou private entrepreneurship was funded by borrowings from family and
friends and even underground money houses. Ong observes that these enterprises
managed to develop in an environment ideologically hostile to privately owned business.
Friedman, E. & Lee, C. K. (2010), “Remaking the World of Chinese Labour Relations: A 30Year Retrospective,” in British Journal of Industrial Relations, Vol. 48, No. 3, pp. 507-533.
Labor relations and working class politics changed dramatically through China’s
economic reforms. The process of commodification of labor and the casualization of
employment have destroyed the social contract through the marketization of employment
relations resulting from the economic reforms. Loss of job security and generous benefits
has also been the result of these changed relations. Furthermore, there has also been
increased, but localized, working class resistance. Labor NGOs and official trade unions
have helped in the state’s efforts to individualize and institutionalize labor conflicts
through the use of labor law and arbitration mechanisms.
Commidification and casualization result from political and economic forces both in and
outside China, which has reduced labor standards and increased discontent and unrest
which is both localized and uncoordinated. In the 1980s the government’s socialist
employment system was reformed to disempower the working class at the point of
production while granting them many rights and entitlements in the legal and
administrative systems. Reforms created a new alliance between the state and capital,
both domestic and global, keeping working class resistance localized and uncoordinated,
reducing collective power. From the 1950s to the 1980s China’s socialist social contract
ensured cradle to the grave welfare, pensions, housing, medical care and educational
opportunity to the workers who in turn pledged their political loyalty and compliance to
the state. The socialist employment system was drastically changed with the economic
reforms from the 1980s onwards. Many of the welfare entitlements previously provided
by the state were delegated to a system of employer and employee contributions to
insurance plans. These were managed by the labor contract, which in turn had to adhere
to the newly developed labor legislations which attempted to regulate employment
relations and institutionalize a labor rule of law in the more market-oriented employment
system.
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The low compliance with the National Labor Law has made the move from socialist
social contract to legal labor contract very difficult. In a 2007 National People’s Congress
report it was found that only 50% of all workers signed contracts, and only 20% of those in
non-state firms did so. Of the contracts that were signed 60-70% were short term. A 2006
State Council report on migrant workers showed an area of employment where labor law
is noticeably absent. Only 12.5% of the 120 million migrant workers signed contracts, 15%
participated in a social security scheme, and only 10% received medical insurance.
Additionally, only 48% of migrant workers get paid regularly, 68% had no weekly day of
rest, 54% had never been paid for overtime, and 76% do not receive any legal holiday
overtime wages. These are problems that also affect other workers but migrant workers
are a more severe example. 64.4% of migrant workers are in industrial employment, and
33% are in the service sector. Most hold rural household residence permits. These give
them certain entitlements, for example, a plot of land, but make it difficult for them to find
formal and permanent employment as they can only get temporary household residence
permits. They use their jobs in the cities to support families back home in the countryside,
where they return to in times of crises, e.g. labor disputes or unemployment. Their lack of
sustained collective mobilization has made it difficult for them to get their needs and labor
conflicts appropriately addressed. \
Employment has also become increasingly informal with 10% of urban workers
registered as self-employed and another 36% not registered. A relatively small percentage
of workers is employed in secondary industries, contrary to Britain´s own development
model. Since the early 1990s more workers have been employed in tertiary industries than
secondary, with most workers still engaged in primary industries, though this has been
rapidly declining. Most tertiary sector workers are engaged in industries like food and
beverage, hotels, entertainment, cleaning and healthcare. Large numbers are employed
without contracts, and with the growth of this sector, the numbers of informally employed
is likely to grow. The more formalized employment structure of the manufacturing sector
has also shown a trend towards flexibilization through the increased use of dispatch
workers, amounting to 270 million in 2008 alone.
Poor regulation of labor has caused labor standards to drop. This poor regulation is
largely due to the fact that local governments responsible for regulation are more
concerned with capital accumulation. The central government has, though, taken steps to
address the worst violations. One of the more notable steps was the 2008 Labor Contract
Law which tried to increase adherence to the National Labor Law through the use of higher
fines for employers refusing to sign labor contracts. Reports have shown that this has been
quite effective. Unions and labor departments in large cities have also made efforts to deal
with non-payment of wages, and in 2003 8.33 billion yuan was recovered in back wages.
However, these efforts deal with the symptoms rather than the source, namely the lack of
countervailing power at the point of production. As a result of the government’s promoted
‘rule by law’ and the more developed labor legislation system, there has been an increase
in labor dispute arbitrations.
Labor unrest has reached levels unheard of in the history of the People’s Republic of
China. In the state sector this is due to accelerated privatization, restructuring and
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redundancies in State Owned Enterprises. Migrant worker insurgency has also increased
and become gradually more radical, with acts of resistance ranging from sit-ins, strikes and
riots, to murder and threats of suicide. Their first course of action is usually litigation,
however, often the processes are too long or their cases are deemed unfit for official
intervention, leading to the acts of resistance mentioned above. Regardless of this it
should be emphasized how successful the state has been at directing labor conflict into the
legal system. The more frequent protests have led to a response from the state, with the
All China Federation of Trade Unions (the ACFTU is formally subordinate to the Party)
successfully securing pro-labor legislation at the national, and sometimes provincial and
municipal levels. However, independent unions are heavily repressed and enterprise level
unions, when present, are extremely weak. Trade Unions function like and think of
themselves as government agencies. It is top-down form of representation, in the sense of
‘we represent you.’ Hence trade union efforts have been to direct labor disputes into the
legal system, as the central government has promoted, rather than towards collective
mobilization.
Labor focused NGOs, frequently harassed by the state, have, in their attempts to help
exploited workers, also encouraged workers to use the legal system to address their
grievances. They have done this partly through guidance in consultations, but also by
providing training on labor legislation to workers. However, these organizations are still
seen by local governments as harming labor relations, intensifying conflicts and
threatening public security.
The labor contract law, described briefly above, originally intended to give workers
more rights and entitlements. Interestingly, the draft version was publicly criticized by
private and foreign capital, as well as EU and US Chambers of Commerce, although it did
receive strong support from workers. Critics claimed, among other things, that it would
create too much rigidity in the labor market. The final version thus gave more rights and
powers to the managerial level.
The employment relations in China can be summarized as a shift from social contract to
legal contract. Workers lack the right to independent organization to represent their
interests. The labor contract law, which could have granted workers more rights and
entitlements, was watered down in favor of private and foreign capital. The state
emphasizes legislation as the best system to mediate labor disputes. However, poor
monitoring and enforcement, due to local governments´ interests in capital accumulation
from enterprises, have caused to continued violation of workers’ rights.
Oi, J. C. (1992), “Fiscal Reform and the Economic Foundations of Local State Corporatism
in China,” in World Politics, Vol. 45, October 1992, 99-126, Cambridge University Press.
Peasant per capita income increased from an average of 133.57RMB to 629.79RMB
between 1978 and 1990. Oi describes how from 1950-1978 the average per annum
increase was 3.2RMB, from 1978-to 1990 it was 41.4RMB. The author states that fiscal
reform in which property rights were assigned to local governments provided them with
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the necessary incentives to pioneer local economic reforms and development. She adds
that as long as some organized unit has secure property rights, there will be economic
growth. This bonding of state and economy Oi terms “local state corporatism,” as the
government coordinates the economic activities of companies within its jurisdiction much
like a diversified business corporation would.
The main objectives of fiscal reforms in the early 1980s were to make local
governments more self-sufficient and reduce the financial burden on the central state, as
well as providing the incentive for local governments to foster economic growth. The most
important of these reforms was the tax responsibility system in which local governments
were made responsible for local expenditures and retained all, or most, of the collected
revenues after a portion was transferred to the central government.
This revenue sharing became more formalized when fiscal revenue contracts were
signed between all levels of government, from center to township and village, each
between the one level lower and one higher. The nature of revenue sharing was different
in different contracts, based on the relation of revenues to expenditures. If revenues did
not cover expenditures then the higher level would provide subsidies. Oi gives the example
of one county in Shandong where 7 of 17 townships paid taxes, while the other 10 had
deficits and therefore received subsidies.
Oi argues that most local share taxes are not major sources of revenue, however,
private enterprise tax, collected by local governments, has been becoming increasingly
important, accounting for 25% of all taxes in one county in Shandong. Prior to reform
extra-budgetary funds were between 1% and 5%, and were subject to central government
approval before they were used. After reforms the total extra-budget revenues were 91.2%
of within budget revenues (such as agricultural tax and profits from state and collective
owned enterprises). Even after reforms, State Owned Enterprises (SOEs) were the largest
tax contributors [note year of publication], but their share of total taxes was decreasing, as
the share from Township and Village Enterprises (TVEs) increased. From 1978 to 1990 TVE
revenues increased from 2.2 billion RMB to 27.5 billion.
Enterprise income tax is the tax paid on profits. It has eight progressive rate grades,
from 10% to 55%. What costs could be included before tax was generally left to the
discretion of local authorities. As it is a profit tax this was a way to maintain incentives for
enterprises while still providing revenue to government. Enterprise income tax accounts
for 25% of the national total industrial tax. Some provinces implemented various forms of
tax cuts to encourage enterprise growth.
Local governments receive tax revenues for taxes on sales, i.e. on price of goods or
services provided, before costs are deducted. In 1988 75% of total taxes on TVEs was from
this sales tax. Although these were more rigorously enforced than enterprise income tax,
there were some instances and forms of tax breaks intended to attract investment and
develop existing enterprises.
In townships, TVEs paid most of their non-tax levies to the economic commission not the
local government. The economic commission uses these funds solely for TVEs. TVEs pay
between 10-20% of gross income, before tax, to the local government. After tax levies are,
depending on ownership level, paid to the township or village government. The economic
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commission takes between 20-40% of after tax profits (regulations stipulate that only as
much as 20% can be taken), which they often use for other non-profitable or growing
enterprises within their “corporation.”
Tight budget constraints are an incentive for local officials to promote revenue
producing sources. This is the case for those who pay remittance, those who don’t, and
even those who receive subsidies as the subsidies hardly cover expenditures and there are
no additional funds available for growth. Oi argues that some localities have failed to
develop not because they didn’t have the right incentives but due to other constraints like
incapable officials or a lack of resources. Another form of incentive was to set quotas for
lower levels of government. Officials’ bonuses were then tied to the performance of TVEs
to meet these quotas.
Decollectivization removed a major source of local government revenue, which then
only received an insignificant amount of agricultural tax [note year of publication]. Income
from farmers’ agricultural product sales went straight to the households, bypassing the
local government. Private enterprises initially still lacked political legitimacy and therefore
had little revenue generating potential, hence TVEs emerged as a source of revenue
generation for the local government as diversification of rural economy was also being
encouraged. This not only solved the surplus labor problem that resulted from
decollectivisation but it also created increasingly large amounts of revenue for the
government. By 1991 rural industry produced 50% of total industrial output, a figure equal
to that of SOEs. As local governments exercised ownership they had legitimate access to all
the funds of TVEs which they used to provide public services and subsidize poor sectors.
Managers in TVEs were only responsible for the day to day management of their
enterprises. Local governments determined what to do with profits and other factors of
production such personnel and product line, about which managers were allowed to make
suggestions but the final decision was made by the local governments.
The government provides preferential resource allocation treatment to enterprises that
create the most benefit for the whole of the “corporation.” Many leading town-county
level cadres often lobby on behalf of specific productive enterprises (though selection
criteria are not clear, and might also be the result of relationship networks and corruption).
County tax offices even lobby banks on behalf of enterprises, and the network of
government bureaus often work together to promote selected TVEs. In addition, they are
able to provide low- or no-interest loans to those companies. Recently TVEs have been
given credit ratings, which are reviewed on a yearly basis, to facilitate the selection
process, and make it more transparent.
Oi concludes that the result of local state corporatism has been rapid economic growth
of rural economies, with TVEs now rivaling SOEs, as well as improving the provision of
social services and income distribution.
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Perkins, F. C. (1997), “Export Performance and Enterprise Reform in China’s Coastal
Provinces,” in Economic Development and Cultural Change, Vol. 45, No. 3, pp. 501-539,
The University of Chicago Press.
From around 1982 to 1994 China’s exports grew 13% per annum, Perkins states, equal
to that of the most successful Asian economies. From 1994 to 1997 export growth rate had
risen to 20% per annum. In 1994 74% of China’s exports came from six provinces and
municipalities: Shanghai, Guangdong, Jiangsu, Shandong, Fujian and Zhejiang, and more
than 60% came from the non-state sector, showing that performance and benefits are
distributed equally. The biggest export growth was in manufactured goods, which grew
more than 7.5 times between 1980 and 1994, whereas total exports only grew 6 fold.
Manufactured goods are labor intensive which utilizes China’s comparative advantage.
State sector exports dropped from 92% in 1985 to less than a third. Collectively Owned
Enterprises (COEs known elsewhere as TVEs), joint ventures (JVs), Privately Owned
Enterprises (POEs) and foreign funded companies produced the remaining two thirds. TVE
exports rose from 5% to 25%, and POE and JV exports increased from 1% to 20%. Between
1992 and 1994 foreign funded exports rose to 29%. More than 90% of non-state sector
exports are manufactured goods, of which 94% are produced in coastal provinces.
One of the earliest trade reforms was the establishment of special economic zones and
open cities in some coastal provinces. These zones had better infrastructure and more
liberal regulations regarding taxes, foreign investment, trade, and foreign exchange, which
was intended to attract export-oriented foreign companies. These companies only had to
pay 15% company tax, whereas nationally the company tax rate was 55%. Perkins adds
that this is now 39% [note year of publication]. Foreign companies in these zones could
retain 100% of their foreign exchange earnings and enjoyed import duty tax breaks.
Chinese companies gained access to foreign markets through registered trading companies,
which had replaced the centralized foreign trade enterprises. If a company’s exports were
large enough, it could bypass these registered trading companies and access foreign
markets directly. In 1991, the government removed export subsidies with the intention of
encouraging registered trading companies to export goods with the highest returns on the
international markets. Although, tariff and non-tariff barriers remain one of the highest
among developing countries, due to a broad system of import tax breaks for exporting
industries import, taxes only account for 5.6% of the value of exports compared to 51% in
India.
Shanghai produced 30% of China’s total exports before 1978, as it was considered the
traditional industrial center of China. However, in 1986 it produced only 10% and in 1994
only 8%, being overtaken by Guangdong which by 1994 accounted for 44%. It should be
noted that Shanghai has a larger number of SOEs. Guangdong’s distance from Hong Kong
and Macao has made it an attractive destination for foreign direct investments (FDIs) from
these areas, receiving 34% of China’s total foreign investment from these areas. Hong
Kong also provides a link for Guangdong to foreign markets. Guangdong has also benefited
from lower fiscal transfers to the central government than some other coastal cities due to
its lack of SOEs. However, the author argues that the rapid pace of reforms and
liberalization have played the more important role in Guangdong’s success. It was only in
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the early 1990s that Shanghai was opened up, whereas Guangdong was opened up in the
1980s. In the period 1992 to 1993, FDI in the Shanghai municipality increased by 430%
from 6.8 billion RMB to 30 billion. Shanghai’s export growth rate has since caught up with
the national average.
Perkins’ findings indicate that SOEs are less export-oriented. More labor intensive
industries are more export-oriented than capital intensive industries. TVEs, JVs, and
foreign funded companies are also more export-oriented, regardless of what goods they
manufacture. At that time, 1997, high tech products were more for the domestic markets
as those products were then unlikely to compete on the international market. Exporting
industries were all more productive than non-exporting companies, an average of 32%
more productive. The author found that the direction of causality was from exportorientation to improved productivity. Export performance improved with increased
decision-making autonomy for the company, as it was better able to compete in exports
markets dues to less bureaucratic interference. Perkins also found that companies with
higher domestic resource cost ratings also exported more. This contradicts expectations of
a market economy, although this might be due to increased exposure to the market
pressure of export products and domestic resources, Perkins observes. Companies in
special economic trade zones were substantially more successful than companies outside
the trade zones. Companies that had control of their own exports, rather than using
intermediary trade companies, had better export performances. The proportion of loans in
the total investment and the percentage of retained profits, Perkins found, had a positive
correlation with productivity.
The author states that the most important finding is that export orientation improves
productivity in China (not vice versa). Export orientation, he argues, can be fostered by
spreading the privileges of special economic zones nationwide and creating a fully
convertible RMB, among other measures.
Cerra, V. & Saxena, S. C. (2002), IMF Working Paper: An Empirical Analysis of China’s
Export Behavior.
Reforms which are expected to have made exports in China more responsive to market
prices were implemented in several stages in 1984-85, 1988, 1991, and 1994. The authors
state that these included increased foreign exchange retention quotas, access to foreign
exchange adjustments centers (FEACs) at more depreciated market-determined exchange
rates (swap rates), and the reduction and eventual elimination of mandatory export
planning.
In 1978, when the reforms were initiated, 12 foreign trade corporations (FTCs), which
were responsible for fulfilling the government’s central trade plan, performed nearly all
trade transactions. These FTCs were supplied with the predetermined quantities of export
goods from exporting companies. All foreign exchange earned was then transferred to the
central bank at the official rate. FTCs could not choose which goods were to be exported
nor the price at which they were to be sold, which meant that they often exported at a
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loss due to lack of market sensitivity. These losses were then subsidized by the central
government. This practice of subsidizing loss was discontinued after 1991. Mandatory
export planning was also gradually reduced. In 1984, the state stipulated that 60% of
exports were under the mandatory plan, 20% were value targets given to provinces, and
the remaining 20% were non-plan exports. These plan percentages were adjusted again in
1988 to favor non-state exports. In 1991 they were finally eliminated. As this coincided
with the subsidy abolition there was an increase in competition among FTCs. Where prices
had formerly been fixed, now, due to FTC competition, suppliers were able to receive
better prices for their export goods.
In 1984 local governments were permitted to retain a share of their foreign exchange
revenue, and in 1985, exporting companies were also granted this right. This foreign
exchange could be used to purchase imports or it could be sold. By 1988 all companies
legally able to retain foreign exchange were given permission to sell it in FEACs at a
weighted average of the swap rate and official exchange rate. That same year, and again in
1991, retention quotas were increased. By 1994, the quota system was abolished. These
steps increased the responsiveness of exports to relative prices.
Export performance of domestic enterprises was boosted when the exchange rate was
unified in January 1994, at the prevailing swap rate. This caused the official exchange rate
to depreciate by 50%, which meant an effective devaluation of 7%.
China’s external sector reform scheme increased market incentives and encouraged
exporters to respond to signals concerning market price. Price elasticity of supply moved
from a negative (i.e. loss incurring) to a significant positive over the course of the reforms.
The authors also found that as enterprises were permitted to retain increasingly large
amounts of their export gains, higher export prices began to encourage supply. Their
findings also indicate that export supply has, since 1994, become more responsive to
market prices. The authors conclude by stating that, during the 1985-2001 period of
analysis, China’s export suppliers increasingly behaved according to the expectations of
economic theory based on a market economy.
Section 3 – Poverty Alleviation
Oi, J. C. (1999), “Two Decades of Rural Reform in China: An Overview and Assessment,”
in The China Quarterly, No. 159, September 1999, pp. 616-628, Cambridge University
Press on behalf of the School of Oriental and African Studies.
Jean Oi describes how agriculture and peasants have paid for the Chinese government’s
program of industrialization as prices always favored urban producers rather than rural.
However, she also states that more than 200 million peasants were lifted out of poverty by
government procurement increases, the newly freed market, and new opportunities for
income. In addition, rural industry developed from almost nothing to being the fastest
growing sector in the whole economy. Rural incomes, in per capita terms, increased by 63%
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between 1985 and 1997. Nevertheless, the gains in grain production started to fall in the
second half of the 1980s after the initial boom period immediately following reform in
1978. This was due to the move away from agriculture by much of the rural workforce in
search of better earning jobs in other sectors and other regions. This was exacerbated by
the fact that the government remained intent on keeping the grain prices low in order to
maintain a steady supply to urban areas. Also, given the high cost of production and lack of
infrastructural and technological support since de-collectivization, profit margins from
agriculture were low. The cost of production rose by approximately 15% annually between
1984 and 1996, and the government, to which the peasants are required to first sell their
quotas, often only gave an IOU. The state hoped to solve this latter problem, the author
asserts, through the establishment of the Agricultural Development Bank.
Oi notes the increasing regional inequalities, as coastal regions continue to develop
much faster than the central and western regions. She also points to the fact that there
have been a number of instances where discontent has turned into unrest. She observes
how the “trickle down” effect underlying Deng Xiaoping’s “let some get rich first policy”
has made many of those who have either fallen behind in the development process, or
those who have not even benefited at all, to become anxious. Oi also points out that
although the initial reforms are still incomplete they have significantly changed the
economic and political context. China now faces the more difficult challenge of
consolidation of the reforms. The author states that the regime has now started to make
trade-offs that might seem economically irrational in order to maintain political and social
stability within the increasingly complex and interrelated policy context.
Migration by the rural workforce has been facilitated by the rural reforms, however,
these peasants are still tied to their land by the policy of household responsibility
contracting. This policy prevents peasants from selling their land, which they are allocated
regardless of whether or not they want to farm. They are further required to cultivate it,
pay taxes and fees, and to sell the set quota of grain for each plot to the state [note year of
publication]. As a result, many farmers either leave the old and weak to farm, or they use
their own earnings to buy the required quota of grain and sell it to the state. The
government’s main concern is of course food security. However, Oi draws attention to the
plans by the State Planning Commission and the Ministry of Agriculture to implement
large-scale rural urbanization and re-classification affecting 300 million peasants by 2010.
The government’s concern about food security has prevented it from diversifying and
developing the rural economy, though it wants to do so, and understands the need. More
than half of China’s total industrial output originates from rural areas, it also makes up a
large part of exports, and has been responsible for a sizeable part of the rise in rural
incomes. However, aside from its worry about food security, the state is also worried
about the political backlash that would result if it were to attempt to take land away from
the peasants in development projects, because although there might be less interest in
farming, peasants are still unwilling to give up their land. The state understands that the
land is vital economic cushion for the rural communities. During the 1980s the government
pursued a policy of using local-state led developments schemes that favored publicly
owned enterprises at the township and village levels. However, during the 1990s, local
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governments started to shift their attention to private, with the backing of the central
government. Gradually, the collectively owned enterprises, many of which by the 1990s
had become liabilities rather than assets, were privatized, as these would then again
become a source of tax revenue.
Oi also draws attention to the development of democratic elections and representative
assemblies in villages. The central government, she states, sees these as a useful “pressure
valve” that directs attention away from the central authorities and towards the local
leadership. She states that examples show that where leaders are popularly elected, there
are higher levels of citizen compliance when it comes to fee payments and meeting
obligations. She also cites preliminary evidence that suggests that the more industrially
developed a village is, the less political participation there is, both in the occurrence of
contested elections and in village assembly attendance. Oi further points out that in no
situation is the highest official in the village, namely the party secretary, subject to popular
election.
Zhang, L. X., Rozelle, S. & Huang, J. K. (2007), “Poverty Alleviation in China: Successes
and Lessons,” in The Dragon and the Elephant, Baltimore: The John Hopkins University
Press.
Zhang et al state that poverty in China is largely a rural problem, and their article
focuses mainly on poverty alleviation in those regions. China’s economic reforms led to
rapid growth which in turn sharply increased rural per capita income and greatly reduced
the occurrence of poverty. However, the initial rapid pace of poverty alleviation has
recently slackened. The authors argue that some of the problems facing further progress in
poverty reduction in China include: improving the targeting of programs; providing social
services both to the rural poor and rural migrants; building institutional and human
capacity in rural areas, and relieving some of the negative impacts of adjustments caused
by WTO membership.
The authors show that prior until the mid-1980s the main poverty reduction strategy
consisted of institutional, land, market and employment reforms. It was not until 1986 that
the first nationwide poverty reduction program was launched as a response to growing
income disparity, and the fact that the extreme poor in remote locations were still
untouched economic growth. The authors claim that the ensuing poverty reduction
program can be divided into three stages.
The first nationwide poverty reduction program started by targeting counties with low
per capita incomes. Depending on location, political considerations, and whether or not
the counties were inhabited by large ethnic minority populations, the cut off lines were
300, 200, or 150RMB. However, this targeting was unsatisfactory, and in the mid-1990s
the next stage was entered with adjusted designations of poor counties and a revised
poverty measurement.
This second stage, known as the 8-7 Poverty Reduction Plan, identified 592 target
counties to focus on. The plan improved infrastructure, electricity and access to drinking
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water. It provided access to universal education and improved healthcare. Additionally,
the plan developed off-farm labor opportunities and improved agricultural production.
However, this plan also suffered from targeting issues which essentially excluded half of
the rural poor in other counties, and suffered from supervision issues. Further, many funds
came in the form of loans to Township and Village Enterprises (TVEs) as these were seen to
have potential generate capital, and the help to alleviate poverty. However, TVEs were not
primarily concerned with poverty reduction, and as a result the funds did not reach
households.
The third step is known as the Rural China Poverty Alleviation and Development Plan
and was launched in 2001 with the aim of being completed in 2010. It was the result of a
reflective and consultative conference analyzing past strategies and designing the new
plan. It devised the following objectives: 1) By 2010 the basic needs of the extreme poor
should be met. 2) Basic infrastructure should continue to be improved. 3) Production
conditions in poor areas are to be improved. 4) Human capital development should be
improved in rural areas. Local governments were given more autonomy in tackling poverty.
New criteria for selection were devised, and 30% of the resources were to be used outside
of target areas. Civil Society was encouraged to join the poverty alleviation forces, as were
international groups. Women, ethnic minorities, and the disabled became specific target
groups. Funds were increased, but the share of these to be issued as subsidized loans was
also increased.
In 1986 the State Council established the State Council Leading Group Office on Poverty
Reduction to provide coherence of measures, facilitate implementation, and provide
supervision. The executive arm of this was known as the Poor Areas Development Office.
These twin offices were also created at lower levels in the national governmental hierarchy,
all the way down to the prefectural and county level.
China greatly reduced poverty since the reforms in 1978. If the measure of poverty is
taken to be 1 dollar a day purchasing power parity (the international standard), then China
reduced poverty from 31.3% in 1990 to 11.5% in 1998, while South Asia’s poverty rate fell
from 45% in 1987 to 40% in 1998, and Africa’s occurrence of poverty declined from 46.6%
to 46.3% between 1987 and 1998, according to a 2001 World Bank report. Levels of
education in China improved and illiteracy was greatly reduced, though remote and
marginal areas still remain cause for concern. Child nutrition statistics have also improved
and per capita income has increased.
The authors claim that there is a causal relationship between economic growth and
poverty reduction. Rural industrialization helped to increase rural incomes, as well as
developing the national economy and foreign trade. An economic environment which
encourages entrepreneurship and provides off farm employment opportunities, as well as
investment in education and agricultural R&D, and other methods that allowed poor
farmer to get money directly, were found to have a positive impact on poverty reduction.
Zhang et al do warn that certain issues remain: targeting is still not satisfactory and
poverty investment has not been effective in reducing poverty. However, government
efforts have been effective to some extent. Well devised and well target projects, like the
Food-For-Work Program, have been effective in improving local conditions and in directly
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contributing to household income increases. Further challenges include the problem of
poverty now being concentrated in remote, resource poor locations in the northern,
northwestern and southwestern regions of China, whereas in the past poverty was
widespread. Other problem groups include the elderly, the urban poor and rural migrants.
While there has been a shift towards improving human capital development, institutional
improvements have been limited. Previous approaches have tended to be top-down and
government led. Developing stakeholder participation might help to devise projects that
are more appropriate to the needs of the local communities. NGOs have been better at
reaching the grassroots. Investing in social services for rural poor and rural migrants has
had positive impacts of poverty reduction. The government has also connected the policy
goals of environmental protection and poverty alleviation due to its realization of their
interrelationship. The government should also provide broader skills training in their
human capital development efforts to allow local farmers to deal with a wider range of
potential issues.
Fan, S. G., Zhang, L. X. & Zhang, X. B. (2004), “Reforms, Investment, and Poverty in Rural
China,” in Economic Development and Cultural Change, Vol. 52, No. 2, pp, 394-421,
University of Chicago Press.
China’s poverty reduction has been remarkable for its scale within in such a short period
of time, the occurrence of poverty dropped from 250 million in 1978 to 30 million in 2000.
Additionally, it is one of the few countries in the developing world that, in that last 25
years, has made any progress in reducing the number of poor in their countries. Elements
of its success include: public investment in rural areas; political and institutional reforms;
and equal access to social services and production assets. The authors argue that
economic growth and poverty reduction through economic reforms since 1978 would not
have been possible without high levels of prior investment. They state that the potential
effects of government’s pre-1978 investment were obstructed by institutional and policy
barriers. Reforms reduced these barriers and allowed investments to generate economic
growth and reductions in poverty.
Before 1978 China was one of the poorest countries in the world. Between 1949 and
1978 per capita per annum income growth was 2.3%, whereas between 1978 and 1989 it
was 15%, an annual income increase from 220RMB to 522RMB. The rapid income growth
came through improved agricultural productivity and higher prices for agricultural goods.
Due to the equitable distribution of land as a result of early land reforms, income was also
fairly equally distributed. From 1985 to 1989 the pace of income growth slowed down to
3%, as the initial reforms lost their effect. Moreover, distribution became more unequal. It
was necessary to improve efficiency, access to markets and off farm employment
opportunities in order to boost incomes. Regional income disparities developed as off farm
employment became a large source of income, as this was predominantly located in
coastal regions with already high incomes compared to the western border regions where
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most of the rural poor were. Poverty in China is mostly rural, though large income
inequalities exist in cities, numbers of poor are still relatively small in comparison.
The government has greatly increased its agricultural R&D expenditures in order to
boost productivity and it is now one of the largest public research systems in the world.
Investment in irrigation was initially very high, but competition over industrial and
residential uses will hinder further expansion. Before 1978 levels of education in China
were poor, this was exacerbated by internal disruptions such as the Cultural Revolution. In
1978 the government introduced “Nine Years Compulsory Education,” and in 1986 it was
written into law. Less than half the school aged children were enrolled in schools in 1956,
however, by 2000 98% of school aged children were enrolled. This has greatly improved
labor quality. However, the authors argue that education expenditure is still not sufficient.
The percentage of GDP spent on education is not even similar to that of most developing
countries, it is more similar to Myanmar’s and Bangladesh’s spending on education. Poorer
western regions of China have much lower enrollment rates and higher illiteracy.
Geography has made infrastructural development difficult, however, the government has
increased its expenditures especially towards high quality roads that connect industrial
centers. Heavy investment in electricity meant that by 1998 98% of villages in China were
connected to electricity, 97% of the households. This is a much higher level than in India.
Rapid growth through investments also occurred in telecommunications. 20 times higher
investment in 2000 than in 1989 meant that the number of phone sets in rural areas rose
from 3.4 million in 1992 to 51.7 million in 2000.
The authors present the findings of their statistical analysis of the effects of various
variables in poverty reduction. Improved productivity, increased agricultural salaries and
off farm employment all helped reduce poverty. Higher agricultural prices meant higher
incomes. Government poverty alleviation loans helped alleviate poverty. Improved roads,
irrigation, education, and telecommunications, as well as investment in agricultural R&D
result in agricultural growth and growth of the non-farm rural sector, though the effect of
electricity is not significant for agricultural growth, it is for the development of the nonfarm sector. Increased agricultural labor productivity increases non-farm wages, and urban
growth increases off farm employment opportunities. The authors also show that
increased investment in roads, education, irrigation, power and telecommunication has
had a significant effect in their improvement, i.e. the more money was invested in
education the more education improved.
Fan et al, through their analysis, confirm Yifu Lin and Fan’s earlier findings that rural
reforms in the form of household responsibility system accounted for more than 60% of
agricultural growth from 1978-1984. More than 51% of poverty reduction is due to these
institutional reforms. In the period 1978-1984 public investments were responsible for 45%
of poverty reduction and 12% of agricultural growth. From 1985-2000, the figures changed
drastically. Institutional reforms had little, or even negative impacts on agricultural growth
and poverty reduction. Public investments´ contribution to agricultural growth increased
to 63%, and contributed to 94% of the poverty reduction.
Nationally, government expenditure on education had the greatest poverty reducing
effect, it also provided the largest gains to non-farm GDP and rural GDP. Investment in
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agricultural R&D had the second biggest poverty reducing effect. Investments in
infrastructure also had a great effect both in agricultural and non-agricultural sectors. For
every 1RMB spent on roads, there is a 6.57RMB increase in rural GDP. For every
10,000RMB spent on education 12 people are taken out of poverty. The authors were
surprised to find that government poverty alleviation loans only had a small impact on
poverty alleviation. For every 10,000RMB provided in loans only 3 people were elevated
out of poverty. The positive effects of these investments were between 3.7 and 7 times
higher in western regions than in coastal cities. Government expenditures had the greatest
impact on agricultural growth in western regions but the greatest effect on rural non-farm
GDP in coastal regions.
The authors state that the government has an urban & industry biased investment
policy, which has led to an increasing rural-urban income gap. Only 5% of GDP is invested
in rural areas, compared to 16.4% in nationwide, even though 50% of GDP is produced in
rural areas and 70% of the population live there. More should be invested in agricultural
R&D as it is shown to reduce urban poverty too through the lower food prices resulting
from increased agricultural efficiency and productivity, which would in turn reduce rural
poverty and reduce regional income disparities. More should also be invested in education
because of its multifaceted effect in poverty reduction, especially in poor western areas.
Rural road investment should also be given priority as its poverty reduction effects are
second only to education, due to its impact on both agricultural and non-farm rural GDP.
Rural poverty alleviation loans should be better targeted as they often go to non-poor
regions, and to non-poor households, the authors found. Western regions should be given
priority due to the high returns in poverty reduction there. Considering the limited fiscal
base of western regions, eastern regions need to provide more financial aid for
development there.
Section 4 – Impacts on Society
Li, L. R. & Liu, L. (2009), “30 Years’ Reform in China’s Mass Media,” in Asia Europe Journal,
Vol. 7, No. 3-4, pp. 405-415, Heidelberg: Springer Berlin.
Liangrong Li and Lu Liu review the evolution of China’s mass media, through the 30
years reform period, from a propaganda tool of the Communist Party to the current
commercialized pluralist structure. The authors argue that there were four influential
successes in the Chinese media industry during the last 30 years.
The first major success was the change in function of the media. In the early years of
Communist China the media functioned as a mouthpiece for the party, a means for
maintaining stability, and representing the interests of the Party Central Committee.
However, by the 1980s, the political, economic and social situation had changed, and the
tradition of “Propagating the Self Centered” no longer met the needs of the time. In 1982,
“Information” was introduced as a new concept in the Chinese media. The need for
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“information” stemmed from the economic reforms. At the time of the planned economy
companies only had to adhere to the centrally stipulated production plan. However, after
companies became responsible for their own management and production, information
became their most valuable resource. Li and Liu point to an inscription made by Deng
Xiaoping in the Economic Information Daily, which was launched by the Xinhua News
Agency. The inscription read “Develop Information Resource, Serve the Construction of the
Four Modernizations” (sic.). They also describe how a forest fire in northeastern China was
the first real test of this new freedom of information. During this incident some journalists
reported on the untold story of the disaster, although they had received directives from
higher authorities to report only on the heroic efforts of the fire fighters. Later that year
the Central Committee declared that the people need to know the “important truth.”
The second major success was the commercialization of the news media. In the 1990s
there were many obstructacles in the path towards a more market-oriented media, this
was partly due to the lingering ties to its past function as a political propagation tool. One
of the authors of this article, Li Liangrong, promoted a theory that facilitated the move
towards market-orientation. The theory holds that the media in China has a double
character. Chinese ideology should be considered the superstructure of the media. At the
same, the media provides necessary information, knowledge and entertainment to the
people and society. This theory established the party’s leadership over the mass media,
while also allowing it the marketable characteristic.
The third major success was the reintegration of the media structure. The authors
describe how before the mid-1990s mass media in China suffered from three main
problems: small size, scattered distribution, and unorganized content. The restructuring
brought the media industry under management leadership allowing it to change from a
unitary structure into a multiple structure, adapting the industry’s growth pattern.
Currently most of the 40 nationally registered newspaper groups have a similar structure.
In this structure there is usually one mother paper which is directly led by the Party
Committee, a range of approximately 6-12 affiliated papers, several magazines, one
printing house and one website. A major issue in the present structures is that although
there is extensive management it is not intensive. This means that many papers under the
same umbrella company vie with each other for market share and their resources are not
used efficiently. An associated problem is that the income of these publications relies
heavily on advertisement. Restructuring also occurred in the radio and TV industries. In
2000 the Chinese radio and TV governing body required the restructuring of their
programming in order to achieve targeting and program specialization. Another major
change was brought about by a directive from the Central Party in 2005 which divided all
public media into two parts: the partially state owned welfare organizations, and the
privately operated business enterprises.
The fourth major success described by Li and Liu was the rise internet use and other
media, which the authors describe as a process that developed from conflict to integration.
They state that the internet, due to its ability to maintain a degree of anonymity, has
enabled freedom of speech. It has become especially popular among the younger
generation. By the end of June 2008 there were 253 million internet users in China, this is
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400 times more than by the end of October 1997, although it only accounts for 19.1% of
the population, which it below the world average of 21.1%. Having said that, it is a sizeable
figure which has grown at tremendous speed. Additionally, 42.3% of the cyber population
in China have their own blog or other form of internet space. The authors name a few
examples of the popular attention to local problems that was brought about by the web
media, namely the Shanxi brick kiln juvenile slavery incident, the Xiamen PX chemical
scandal, and the Chongqing reconstruction displacement. The final example they give is of
the grassroots voices that exposed the lies of the Western media after the March 14 2008
riots on the web through articles posted on websites, blogs and forums. Li and Liu state
that some special websites were set up expressing the peace-loving, antiviolence, and
antidiscrimination standpoints of the Chinese people, in response to Western media’s
reporting of harsh crackdowns in Tibet.
Egan, A. (2006), “Regulatory Changes in China Against Evolving Media Freedoms,” in Asia
Europe Journal, Vol. 4, No. 1, pp. 77-85, Heidelberg: Springer Berlin.
Annabel Egan argues that there is no freedom of press in China, that it is a difficult and
dangerous place to work as journalist due to the heavy handed tactics used by the
government to control the media. She believes that rapid economic modernization has not
helped to develop press freedom. The author supports this claim by pointing to regulatory
changes that occurred in that year which eliminated private and foreign influence in the
media and another crackdown on the internet.
She also points to a number of events in 2005 which limited press freedom. The first of
these occurred in March of that year when the government prohibited Chinese journalists
from reporting on scandals that didn’t occur in their own provinces. In June journalists
were told to implement the Marxist concept of press, and later that month the
government announced that a new 4,000 man team had been established to monitor the
internet cafes and Internet Service Providers in Beijing. In July 2005 the State
Administration of Radio, Film and Television issued a directive banning all city and
provincial level broadcasters from forming joint ventures with international media, which
seemed to reverse earlier policies established in November 2004 that had allowed for
49:51 program production proportions. September 2005 saw the revival of guidelines that
had been largely forgotten which regulated the speech, dress and hairstyles of the
presenters. They were told not to speak with regional dialects and reminded that their
appearance should be in good taste and present healthy images. A year earlier the
broadcasting of foreign animations had been banned between 5:30pm and 9pm, and 60%
of all broadcast animation was to Chinese-made.
The government has, however, tried to open up the sector to foreign and private
investment in politically non-sensitive areas such as advertising and sales. The listing of
Beijing Media Corp was a test case, in which it was quickly discovered that public listing
can expose a company to a lot risk if its “house is not in order,” and is not necessarily a fast
and easy way to raise capital.
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Mobile phones are also not free from regulation, Egan asserts. In 2005 there was a new
crackdown on the content of SMS text messages, which the Ministry of Information
Industry claimed was an extension of the previous years’ campaign against pornographic
and subversive content and spam messages. Further monitoring has come about through
the new regulation that requires people to use their real names when buying phone
numbers, which has enabled the authorities to track users.
Government leaders have become increasingly uneasy about the widespread reporting
of scandals and corruption, which has led to blogs and websites questioning the
authorities and discussing sensitive issues. As a result, the state as encouraged media to
report on issues close to the people’s hearts, like AIDS, corruption and payment of migrant
workers. However, to ensure that the official version of events was reported, the
government instituted a system of spokespeople and held more press conferences. Any
website disseminating news without governmental approval can be fined 30,000RMB.
She concludes that Chinese media is once again taking up the role of propaganda
machine for the party and plans to make the industry a pillar of the economy have been
put on the back burner.
Teets, J. C. (2009), “Post-Earthquake Relief and Reconstruction Efforts: The Emergence of
Civil Society in China?” in The China Quarterly, Vol. 198, pp. 330-347, Cambridge
As the state removes itself from the micromanagement of its citizens’ social affairs, civil
society has gradually emerged to fill the void. Jessica Teets investigates the effects of the
Sichuan post-earthquake relief and reconstruction on civil society and its relations with the
government. In order to better understand the effects, Teets first analyzes the position of
civil society in China. She argues that civil society in China cannot be understood in
dichotomous terms. Neither is it, in the sense of the Habermasian model, completely
autonomous from and in opposition to the state. Nor is it completely co-opted by the state,
in the sense of the state corporatism model, although in the past it did fit this model best.
Teets supports Timothy Brook’s description of the way civil society in China can be
considered, namely, as the spatial interaction between state and society. According to
Ministry of Civil Affairs (MOCA) figures, fewer than 50% of the civil society groups were
self-organized, self-supported and self-governed. The author points out that civil society in
other countries also receives a certain amount of funding, administration, and organization
from the state.
Civil society groups in China are increasingly receiving legal status, and decisions are
made ever more independently. The numbers of registered groups and the levels of
participation have grown tremendously since the mid-1990s. It is within this picture of the
rapid growth of emerging civil societies, and the spatial interaction between state and
society that Teets begins her investigation.
She claims that initially there existed a level of distrust from local government in
Sichuan, and the earthquake stricken areas, towards the civil society groups. This was
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overcome through efforts by these groups to show that they did not want to serve as a
substitute for the government, rather wanted to work as a complement to the
government. The earthquake raised large quantities of donations and groups were able to
mobilize an expansive volunteer base. However, there seemed to be a lack of experienced
project managers and institutional audit processes to manage the available financial and
human resources, and provide volunteer training. In light of this situation, often an INGO
or larger domestic group supervised smaller local groups, in developing and delivering
services. In addition, due to the large amount of donations, and public concern about
corruption, the central government created new supervision channels for the funding of
groups and project development. It also increased information transparency about how
funds were being spent. A new supervision model was piloted in which the local
government, MOCA and civil society group representatives provided mutual supervision.
Teets believes that the models of state-civil society cooperation and monitoring could be
used as models throughout the rest of China.
The author argues that, although there were increasing levels of cooperation with other
civil society groups and the different levels of government, and there was a high degree of
capacity building gained through the experience, one aspect of civil society remained to be
developed. Civil society groups in China do not enjoy much public legitimacy. During the
relief and reconstruction efforts this was illustrated by the fact that the vast majority of
funds bypassed these organizations. This is in part due to their lack of capacity, and also
due to the lack of public trust. Playing a relatively new role in Chinese society, this is to be
expected. Teets states that, out of fear of increased governmental monitoring, civil society
groups do not advertise their activities. However, for these groups to receive more public
recognition, it essential that they develop their promotion abilities.
Teets draws attention to a recent elaboration of government efforts to understand and
institutionalize the role of civil society in China. MOCA has created a new NGO
management department which is headed by an academic from Xinhua (Tsinghua)
Univeristy who studied civil society there. The role of the department is to evaluate how
best to reform the current legislation with regard to civil society groups.
Zhang, Q. F. (2003), “The People’s Court in Transition: The Prospects of the Chinese
Judicial Reform,” in Journal of Contemporary China, Vol. 12, No. 34, pp. 69-101,
Routledge.
In his article Qianfan Zhang analyzes the judicial system in China, its recent reforms, and
the future prospects for the legal system. Zhang states that many observers agree on the
fact that China has come a long way in developing the rule of law since ‘reform and
opening up’ in 1978. However, they also agree that it still has a long way to go before the
state is truly governed by the rule of law. Both the legal framework and legislations have
provided support to the growing market economy which has been the catalyst for reforms
in China. Although most of the laws necessary to sustain the new society are in place,
these have yet to obeyed and enforced.
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To begin his analysis Zhang lays out a model of what he considers a fair and just judicial
system. This is one in which: the body of individual judges is highly educated, well-trained,
and possesses high moral integrity; penal law effectively controls judicial corruption,
judicial independence results from judicial appointments and dismissals are made strictly
according to the law; judges have a high socio-economic status, the law guarantees
sufficient operational funds, judges are individually responsible for delivering judicial
opinions without political, administrative or social interference. According to his analysis,
the Chinese judicial system is lacking in all these aspects. He presents the causes, and
interrelations, of each of these deficiencies in great detail.
The plans for legal reform were set out by the Supreme People’s Court in October 1999,
in a document entitled ‘The Outline of a Five-Year Reform of the People’s Court.’ This
outline intended to improve the judicial structure, increase the power and autonomy of
judges in their individual capacities, and guarantee efficiency and fairness. It was the result
of various academic discussions, criticisms and experimental reforms. The reformation of
the judicial system, according to the outline, was to be finished within five years.
To improve the quality of the judiciary, comprehensive training was to be provided.
New selection criteria and methods were implemented to reduce the number of “qualified”
judges (as there were more judges than lawyers). Judicial decisions were to be, gradually,
made public. Trial processes were separated into three parts: filing, enforcement, and
supervision. The intention was to separate the cases from the judges to prevent judge bias
resulting from being too familiar with the litigants who, previously, had been able to build
relationships and bribe the judges. New methods of funding the courts were being
experimented with so as not to be dependent on local funds but on those provided by the
central government, and to always have sufficient operations funds.
Zhang argues that although there has been some progress in many aspects, the
fundamental issue is, as yet, not addressed, and is not likely to be addressed in the
foreseeable future, namely the independence of the judicial system from political and
administrative interference. According to a directive from the central government in the
1950s “The people’s judicial work is just like the people’s army and the people’s police; it is
one of the important tools of the people’s government.” Although selection criteria for
judges has removed the administrative interference, as judges are party members their
loyalty must, as a prerequisite of party membership, be with the party first and foremost.
It is the party which is responsible for starting and developing all political and legal reforms,
therefore, whether or not, and how the judicial system is reformed depends primarily on
the party.
Faure, G. O. (2008), “Chinese Society and Its New Emerging Culture,” in Journal of
Contemporary China, Vol. 17, No. 56, pp. 469-491, Routledge Taylor & Francis Group.
During the 30 years reform China has not only experienced economic and political
changes, there have also been cultural transformations. Faure analyses these cultural
transformations through 73 in-depth interviews. In this paper he presents how values and
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social behavior once not accepted have recently been emerging, and some of the values of
Maoist communist China are gradually fading. In his investigation he also reflects on the
effects of Confucianism on Chinese culture throughout history, its marginalization during
the Maoist period, and the revitalization of some of its values during the reform period.
Faure also notes the impact of a more Western orientation after 1993. The economic and
political changes have affected every social activity, including private life, religion, money,
and work.
The author analyzes a few particular changes in more detail. The first change is the
growing process of ‘individuation’. According to Confucianism, in order to maintain social
harmony, the group was more important than the individual. In the time of Mao only the
terminology changed, namely, focus on the individual was seen as selfish and thus not
acceptable, but Confucianism was cast aside as a feudalist ideology. The Communists also
introduced equality into the Confucian concept of harmony. However, since the reform
period the individual has started to play a larger role, with fewer concerns about the group,
society or equality, and more emphasis on the individual and individual responsibility.
Individuals can now express their own feelings and opinions more freely, and being unique
and different is socially acceptable. Previously, people were told to not openly show their
talents for fear of making people jealous, however, nowadays many people living in cities
put less effort into keeping a low profile. Humility, once a great virtue, is slowly being
marginalized, and some might even consider it a handicap, Faure claims. The one child
policy has aided the process of individuation as the ‘little emperor’ develops a more egocentric psychology due to the fact that six adults dote on him. The privacy of the individual
is also becoming more and more respected.
Another change is the more materialistic orientation of society today. Prior to
communism, frugality was a dominant virtue. During the Maoist period any sign of wealth
or pursuit of it was considered bourgeois and capitalist, ergo not acceptable. Since the
reform and opening up, the pursuit of wealth is not only accepted it is encouraged, as it is
seen as the means for all of China to prosper. Cars, apartments and other expensive goods
are seen as symbols of the worth of people. Money is no longer being saved but is being
managed as a flow. Borrowing money one does not have, has also been increasing.
Religious and spiritual beliefs are also making a comeback in response to the spiritual
needs not fulfilled by material pursuits. Temples, once the domain of the ‘naïve,’ are now
also being visited by those who are not Buddhists, because ‘you never know.’ Fengshui,
labeled as a superstition under Mao, now plays a vital role in business. Astrology, also a
superstition under Mao, is now frequently being consulted during Spring Festival or before
important events in one’s life. Even Christianity, once the tool of Western powers, has
made a resurgence, and is considered by some a sign of their modernity.
Faure also describes the changes within the family. Extended families are becoming less
important and the nuclear family (couple and child) is more prominent. Children once used
to serve their parents, now the opposite is true, as all the dreams and expectations of the
family are put on the one child. The child’s career choice, tastes and concept of life are less
determined by their parents than they are by their peers, the educational system and the
media. The choice of marriage partner is also no longer decided by the parents, instead,
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love and personal selection criteria are the determining factors. Though children are still
prepared to support their elderly parents, Faure quotes a study which reports that 75% of
the respondents in Beijing were reluctant to let their parents live with them, as would
have previously been the norm.
Women have also become more emancipated following Mao’s statement that they hold
up half the sky. They no longer need to be quiet and unsmiling, now women are expected
to be industrious, wise and capable. She is no longer subservient to father, husband and
son, and is allowed to give her own opinions and make decisions.
Previous communist role models like Lei Feng, who sacrificed himself to help others,
have been replaced by movie stars, singers, athletes, and successful business. Workers,
farmers, and soldiers are revered figures of past times no longer suited to the current
model of economic development in which success inspires more that service.
As China gets to know the world better through the media and through travel, Sinocentrism, based on the concept of the Middle Kingdom being the source of everything, has
been greatly reduced. Though, Faure notes, the humiliations caused by Western powers
and Japanese aggression prior to the Liberation in 1949 have had a deep impact on
Chinese people, China’s emergence as an economic power has given its people the image
of a strong and capable country.
Faure believes that the new culture of China is still emerging, and the new values have
not, as yet, influenced the overall fabric of Chinese society. These are trends which are still
developing.
Yip, W. & Hsiao, W. C. (2009), “Non-Evidence-Based Policy: How Effective is China’s New
Cooperative Medical Scheme in Reducing Medical Impoverishment?” in Social Science &
Medicine, Vol. 68, pp. 201-209.
Yip and Hsiao state that lower to middle income countries are increasingly looking to
using insurance to protect their citizens from medical impoverishment, i.e. falling into
poverty because of high medical costs. The New Cooperative Medical System (NCMS) was
launched in China in 2003 as a government run voluntary insurance program for rural
populations. One dominant NCMS model, especially in central and western regions, is a
combination of medical savings accounts (MSAs) and high-deductible catastrophic
(catastrophic) hospital insurance (MSA/Catastrophic). The authors use survey data from a
2006 household survey to analyze the effects of this scheme on the occurrence of medical
impoverishment. They also compare their results with an analysis of another experimental
scheme known as Rural Mutual Health Care (RMHC). The authors describe that this latter
scheme provides first dollar primary care, hospital and drugs with a similar premium but a
lower ceiling.
They found that RMHC more effectively reduces medical impoverishment than
MSA/Catastrophic as it also addresses the issue of expensive outpatient care for chronic
diseases like asthma, diabetes, hyper tension, and arthritis, which MSA/Catastrophic does
not. Chronic disease treatment, the authors claim, is also an important cause of medical
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impoverishment. Yip and Hsiao use the 1.08 dollars a day measure of poverty and show
that MSA/Catastrophic reduces the poverty count by 3.5-3.9% with an average poverty
gap reduction of 11.8-16.4%, whereas RMHC reduced the poverty count by 6.1-6.8% and
the poverty gap by 15-18%.
Before 1979, Chinese health care was incorporated in the communes. With the rural
reforms the rural health system fell, leaving 90% of the rural population uninsured, and
doctors to become private practitioners with little government monitoring, earning their
money on a fee-for-service basis. The government’s ability to fund health care was
hampered by the drop in national revenues caused by its economic reforms. In the 1990s
the government was only providing 10% of medical facilities’ total revenues, requiring
these facilities to generate the remaining 90% through other means. Another burden for
these facilities was the fact that the government fixed the prices of basic services below
cost to make sure that basic health care was still affordable. However, it did allow for a 15%
profit margin on drugs and set prices for new and high-tech diagnostic services above cost.
As a result, in order to generate the remaining 90% of their budget, medical facilities overprescribed drugs and tests. Antibiotics were prescribed to 79% of hospital patients, more
than double the international average of 30%, the authors claim.
The authors assert that the current leadership has given social development and the
building of a equitable society a high priority. Hu Jintao has also stated that the
government will play a bigger role in public health and aims to allow everyone to enjoy
basic health care. Due to the growing tax revenue generated by its flourishing economy,
China is once again able to start developing its rural health care, of which NCMS is to be
the foundation. The government’s dedication to this system was evident from the fact that
it provided 20RMB annual subsidies to farmers if they paid an annual premium of 10RMB,
making the total 30RMB. Subsidies increased to 40RMB in 2006, and are set to increase
again to between 60RMB and 80RMB. In recognition of potential skepticism the
government has made the scheme voluntary. Moreover, it emphasized catastrophic illness
coverage to prevent medical impoverishment. Further details of the plan’s design were to
be determined by local governments. In most central and western regions
MSA/Catastrophic is the most popular model.
Through their careful comparative analysis of MSA/Catastrophic (using a selection of its
different packages) and their own RMHC (using the two available packages), Yip and Hsiao
conclude that a clearer understanding of the disease profile and health expenditure
patterns of the population can help to devise schemes that are better able to prevent
medical impoverishment. While MSA/Catastrophic is useful for hospital costs, it doesn’t
cover outpatient costs for chronic illnesses which are an important factor in medical
impoverishment. The authors note that chronic diseases are particularly prevalent in rural
communities as the elderly and the frail are left behind by young rural men and women
who go to work in cities. The authors cite evidence that the burden of chronic disease is
only likely to get heavier in the near future, thus making further medical reforms essential.
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Tam, W. (2010), “Privatising Health Care in China: Problems and Reforms,” in Journal of
Contemporary Asia, Vol.40, No. 1, pp. 63-81, Routledge.
Since the mid-1980s the Chinese government has substantially developed the
privatization of state welfare services. Tam focuses his analysis on the privatization of
finances and services as these are the aspects, he argues, on which the government’s
efforts have largely been centered.
In 1949, the year of the founding of the People’s Republic of China, private practice
dominated the health care sector. However, by the mid-1950s all hospitals in China were
nationalized and financially supported by the government. By the 1980s the government
started to allow some private practice to return, though mostly in the ambulatory sector.
Large-scale private capital entered the hospital sector in the mid-1990s. However, public
hospitals still play an important role. The author cites research reporting that 96% of all
hospitals at county level or above are still public.
Government funding of hospitals fell from 38.6% in 1985 to 18% in 2005. Social health
expenditures as a whole declined, while personal health care costs have been increasing,
showing that the public has had to make up for the shortage in government funding of
medical care. The government had been providing an ever smaller percentage of total
budgetary expenses to the health care sector until 2006, when there was a large increase,
though still below 1997 levels.
The intention of hospital reforms since the 1980s was to make hospitals financially selfsufficient and reduce the financial burden on the national government by encouraging
them to boost their revenues and limit their expenses. Hospitals were provided with fixed
subsidies and had to cover operational costs, and part of the capital costs, themselves.
They were responsible for any deficits or surpluses. Hospitals were, in light of this financial
necessity, authorized to generate revenue through medical service provision. Additionally,
hospital staff salaries and welfare benefits could also be tied to the overall income of the
hospital. Revenue targets set by hospitals for departments and individual doctors provided
an added stimulus.
Local governments in underdeveloped regions first started to privatize, in order to
remove the financial burden, between 1995 and 2005. However, in this period only 2% of
all hospitals in China had been officially privatized, though public hospitals were being run
in an increasingly commercial manner. Another form of privatization, prohibited by law, is
the contracting out of clinical departments, which has become increasingly common since
the 1990s as it is a highly lucrative practice. Many of the leasing parties do not have the
necessary qualifications, therefore it is considered illegal medical practice. The poor
monitoring of these contracting companies by the hospitals and the government has had
adverse effects.
The privatization, licit and illicit, complete or only financial and provisionary, has led to
increasing occurrences of hospitals not treating patients who are unable to pay for their
own treatment, regardless of whether their lives may be at risk or not. Even some public
hospitals have admitted that they will not treat patients who are unable to pay, even
though they are legally obliged to treat all patients. This issue has been under hot debate
at all levels of government and the health sector, as well as by the public, academics and
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the Chinese People’s Political Consultative Conference (CPPCC). Rectification measures,
including fines for non-compliance, are being experimented with.
As physician bonuses are now tied to their revenue generating ability, many are
prescribing unnecessary drugs and treatments, which has greatly reduced the quality of
service provision. In addition, contracting companies leasing departments often use
unqualified personnel and are more concerned with maximizing profits than with medical
care provision. Some leased departments have also advertized that they had developed
new treatments for complicated diseases, which, however, have not been clinically tested
or approved. A further cost reducing method has been to not meet government safety and
sanitation standards, further reducing the quality of health care provision.
In other countries the privatization of medical facility finances and service provision has
not led to the government playing a lesser role in the health care sector. Instead, the
state’s governing capacity is reasserted through the creation of monitoring mechanisms
and regulatory bodies. This can be more expensive than maintaining control of finances
and services. In China, revenue generation was more important than regulation for local
governments, Tam asserts. He cites one Chinese health expert who claims that
privatization, in Heze in Shandong province, was not successful due to the absence of
government regulation. Local regulatory bodies are also said to voice discontent at not
being involved in privatization processes.
The bureaucratic structure, in which county hospital directors are of equal rank to
county health bureau chiefs, has left the bureau chiefs with no formal authority to
discipline hospital directors. Regulatory authorities are also poorly financed and use poorly
qualified or unqualified staff. The poor funding of health bureaus has caused them to fine
lawbreakers rather than close them down or imposing other non-finance generating
punishments. Many even lack the funds for necessary equipment like computers, video
cameras or even, in some cases, offices.
In the wake of SARS in 2003, and a State Council report on the health care system in
2005, the government recognized the problems of privatization, and has since started deprivatization, especially of hospitals below county level. Local governments have also
started to reassert their financial control. Tam states that the Guangdong provincial
government would cover all township and village hospital budgets, and Beijing’s municipal
government would fully finance 80% of all urban community hospitals.
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Conclusion
As can be seen from the above summaries, China has undergone radical changes in the
past three decades. The reforms have had a major impact on almost every facet of life in
China. The government of China has succeeded in drawing most of its population out of
poverty, and is continuing in its efforts to develop a healthy economy and society. The
experimental and gradual approach of China’s leadership has allowed it to prevent largescale social unrest commonly associated with economic transitions. Many lessons in
development can be learned from China’s experiences and applied in different places.
60 of 76
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China’s Development in
Recent Years
A Select Bibliography
Bibliography of Chinese Sources
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Introduction
China's immense achievements over sixty years of socialist construction, thirty years of reform
and opening-up and Chinese development trend with regard to international politics and global
strategies have inspired hot debates worldwide. After the voices of China threat and China’s collapse
being lowered down, a new opinion of Chinese uncertainty of development comes out. In the
context of globalization, what exact path is China going through? What are the basic qualities of the
path? What historical consequences will China’s political, economic and social development
generate from these qualities?
For the purpose of answering the above issues, it is quite necessary to understand the political
and economic reforms and development in China first. Brief summaries of the 16 selected articles
are as follows, which is meant to answer the above questions and describe the experience and
lessons of China’s development.
The first section is concerned with Chinese path in global perspectives. The four articles are
selected from the series of research papers entitled “Chinese path in global perspectives: 1949-2009”
in Social Sciences in China. The second section describes the political development focusing on its
reflections, qualities, experience and lessons. From the perspectives of sociology the third section
outlines some of the economic and social development and their reform effects. The four papers in
the last section summarize the development of Chinese social policies and welfare systems, which
cover the themes such as the housing of the elderly, income distribution, population flow and free
medical service reform.
30 Years Reform in China
A Selected Bibliography
Section 1 – Chinese Path in Global Perspectives
Wang, S. G. (2009), “The Emerging Chinese Model of Development (1949-2009): From the Global
Perspective Adhering to the Right Direction and Exploring New Paths: Reflections on Sixty Years of
Socialist Practice in China,” in Social Sciences in China, No. 5, pp. 4-19.
王绍光，坚守方向、探索道路：中国社会主义实践六十年，中国社会科学, 2009, (5): 4-19.
To examine the directions and developmental process of China's socialist construction at a time
when the Chinese economy is growing rapidly despite the current world economic crisis is an act of
no ordinary significance. Broadly speaking, China's sixty years of socialist construction can be divided
into two phases: the first thirty years from 1949 to 1979 and the second thirty from 1979 to 2009.
In the first thirty years China did many explorations that were concerned with ownership,
planning economy, eliminating the bourgeois legal rights and achieved great successes. The first
thirty years of China's socialist revolution and construction laid a solid foundation for the reform and
opening up of the next thirty years, a period in which China’s continued exploration of new
directions led to spectacular achievements which are characterized by rapid and stable economic
increase, and diminished poor population. Then the author analyzes the problems faced by China
development in the recent thirty years.
History teaches us that the linchpin of building socialism is not whether you have a detailed
blueprint for socialism, but whether you have a grand vision for understanding socialism and the
courage to direct socialist construction. Although China today faces many problems and even grave
challenges, we will open up an ever wider path for socialism with Chinese characteristics so long as
our country adheres to the direction of socialism.
Zheng, Y. N. (2009), “The Chinese Model of Development: An International Perspective,” in Social
Sciences in China, No. 5, pp. 20-28.
郑永年，国际发展格局中的中国模式，中国社会科学, 2009, (5): 20-28.
With the success of China's reform and opening-up, increasing attention has been paid to the
Chinese model of development both in China and abroad. However, in studying the Chinese model,
many scholars, particularly Western ones, have avoided studying China's political model. Instead,
they have conceptualized the Chinese model of development as a matter of purely economic success.
In fact, however, it is extremely hard to understand the Chinese economic model without discussing
the Chinese political model, because it is China’s political model that has driven the success of its
economic model.
Many underdeveloped countries face the grave challenge of building a stable political and social
structure. There can be no doubt that the political and economic implications of the Chinese model
of development provide a valuable lesson in this respect. The Chinese political model of
development is of many implications for the developing countries to build a stable political and
social order.
After analysis of the great values of Chinese model of development, the paper focuses on the
Chinese political model and economic model respectively. It’s a popular international idea that
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DISCLAIMER: This bibliography contains summaries of the presented articles. It does not represent the views of the author
or any of the institutions involved in its preparation.
there’s no political reform but economic reform in China. However that’s a misunderstanding for
Chinese model of development. In fact it’s impossible to earn such great achievements of economic
development without political reforms. National system building was the core of the political reform
in the past thirty years. In different periods China focuses on different reform tasks. From the end of
1970s to the beginning of 21st century the main task of Chinese reform is an economic one. China
has entered a reform period with social reforms as main tasks since 2002, but the reform period
with political reform as a core task hasn’t come. The Chinese model of development has stood the
trials of the world-spread financial risks. However the capability of Chinese economy is closely
related with Chinese economic model built after reform and opening-up. Lastly the paper brings
some suggestions for Chinese model of development.
Zhou, H. (2009), “The Implications of the Chinese Model of Development in the Context of
Globalization,” in Social Sciences in China, No. 5, pp. 37-45.
周弘，全球化背景下“中国道路”的世界意义，中国社会科学, 2009, (5): 37-45.
China's immense achievements over sixty years of socialist construction and thirty years of reform
and opening-up have inspired hot debate over whether there exists a Chinese model of
development or a Beijing Consensus. The term model has two layers of meaning: one refers to the
uniqueness of China's development path, the other to its exportability and transferability.
In terms of the former, we can conclude that China has indeed created a unique developmental
model. China's development path was arrived at when the Chinese people finally chose Marxism as
the course of their pursuit of national independence and modernization. Its essential character is the
choice to follow and keep the socialist road and reject capitalist expansion and enslavement.
Globalization is accompanied by the unbounded aggrandizement of capital, which brings world
politics and the world economy into a system dominated by world capitalism. Against such a
background, the uniqueness of the Chinese model of development stands out.
At the same time, China has no intention to export its own model of development. Rather, China’s
pursuit of harmony, equality and diversity among nations will allow the success of its developmental
model to change current international rules and concepts of global development. In this era of
globalization, the Chinese model is of world significance.
Wu, X. M. (2009), “Reflections on China's Peaceful Development and Its Significance for World
History,” in Social Sciences in China, No. 5, pp. 46-59.
吴晓明，论中国的和平主义发展道路及其世界历史意义，中国社会科学, 2009, (5): 44-59.
With the rapid increase of the national economy and overall national strength enhanced, Chinese
development trend with regard to international politics and global strategies is more and more
concerned about by the world. After the opinions of Chinese threat and Chinese collapse being quiet,
a new opinion of Chinese uncertainty of development comes out. The author tries to answer the
following questions in the paper. In the context of globalization, what exact path is China going
through? What are the basic qualities of the path? What historical consequences will China’s
development bring from the qualities?
The author argues that the Chinese model of development must necessarily be peaceful. While
such pacifism is closely related to Chinese cultural traditions, its direction was essentially settled by
China's historical experience from the nineteenth century on. It was not possible for this path to
derive all its specifications from the basic construction of modern capitalism, so that at the same
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time as it critically clarifies the main sources of modern conflicts and wars, it makes revival and
rebuilding of traditional Chinese pacifism a realistic possibility.
China’s peaceful developmental path will have considerable significance for the world that it
offers mankind inspiration for planning a future world through a development model that does not
begin with expansionism or end in hegemonism.
Section 2 – Political Development
Wang, G. X., Cai, D. J., Gao, F., Ren, J. T. & Wang, C. J. (2009), “Reflections on the Thirty Years of
Political System Reforms in China and Its Prospects,” in Leaders, No. 28.
王贵秀、蔡定剑、高放、任剑涛、王长江，中国政治体制改革三十年反思与前瞻，领导者, 2009, No. 28.
The thirty years of reform and opening up in China begins with political system reform. It’s
impossible to do further judgment and prospects for China’s future development without analysis of
the history in political system viewpoint. Professor Cai, D. J. from Constitutionalism Research
Institute (CRI), China University of Political Science and Law invited the concerning academics and
professors to conclude and reflect on the experience and lessons of the political system reforms in
the past thirty years, analyze the trends of the future political system reforms, and propose some
suggestions to prosper the political system development.
The paper includes four parts in detail. First, the authors reflect on the thirty years of political
system reforms. Second, the authors analyze the problems and barriers faced by political system.
Third, Dingjian Cai and Shukai Zhao focus on the impetus to drive the political system reforms.
Fourth, Yu Xin et al suggest the goals and paths of the political system reforms.
Guixiu Wang from Party School of the Central Committee of C. P. C. thinks that China’s political
system reform is facing “one great turning” and “three big contradictions.” For the sharp changes of
home and abroad situation around June 4th, 1989, the great turning and adjustment happened to
the political system reform ideas and path, and led to the three big contradictions, which are the one
between lagging political system reforms and deepening economic system reforms, the one
between the cognition and practice of the political system reforms, the one between the two roles
of C.P.C.’s revolutionary party and the ruling party.
Dingjian Cai from China University of Political Science and Law concludes the three different
political system reforms in the past thirty years. The first one at the beginning of 1980 brought the
democratic constitutional results, such as broadening the democratic voting system, strengthening
the people’s congress system, and abolishing the system of life-long tenure in leading post. The
second political system reform in 1986-1989 aimed at separating the functions of Party and
Government, but didn’t bring any result. The political system reforms from top to bottom nearly
stopped after 1989. But the reforms driven by the society from bottom to top has happened to
China since 2003.
Yu, K. P. (2008), “China's Political Reform towards Good Governance from 1978 to 2008,” in Jilin
University Journal Social Sciences Edition, No. 3, pp. 5-17.
俞可平，中国治理变迁 30 年 (1978-2008)，吉林大学社会科学学报，2008, (3): 5-17.
There are five roads in the map of evolution of China's democratic governance since the Reform,
i.e. from monistic governance towards pluralist governance; from centralization towards
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decentralization; from the rule of man towards the rule of law; from regulatory government towards
service government; and from the Party democracy towards social democracy. China's governance
reform will continue to focus on ecological balance, social justice, public service, social harmony,
governmental cleanness, governmental innovations, intra-party democracy and grassroots
democracy. The evolution of China’s democratic governance will eventually rest on social and
economic development, the logic of political development, formation of a new political culture and
the impulse of globalization as well. With the consistent efforts in the last three decades, a unique
governance model is under formation in China, which will march towards democracy, rule of law,
justice, accountability, transparency, cleanness, efficiency and harmony.
Xu, Y. (2009), “Social Mobilization, Autonomous Participation and Political Integration: Sixty Years
of Basic-Level Democracy and Political Development in China,” in Social Science Front, No. 6, pp.
19-26.
徐勇、社会动员、自主参与与政治整合——中国基层民主政治发展 60 年研究，社会科学战线, 2009, (6):
19-26.
The founding of People’s Republic of China laid a basic foundation for the development of basiclevel democracy system. In 1949-1978, the ruling party put forward important assumptions and
explored its forms of practice. But the basic-level democracy in this period belongs to mobilization
democracy which was hard to be institutionalized and find room to develop. Instead it was often
replaced by usual mass movements. It was difficult to achieve the aim of effective integration by
democracy and brought a big lesson.
After 1978 great development happened to the basic-level democracy, the institutionalized base
became more stable and room for development became larger. This participative democracy based
on the personal interests is different from the one before. It prospers the improvement of national
governance and arrives at the effective political integration.
Chinese socialist democracy is structured as two levels. On the national level of political power it
is a representative democracy, on the basic level related with people’s daily life it’s a direct
participative democracy in which people take part to manage the public affairs. The sixty years of
development has generated a basic-level democracy system with the masses’ participation. In the
report of 17th National Congress of the C. P. C. the system of basic-level autonomous democracy is
one of the four political systems of the socialism society with Chinese characteristics. Based on the
analysis of mobilization democracy in 1949-1978 and participative democracy in 1979-2009, the
paper answers the questions of characteristics of the Chinese basic-level democracy, its experience
and lessons, and its developmental trend.
Lin, S. L. (2008), “Effective Politics and the Growth of Great Nation: A Discussion on China 30 Years’
Political Development,” in Journal of Public Administration, No. 1, pp. 38-66.
林尚立，有效政治与大国成长——对中国三十年政治发展的反思，公共行政评论, 2008, (1): 38-66.
This study argues that political progresses can boost the economic and social development. The
argument is supported by illustrating how the political development in China promoted state growth
and social development during the 30 years of reform. It also emphasizes that authority, order and
vitality play very important roles in political validity construction. The splendid achievements from
the thirty years of reform and opening-up result from the development of political validity in China.
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That’s also the fact that political validity construction can prosper national and social growth and
development.
The paper consists of six parts: (1) Reflective comparison: Politics and social development. (2)
Political building and the growth of modern China. (3) Creating transformational development:
authority, order and vitality. (4) Political validity: Core principle of political development in China. (5)
Political validity creates effective development: Practices in China. (6) Conclusion.
Section 3 – Economic and Social Development
Qu, J. D., Zhou, F. Z. & Ying, X. (2009), “From Macromanagement to Micromanagement:
Reflections on Thirty Years of Reform from the Sociological Perspective,” in Social Sciences in
China, No. 6, pp. 104-127.
渠敬东、周飞舟、应呈，从总体支配到技术治理——基于中国 30 年改革经验的社会学分析，中国社会
科学, 2009, (6): 104-127.
In a sociological perspective resulted from political economy, the three decades of China's reform
and opening up can be divided into three phases.
The first decade in 1978-1989 took the form of a dual social structure centered on the two-track
system whose core nature is the contracting system popular in the rural families, state-owned
businesses and local finance. In the 1990s the second phase of comprehensive marketization and the
decentralization system of taxation established a new state of power and the market, the central
government and local government, and the social distribution. With the advent of the new century,
governance reforms have been implemented in administrative bureaucratization and have become
an essential mechanism driving social construction. As a result the overall allocation power of the
pre-reform era has been replaced by a kind of technological governance power.
We can see here the distinctive nature of the “Chinese experience" and gain an insight into the
challenges and opportunities faced by China’s transformation.
Zheng, H. & Li, L. L. (2009), “Elite Exchange and In-group Reproduction in Urban China,” in
Sociological Studies, No. 6, pp. 65-86.
郑辉、李路路，中国城市的精英代际转化与阶层再生产，社会学研究, 2009, (6): 65-86.
Two theories have been dominant in the studies of elite under state-socialism. Walder's theory of
divided elite depicts two distinct elite groups as cadre elite and professional elite. Szelenyi's theory
of differentiated elite takes on the issue of differentiation of former elite in transitional post-socialist
societies. As neither of the theories could fully capture or explain the dynamic of elite mobility in
contemporary China, the authors propose a theoretical model of elite exchange and in-group
reproduction. Elite exchange and in-group reproduction contains two mechanisms: elite exclusion
and elite exchange. The conjunctive function of elite exclusion and elite exchange contributes to the
formation of a new elite class in China. The empirical analysis in this paper also provides preliminary
evidence for the theoretical frame.
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Xue, L. & Zhu, X. F. (2009), “The Social Functions of China’s Think Tanks,” in Management World,
No. 4, pp. 55-65.
薛澜、朱旭峰，中国思想库的社会职能——以政策过程为中心的改革之路，管理世界, 2009, (4): 55-65.
In order to make operational public policies that generate the long-term national interest, we
need to seek a path to reform centered on the policy-making process. As one of the important
mechanisms of this reform approach, China think tanks have, at the present stage, three social
functions: the external brain of rational policy decision, the agency for marginal benefit, and social
supervision. However, as the policy system has gradually opened to elites outside the system, there
is, in the process of policy making, the probability of transition from the monopoly of the process of
policy making by the administrative system to the monopoly of the mighty elite alliance giving ideas
for policies. In the process of this evolution, the think tanks may be evolving into the tools of the
mighty elite alliance. Therefore, we will, in this paper, offer our suggestions about a set of system
arrangements, with the perfection of “the market of policy analyses” as the core, to ensure that
social functions of the think tanks.
With regard to the case study, based on the data of the year 2004 gathered in the investigation
on the leaders of 301 think tanks throughout the country, the authors have analyzed the present
situation of think tanks’ functions played in the process of policy making, pointing out that, although
“the market of policy analyses” that ensures that China’s think tanks play social functions has
developed greatly, still there is, overall, considerable space for further development.
Fan, M. L. (2010), “Interactions between Government and Different Types of NGOs: A Comparative
Case Study from Perspectives of Corporatism and Civil Society Theory,” in Sociological Studies, No.
3, pp. 159-176.
范明林，非政府组织与政府的互动关系——基于法团主义和市民社会视角的比较个案研究，社会学研
究, 2010, (3): 159-176.
Based on the comparative case study of interactions between government and different types of
non-governmental organizations (NGOs) in the social service field, this research attempts to make an
in-depth examination and comprehensive analysis of the interactions and develop a preliminary
typology from the perspectives of corporatism and civil society theory. By integration of the
interaction types into the discussion, the paper tries to better describe the current interactions
between domestic government and non-governmental organizations.
In terms of theory framework the article is not confined to a certain paradigm. Instead it
examines the cases from the perspectives of corporatism and civil society theory simultaneously, so
that it’s easy to find the advantages and limitations of them both. That is to say, it is open with
regard to the theoretical illustration. However, the chosen research objects are the NGOs confined
to the social service field, and this is not meant to be applied to all the NGOs in China.
Concerning the corporatism the author refers to the typical classification of National Corporatism
and Social Corporatism by Schmitter (Schmitter, 1974: 103-104; Wiarda, 1997: 33-42), and argues
that the political and social system represented by national corporatism is near to the facts in China.
The civil society theory put more emphasis on relative autonomy independent of a state,
individualism, pluralism, openness, and contractualization, which are the core values and principles
(Cohen &Arato, 1992; Eisenstadt, 1995; He, Z. K., 1998; Deng, Z. L. 1996, 2002). In this article the
three dimensions of independence, autonomy, and contractualization are referred to examine the
characteristics of the civil society from the interactions between NGOs and the government.
The research strategies of the article are illustrated in a picture (p.161).
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Section 4 – Social Policies and Welfare Programs
Li, B. (2010), “Diversification and Characteristics: the Living Arrangements and Housing of the
Elderly in China,” in Chinese Journal of Population Science, No. 2, pp. 101-110.
李斌，分化与特色：中国老年人的居住安排——对 692 位老人的调查，中国人口科学, 2010, (2): 101-110.
This paper focuses on the survey data of 692 Chinese households with elderly members. What
follows are the major findings of the research:
(1) Living arrangements of the Chinese elderly were diverse, but the majority were living
independently, or in empty nests, with 67.8% of the respondents not living with their adult children;
(2) Housing and community facilities for the elderly were inadequate (especially those serving the
disabled);
(3) No significant group difference was found in the utilization of public facilities by the elderly;
(4) Working unit was no longer a dominant source of housing benefits;
(5) Diversified housing conditions and property rights as a result of the social stratification in
China reflected different occupational statuses before retirement.
The article is a case study, which is classified as three types of inherent case study, instrumental
case study and multiple case studies. In terms of the research methodology, the author integrates
the statistical sampling with multiple case studies when collecting data.
Li, S. & Yang, H. (2009), “Impact of Minimum Living Standard Guarantee on Income Distribution
and Poverty Reduction in Urban China,” in Chinese Journal of Population Science, No. 5, pp. 19-27.
李实、杨穗，中国城市低保政策对收入分配和贫困的影响作用，中国人口科学, 2009, (5): 19-27.
Based on the survey data from the research team of China’s Income Distribution in 2007, the
authors investigate the impact of Minimum Living Standard Guarantee (MLSG) on income
distribution and poverty reduction in urban China. Then they estimate changes in the Gini coefficient
and poverty measures after receiving income allowance and decomposes the total effect into
between- provinces and within- provinces. The results indicate that the MLSG has a significant
impact on poverty alleviation, but it has very limited impact on narrowing income inequality in urban
China. The policy implications are that the level of the MLSG should be raised and its coverage
should be expanded.
The five parts of the article are as follows: (1) Foreword; (2) About the data; (3) Analysis of the
effects of MLSG on income distribution; (4) Analysis of the effects of MLSG on poverty relief; (5)
Conclusion.
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Tan, S. (2009), “Population Flow And Its Effects Upon the Rural Poverty and Inequality,” in Open
Times, No. 10, pp. 81-95.
谭深，人口流动对农村贫困和不平等的影响，开放时代, 2009, (10): 81-95.
This essay studies various social groups, such as those of women, children, and elders, at the
family and the community level in the rural areas, with an attempt to analyze how social mobility
affects different social groups at different levels and how it bears upon poverty and inequality.
The author argues that the mobility of peasants and their turning into workers have had positive
impacts on economic development, resulting in widespread elimination of absolute poverty and an
overall improvement of life quality. However, peasantry mobility has also had negative impacts on
social and cultural aspects, leading to weaker community cohesion and the spreading of utilitarian
values. It must be pointed out that the impacts on different regions, on different families in one
region, and on different members in one family vary from one to another. The shift of power in a
family enhances the younger generation but weakens the elder. At its early stage, mobility plays a
positive role in breaking down the barrier between urban and rural areas and eliminating status
inequality brought about by that barrier. However, sustained mobility has enlarged rather than
diminished inequality. Compared to the well-off and the young, the poorly-off and the old are
further marginalized.
Zhang, X. L. (2010), “Prospering the National Welfare System by Central Government: Significant
Experience and Its Implications of the Medical Reforms in Shenmu County,” in China Economic
Times, May 10th.
张秀兰，中央政府出场，推进国家福利体系构建—神木医改的核心经验及其启示，中国经济时报.
First, Xiulan Zhang answers the three doubts about the reform practice of “free medical service”
in Shenmu County. She argues that there’s no excessive medical service at all in the free medical
service reform of Shenmu, the increase of being in hospital by 30% only explains the release of past
depressed needs. The 4,000 RMB expense standard of being in hospital per year is near the national
average. It’s difficult to monitor the hospitals beyond Shenmu County so that it brings the financial
risk of the reform. Xiulan Zhang claims that the free medical service system needs to be further
improved, but there’s no need to doubt its rationality to continue.
Then Xiulan Zhang illustrates the system and mechanism innovation as Shenmu County practice
experience. The author argues that the core of the medical system reforms lies in the cooperative
mechanism of the buyers, providers and customers, in which it’s the most important to monitor the
service price of the providers.
Lastly, the author brings the implications and suggestions of the medical system reforms that it’s
the government’s duty to build a cooperative and restricted mechanism among the three parts. The
central government should be initiative to build the national welfare system and change its trend of
fragmental situation. And it’s a historic chance to prosper the national welfare system with the 50%
of the urbanization in a nation.
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Conclusion
From the above summaries of the sixteen selected articles we can see the distinctive nature of
the Chinese model of development and gain an insight into the challenges and opportunities
associated with its economic and social transition. The splendid achievements from the thirty years
of reform and opening-up result from the development of political validity in China, which can be
seen as the fact that political validity construction can prosper economic and social development.
Many underdeveloped countries face the grave challenge of building a stable political and social
structure. There can be no doubt that China’s peaceful developmental path have considerable
significance for the world, the political and economic implications of the Chinese model of
development provide a valuable lesson in this respect.
74 of 76
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Li, B. (2010), “Diversification and Characteristics: the Living Arrangements and Housing of the Elderly
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老年人的居住安排——对 692 位老人的调查，中国人口科学, 2010, (2): 101-110.
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Xue, L. & Zhu, X. F. (2009), “The Social Functions of China’s Think Tanks,” in Management World, No.
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Yu, K. P. (2008), “China's Political Reform towards Good Governance from 1978 to 2008,” in Jilin
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Zhang, X. L. (2010), “Prospering the National Welfare System by Central Government: Significant
Experience and Its Implications of the Medical Reforms in Shenmu County,” in China Economic Times,
May 10th. - 张秀兰，中央政府出场，推进国家福利体系构建—神木医改的核心经验及其启示，
中国经济时报.
Zheng, H. & Li, L. L. (2009), “Elite Exchange and In-group Reproduction in Urban China,” in
Sociological Studies, No. 6, pp. 65-86. - 郑辉、李路路，中国城市的精英代际转化与阶层再生产，
社会学研究, 2009, (6): 65-86.
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A Summary of Recent Literature on China`s Development

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