Rural China: Economic And Social Change In The Late Twentieth Century

R URAL C HINA

Fan Jie, born in 1961, graduated from the Department of Geography/Peking University in 1982 and received his Ph.D. (1992) from the Chinese Academy of Sciences (CAS). He has been professor at the Institute of Geographical Sciences and Natural Resources Research, CAS, since 1996. His research interests concentrate on different aspects of regional development in China. Currently he is chair of the Commission of Economic Geography and the Chinese Society of Geography. His recent publications include the Regional Development Reports of China (co-editor, Commercial Press, 1997, 1999, 2000, 2003). Thomas Heberer, Ph.D. (1977) in social sciences, University of Bremen, is Professor of Political Science and East Asian Studies at the University of Duisburg-Essen (Germany). He has worked and lived in China for many years and conducts regular fieldwork in China. He has published extensively on various issues of social and political change in China and Vietnam, nationalities issues, corruption, and private sector development. Among the topics of his recent book publications are social and political functions of private entrepreneurs in China and Vietnam, entrepreneurs as strategic groups, social and political functions of ethnic entrepreneurs in China, and introduction into political systems in East Asia. Wolfgang Taubmann, Ph.D. (1965) in philosophical sciences, University of Muenster, was Full Professor in Human Geography at the University of Bremen (1975 to 2002). He is now Professor Emeritus and independent scholar. Before he received his chair he was assistant professor, lecturer, and senior lecturer at the universities in Muenster, Aarhus/Denmark, and Regensburg. His research areas are urban planning, urban renewal, urban economy, the urban housing market, and especially urban and rural development in China (including about sixty publications on these topics regarding China).

R URAL C HINA ECO N O M I C

AND

SOCIAL CHANGE

IN THE L ATE T WENTIETH

AND

CENTURY

J I E FA N , THOMAS HEBERER, W O L F G A N G TA U B M A N N

An East Gate Book

M.E.Sharpe Armonk, New York London, England

4

APPLIED THEORY IN WORKPLACE SPIRITUALITY

} An East Gate Book Copyright © 2006 by M.E. Sharpe, Inc. All rights reserved. No part of this book may be reproduced in any form without written permission from the publisher, M.E. Sharpe, Inc., 80 Business Park Drive, Armonk, New York 10504. Library of Congress Cataloging-in-Publication Data Fan, Jie, 1961– Rural China : economic and social change in the late twentieth century / by Jie Fan, Thomas Heberer, and Wolfgang Taubmann. p. cm. “An East gate book.” Includes bibliographical references and index. ISBN 0-7656-0818-9 (hardcover : alk. paper) 1. China—Rural conditions. 2. China—Social conditions—1976–2000. I. Heberer, Thomas. II. Taubmann, Wolfgang. III. Title. HN733.5.F35 2005 306’.0951’091734—dc22

2004-13795

Printed in the United States of America The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI Z 39.48-1984.

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Contents List of Tables, Figures, and Maps Preface 1.

ix xv

Introduction

3

Distinct Features of the Process of Change Social Change

5 7

2. Zhen Settlements: Between Urban and Rural

11

Preconditions for the Designation of Zhen Development of the Number of Zhen Definition and Development of the Urban Population in Zhen Perspectives on the Process of Urbanization and the Functions of Zhen 3. Field Research: Fieldwork Procedures and the Surveyed Zhen Methods in Our Fieldwork Procedures in 1993–1994 and 2000–2001 Empirical Problems, Especially During Our First Fieldwork Period, 1993–1994 The 1993–1994 and 2000–2001 Case Studies: Zhen Regional Conditions of Development 4. Settlements and Population

12 13 15 17 21 21 23 24 33

Development of Settlements, Infrastructure, and Public and Commercial Institutions Development of Settlements, Land Utilization, and Infrastructure Public and Commercial Institutions Population Growth and Migration Development of Population and Migration in Chinese Zhen Population Development and Migration in the Selected Zhen Summary 5. Economic Structures and Economic Change Process of Privatization

33 33 39 48 48 52 62 65 65

v

vi

CONTENTS

Nationwide Development Private Sector in the Regions Studied in 1993–1994 Structure of Ownership in Rural Areas in the Mid-1990s Summary Rural Collective and Private Enterprises Development and Regional Structure of Rural Enterprises Township and Village Enterprises Development and Situation of Zhen-Owned, Village-Owned, and Private Enterprises in the Analyzed Zhen Summary The Regional Labor Market in Relation to Rural Collective and Private Enterprises: Results from Our Case Studies, 1993–1994 and 2000–2001 The Rural Labor Market: Transition from Agriculture to Nonagrarian Sectors Development of Employment: Origin and Engagement of the Workforce Composition of the Workforce: Age, Gender, and Qualifications Situation of Employment, Social Security, and Living Conditions Summary 6. Finance System and Development of Rural Towns (Zhen) Introduction Local Budget and Taxes: An Overview Township- and Town-Level Revenues and Expenditures: Empirical Data of the Analyzed Zhen Structural Problems of the Towns’ and Townships’ Public Budgets Tax Agreement between Township/Town-Level and County/City-Level Governments Conclusion 7. Processes of Change in Administration and Politics Increasing Economic Factors of Politics: New Functions of the Local Bureaucracy Inflation of the Local Bureaucracy Economic Transformation of the Bureaucracy Administration at the County, Zhen, and Village Levels Cadre System Administration at the County Level Administration at the Zhen Level Administration at the Village Level Problems and Changes in the Traditional Party and Administrative Structures Problems of the Local Administrative Hierarchy: The Relationships among Counties, Zhen, and Villages

65 70 78 83 86 86 106 115 138 139 139 141 145 151 158 161 161 162 164 168 170 171 173 173 173 175 179 179 181 184 194 200 208

CONTENTS

County–Zhen Relationship Zhen–Village Relationship 8. Rise of a New Social Stratification and of New Local Elites Stratification New Local Elites Local Elites at the County Level Elites at the Zhen Level Elites at the Village Level Summary 9. Value Change and Interest Articulation Changing Attitudes, Values, and Ideology Attitudes of Staff and Workers in Enterprises at the Zhen Level Orientation Toward Traditionalism Increasing Potential for Protest and Conflict Among the Peasants Emergence of Interest Associations Significance of Associations Rise of New Interest Groups in China Associations at the County and Zhen Levels Summary 10. Summary and Evaluation The Role of Zhen in the Economic Process of Development Stage and Chances for Zhen Development Zhen as Local Labor Markets Zhen and Rural Enterprises Local Administrative Structures Municipal Development and Land Use Processes of Social and Political Change Development of Ownership Economic Transformation of the Bureaucracy New Stratification, Change of Elites Retraditionalism and an Increasing Potential for Conflicts in Rural Areas Change of Values Interest Associations Communalism Notes Bibliography Index

vii

208 211 215 215 219 222 225 230 236 239 239 240 257 260 263 263 266 271 277 281 281 281 283 284 286 286 287 287 288 288 288 289 289 289 295 315 345

List of Tables, Figures, and Maps Tables 2.1 Number of All Chinese Zhen and Their Populations, 1952–1999 (selected years)

16

2.2 Typical Features of Zhen in the Surveyed Provinces, 1999 3.1 Rural per Capita Net Income in the Surveyed Provinces, 1999

19 27

3.2 Basic Data Regarding the Economy and Population of the Surveyed Zhen, 1999–2000

28

4.1 Expenditure of a Rural Household for Private Housing Construction in Selected Provinces, 1994 and 1999

34

4.2 Land Utilization and Infrastructure in Officially Designated Zhen and Market Towns in the Selected Provinces, 2000

35

4.3 Free Market Trade and Retail Turnover, 1978–1999, various years

43

4.4 Characteristic Features of Surveyed Markets 4.5 Distribution of Rural Temporary Migrants by Destination, 1994

46 50

4.6 Factors of Population Increase in Zhen, 1984–1992

52

4.7 Age of Migrants in Surveyed Zhen, 1993–1994 and 2000–2001

54

4.8 Important Motives for In- and Out-migration, 1993–1994 4.9 Important Motives for In- and Out-migration, 2000–2001

54 54

4.10 Origin and Destination of In- and Out-migrants, 1993–1994 and 2000–2001

56

4.11 Occupations of Temporary Inhabitants in Dongting and in Wuxi County, June 1993

58

4.12 Occupations of Temporary Inhabitants in Xiangyang and Yuquan, 2000–2001

59

4.13 Occupations of Temporary Inhabitants in Selected Provinces, 1997

59

4.14 Reasons for the Change from an Agrarian to a Nonagrarian Hukou in Jinji, 1980–1992 5.1 Urban–Rural Distribution of the Private and Individual Sectors in China

62 69

ix

x

LIST OF TABLES, FIGURES, AND MAPS

5.2 Investment, Production Value, Turnover, and Trade Volume per Enterprise in the Private Sector—Small and Medium-Size Businesses, 1993 5.3 Investment, Production Value, Turnover, and Trade Volume per Enterprise in the Private Sector—Large-Scale Enterprises, 1993 5.4 Employed Persons per Enterprise, by Ownership, 1992–1993 5.5 Rearrangement of Rural Enterprises’ Ownership Structure, 1995 and 2000 5.6 Shareholders in Rural Enterprises in China, 1999 5.7 Export Turnover of Rural and Total Industry, 1986–1999, Various Years (current prices) 5.8 Export and Import Value for Selected Provinces as a Percentage of the Total for China, 2002 5.9 Industrial Gross Value of Production, by Form of Ownership, 1978–1999 5.10 Employees in Rural Enterprises, by Form of Ownership, in Selected Provinces, 1993 and 1999 5.11 Gross Value of Production of Rural Enterprises in the Provinces Analyzed, 1999 5.12 Borrowed and Equity Capital of Township and Village Enterprises (1992) and Collective Enterprises (1999) 5.13 Percentage of Rural Enterprises with Losses and Credit Loads in Selected Provinces, 1992 and 1999 5.14 Stockholders, by Capital Share, 1999 5.15 Origin of the Managers in the Surveyed Collective Enterprises, 1993–1994 5.16 Private—Including Urban—Entrepreneurs and Enterprises, 1999 5.17 Cooperating Rural Enterprises, 1992 and 1999 5.18 Statistical Data of Analyzed Zhen, 1992–1993 and 1999–2000 5.19 Statistical Data for the Cities and Counties Inside Which the Analyzed Zhen Are Located, 1999–2000 5.20 Basic Indicators of Zhen Township Enterprises, 1999–2000 5.21 Profits and Losses of the Larger Enterprises, Jinji, 1994–2000 5.22 Development of All Types of Enterprises, Jinji Zhen, 1994–2000 5.23 Average Number of Employees per Collective and Private Industrial Plants, China, 1994–2000 5.24 Number of Enterprises and Employees, by Form of Ownership and Industry Type, Jinji, 1999 5.25 Economic Development of the Twelve Analyzed Enterprises, Jinji, 1994–2000 5.26 Rural Industrial Enterprises, Xiangyang Zhen, 1999

73 73 80 91 91 92 93 95 98 100 102 104 109 111 112 114 116 118 119 120 123 124 125 125 128

LIST OF TABLES, FIGURES, AND MAPS

xi

5.27 Budget of Xiangyang, 1999

129

5.28 Number of Enterprises and Employees, by Form of Ownership and Industry Type, Zongshizhuang, 2000

131

5.29 Collective Enterprises as a Percentage of All Rural Enterprises, Zongshizhuang, 2000

132

5.30 Enterprises and Employees, by Form of Ownership, Pingle, 1993 and 1999 5.31 Economy of Rural Enterprises, Yuquan Zhen, 1994–2000

133 135

5.32 Rural Enterprises, by Type of Ownership, Xinzhou Zhen, 1999

137

5.33 Origin of Interviewed Employees, 1993–1994 and 2000–2001

143

5.34 Type of Household Registration Among the Interviewed Employees, 1993–1994 and 2000–2001

145

5.35 Job Changes in the Surveyed Zhen, 1993–1994 and 2000–2001 5.36 Age of Employees, by Gender and Origin, 1993–1994 and 2000–2001

146 148

5.37 Period of Employment of All Interviewed Individuals, 1999–2000

149

5.38 Education of Interviewed Employees, 1993–1994 and 2000–2001

150

5.39 Former Jobs of Interviewed Employees, 1993–1994 and 2000–2001 5.40 Present Jobs of Interviewed Employees, 1993–1994 and 2000–2001

151 152

5.41 Employees, by Employee–Employer Relationship, 1993–1994 and 2000–2001

153

5.42 Former and Current Monthly Salary (in yuan) of Interviewed Employees, by Income Group, 1993–1994 and 2000–2001

154

5.43 Arable Land per Household, 1993–1994 and 2000–2001

155

5.44 Farming of Arable Land, by Group, 1993–1994 and 2000–2001 5.45 Fringe Benefits of Rural Enterprises, 1993–1994 and 2000–2001

156 158

6.1 Budget Revenue of Analyzed Zhen, 1992–1993 and 1999–2000

166

6.2 Revenue and Expenditure per Head in Analyzed Zhen, 1999–2000

166

6.3 Agricultural Tax and Rural Fees as a Percentage of the Zhen Budget Revenue, 1992–1993 and 1999–2000

167

6.4 Industrial and Commercial Taxes of Rural Enterprises, 1999–2000 6.5 Annual Proportional Growth Rates of Local Revenues, 1995–1999

168 170

7.1 Grades of State Cadres

180

7.2 Administrative Structure Levels, Dongting Zhen, 1993

186

7.3 State Cadres, Xinzhou 7.4 Rural Cadres per Administrative Unit in the Provinces Investigated, 1991–1992

187 188

xii

LIST OF TABLES, FIGURES, AND MAPS

7.5 Rural Cadres in the Investigated Areas, 1992–1993

189

7.6 Members of the Dongting Party Committee, 1993

191

7.7 Functions of Dongting Zhen Government Members, 1993 7.8 CCP Members, by Profession, Zongshizhuang, 1985 and 1991

192 205

8.1 Order of Stratification in Zhen, by Factors of Political and Economic Power, Social and Local Prestige, and Prestige Status

217

8.2 Structural Change of Wuxi County’s Leadership

224

8.3 Social Composition of People’s Congresses of Wuzhong City, 1980–1993

224

8.4 Changes in the Leadership Structure of Zongshizhuang, 1978–1993 8.5 Changes in the Leadership Structure of Dongting, 1978–1992

226 226

8.6 Composition of the Salary of the Party Secretary of Yuquan, 1994

227

8.7 Village Committee, Yuwang, Pingle Zhen, 1994

233

9.1 Question A: How Important Are the Following Issues in Your Life? 9.2 Summary: Importance of Life Spheres

241 242

9.3 Summary: Importance of Life Spheres in Zhen

242

9.4 Question B: What Would You Do If a Larger Amount of Money Were Available to You?

243

9.5 Purposes of Investments

243

9.6 Question C: Mark the Statements with Which You Agree 9.7 Question D: What Do You Think of the Statements Below?

245 246

9.8 Question E (1993–1994): What Do You Think of the Prestige of the Following Professional Groups?

247

9.9 Question E (2001): What Do You Think of the Prestige of the Following Professional Groups?

249

9.10 Question F: What Relationship Do You Have to the Management of This Enterprise?

251

9.11 Relationships to Management in Examined Zhen

251

9.12 Question G: How Do You Evaluate Your Present Working Conditions and Your Quality of Life? 9.13 Question I: What Is Currently Your Most Serious Personal Problem?

252 255

9.14 Trends in the Change of the Subculture of the Peasantry

257

9.15 Trends in the Change of Values

258

9.16 Structure of Associations in Zunyi County 9.17 Classification of the Associations in Seven Investigated Towns, by Sector

273 274

LIST OF TABLES, FIGURES, AND MAPS

xiii

Figures 1.1 Interdependence of Economic, Social, and Political Change

9

3.1 Rural per Capita Income in GDP, 1952–2000, in the Surveyed Provinces in Relation to the Chinese Average (100)

25

4.1 Organizational Structure of the Rural Supply System in China

42

4.2 Hierarchy of Markets

44

4.3 Space-Time Connections Among the Markets of Xinzhou/Xiaxi and the Neighboring Markets, 1994

45

5.1 Number of Individual Companies, China, 1990–2001

67

5.2 Growth Rate of Individual Companies, China, 1989–2001

67

5.3 Number of Private Companies, China, 1989–2001

68

5.4 Growth Rate of Private Companies, 1990–2001

68

5.5 Private Sector’s Share of the Tertiary Sector, Sichuan Province, 1993

77

5.6 Share of the Private Sector in the Tertiary Sector, City of Guanghan, 1992

81

5.7 Share of Private Enterprises and Employed Persons of All Xiangzhen Enterprises and Employees in China, 1990–1993

82

5.8 Share of Private Enterprises and Employed Persons of All Xiangzhen Enterprises and Employees in the Provinces Studied, 1992–1993

82

5.9 Private and Individual Sector’s Share of the Total Workforce, 1993 and 1998

89

5.10 Employees in Township and Village Enterprises, by Collective and Private Form of Ownership, 1984–2000

96

5.11 Total Rural and Agricultural Labor Force, 1978–2001

96

5.12 Nonagricultural Workforce’s Share in Total Rural Workforce, 2001

97

7.1 Organization of the Party Committee, Qionglai, Sichuan, 1994

182

7.2 Organization of the County Government, Qionglai, Sichuan, 1994

182

7.3 Organization of the People’s Congress, Qionglai, Sichuan, 1994

183

7.4 Organization of the Political Consultative Conference, Qionglai, Sichuan, 1994

183

7.5 Development of CCP Membership, Zongshizhuang, 1979–1992

204

7.6 New Admissions to the CCP, Zongshizhuang, 1979–1992

204

7.7 Individuals Leaving the CCP, Zongshizhuang, 1979–1992

206

7.8 CCP Members in Zongshizhuang, by Education, 1985 and 1991

206

7.9 CCP Members by Age, 1985 and 1991

207

7.10 Zongshizhuang Party Members, by Time of Joining

207

xiv

LIST OF TABLES, FIGURES, AND MAPS

8.1 Change of Age Structure: Leadership in Jinzhou County, 1978–1992

223

8.2 Wangyiba Village Administration, Wuxi County, 1993

231

8.3 Village Administration Committee of Chunleicun, Dongting Zhen, 1993

231

8.4 Village Administration Committee of Kongmuzhuang, Zongshizhuang Zhen, 1993

232

9.1 Assessment of Professional Groups 9.2 Question H: To Whom Do You Turn in Case You Encounter Problems with Your Job?

248 253

9.3 Individuals Who Would Turn to the Party for Assistance with Employment Problems, by Age Group

254

Map 3.1 Analyzed Towns

22

Preface This study was carried out as an interdisciplinary research project of the three authors: Jie Fan, professor of geography at the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing; Thomas Heberer, professor of political science at the University of Duisburg-Essen; and Wolfgang Taubmann, professor of geography at Bremen University. The German Volkswagen Foundation generously sponsored the project during its first phase (1993–1994), while the National Foundation of Natural Sciences of China supported the second phase of analysis (2000– 2001). We warmly thank both institutions. The analysis and comparison of seven rural towns (zhen) in six different provinces in 1993–1994, and six zhen in five different provinces in 2000–2001, in terms of their economic, social, and political development, is presumably one of the first attempts to use the same questions and definitions of the problems for identical rural settlements at an interval of six years. Several Chinese colleagues supported us during the periods of fieldwork and analysis. We also thank them very much. The governments of the provinces of Guizhou, Hebei, Heilongjiang, Jiangsu, Sichuan, and the Autonomous Region of Ningxia; the cities and counties of Acheng, Guanghan, Jinzhou, Qionglai, Wuxi, Wuzhong, and Zunyi; as well as Dongting, Jinji, Pingle, Xiangyang, Xinzhou, Yuquan, and Zongshizhuang zhen have supported our research project effectively. We also thank the staff members of these administrative units who were willing to respond to our gathered information. We are furthermore indebted to all the other institutions and persons in China that helped us to carry out our project. We sincerely thank the employees and students in our departments who assisted with the evaluation of the data, paperwork, translations, and corrections. Finally, we also thank the managing editor Angela Piliouras for her helpful support and Eileen Chetti, who checked our text very carefully. Jie Fan, Beijing Thomas Heberer, Duisburg Wolfgang Taubmann, Bremen

xv

R URAL C HINA

1

Introduction In socialist countries a powerful state system seems to confront a weak society, resulting in isolation and powerlessness for individual members of society. As a result, analyses of these systems are dominated by aspects such as elite groups, the bureaucracy and its behavior, central institutions, and macroeconomic processes. The conditions of everyday life, or informal protest movements by various sections of society, in the People’s Republic of China (PRC), particularly by the peasants, have been in general ignored in academic literature. This, of course, had been largely due to the shortage of information and the impossibility of fieldwork before the 1980s. Nevertheless, the habit of staring fixedly at the activities of the Politburo or other central institutions—the well-known “Kremlinology”—has blinded observers to protests and resistance activity, as well as to bottom-up processes of change. Joel Migdal has compared such uncritical concentration on the centers of power and the state with “looking at a mousetrap without at all understanding the mouse.”1 Such an “expressionist idea of politics” (Habermas), which stares at and waits for policies from above, fails to understand the self-organization of the political, which in a “sub-political way” can move all spheres of society.2 In political analyses of developing countries, rural inhabitants and peasants played a rather marginal role. They are considered to be weak, dispersed, unorganized, backward, and conservative. They are held to exert little influence on political decision-making processes and have therefore been regarded as a negligible factor. This applies equally to discussions of the processes of modernization and democratization, where, as in transition theory, for instance, only the elites or the urban classes are seen to have a role in the democratic processes, or where the peasants essentially are seen as a factor in the preservation of the authoritarian forces (the “culture of authority”). Peasants only feature in the discussion when they participate in revolutionary activity as guerrillas, and even then they are widely dismissed as merely the tool of an intellectual leadership. What have been ignored in this approach are the specific forms of protest available to peasants, which, since they are not without effect within peasant society, must ultimately have a political effect. These include giving false information about yields, areas under cultivation, and income, the delivery of low-quality produce to the state, noncooperation with official regulations, tax evasion, slacking, theft, and the destruction of public property. Even such everyday forms of resistance activity can in time enforce political change, due to the high social and economic costs they exact. Peasant resistance will take such forms in any society where other ways of expressing discontent

3

4

CHAPTER 1

are unavailable.3 When political repression is extreme, the resistance may take a more subtle form, but when there is economic and political liberalization, the resistance becomes even stronger and more explicit, as will be shown below. Vaclav Havel has spoken in this sense of an “autonomous life of society,” which always escapes state control, and which never completely disappears even in times of political repression.4 This autonomous life, stimulated by poverty and the problems of everyday survival among the peasants, was what finally set in motion the process of reform in China. Peasants in the poorest regions, driven by necessity, spontaneously adopted the practices that were later designated as reform by the party leadership: the division of the land and the return to family farming. After a short but intense conflict within the party leadership, the authorities in Beijing, desperately searching for a way out of the dilemma of agricultural stagnation and peasant discontent, designated this spontaneous privatization as “agricultural reform,” making it official policy. The return to family farming entailed a whole range of further developments among the rural population. These were all illegal at the time of their introduction, but due to the results achieved and the impetus among the peasants, they were incorporated into the reform program, first at a local level, and then by the central authorities. These developments included the authorization of markets and private businesses, the migration of members of the rural population to the cities, the privatization of state-run or collective enterprises, private credit arrangements, and so on. Because farmers throughout the country pursued the same developments, they in fact were able to exert power without being formally organized. Due to the extent of these activities and the number of people involved in them, the concomitant high social costs that would have resulted from the government’s halting of these developments allowed this power to manifest itself in national policy.5 In the following chapters, this collective social movement “from below” will be examined using the examples of the towns (zhen) and their respective structures (at the county and village levels). Furthermore, the social and political consequences of rural urbanization will be described. We will concentrate on the development of new ownership structures and their social consequences; on the changed functions of the administration by direct and indirect interweaving of political, economic, and individual interests of those concerned; on the attitudes and ideas of agrarian workmanship in rural enterprises (peasant-workers); on the emergence of new interest groups and their organizations as prototypes of political participation; as well as on the tendencies toward regionalism and communalism. The results will show that the process of social change leads to a change in the political system from below. In China some of our topics were looked upon as rather sensitive. We therefore had difficulties in openly investigating, for example, privatization, stratification, the change of elites, and regionalism. Only in rare cases did we receive detailed party data; there were no data and analyses of stratification in the area of our field research. Our questions concerning the number of party members, the income of the local leadership, and the networks among political and economic functions, as well as our investigation of the structure of associations, put the local authorities on guard. These

INTRODUCTION

5

problems resulted in our having less statistical data and survey results for the chapters on social and political issues. This is particularly the case for the findings on the updated research, conducted mainly by Fan Jie, which did not comprise social and political dimensions investigated during the field study in the 1990s. Hence, comparison in this respect is of greater significance. We have therefore included information from informal interviews and talks, from Chinese publications, and from other Chinese regions. At the same time we have tried to combine the findings of our fieldwork with theoretical and general arguments to avoid a mere description and to deepen our analysis of social phenomena. Distinct Features of the Process of Change Our fundamental hypothesis is that China is not necessarily heading for a landslide collapse of its political system such as occurred in Eastern Europe. Relatively successful economic reforms are bringing about high-speed change from the bottom up, currently reflected in rapid social change, in trends toward privatization and individualization, in the rise of new elites, and in growing regionalism and communalism. Proposals such as a prompt introduction of a market economy and a multiparty system that could save China from collapse are shortsighted and unsuited to conditions in that country. There are signs that China could be the first country to prove that the transition from a Stalinist-style planned economy to an (etatist) market system under the rule of a communist party may be possible and need not necessarily be accompanied by economic decline. After all, the theory that a market economy and democracy are a “couple product” has been refitted. Not only do developments in the newly industrialized countries of East Asia contradict the theory, but even Friedrich Hayek, the champion of liberal market economy and democracy, has stressed that a market-economy policy on the basis of a totalitarian political order can by no means be ruled out.6 The reform program by no means is or was a deliberate act of transformation but instead started and evolved largely as a trial-and-error process. Accordingly, the departure point for that program was not the farsightedness of individual party leaders; instead, it was economic stagnation, the crisis in agricultural production, supply bottlenecks, and political and social discontent among broad sections of the population in the mid-1970s, all of which made wide-ranging reforms a matter of urgent concern. This discontent was expressed not only in protest actions in many cities in 1976 (e.g., the “Tiananmen counterrevolutionary incident,” re-titled “revolutionary” in 1978) but also in the protests by the rural population and in the urban “democracy movement” of 1978–1979. By transformation we mean a planned process of transition from a planned to a market economy, whereas social change is not the result of an intended act. It has its own dynamism; in other words, it is spontaneous and frequently not in line with official policies.7 There is no general theory of operation concerning the transformation from a planned to a market economy. Obviously such a transformation is not a short-term but a longterm process of change, comprising not only economic factors but also the development of market features, ideas, and institutions.

6

CHAPTER 1

Theories that proclaim a radical method, that is, a very sudden transition to a private market economy and a very rapid privatization (e.g., as described by Jeffrey Sachs or Milton Friedman),8 start with purely economic considerations without bearing in mind the consequences for a great number of people concerned. These theories take for granted that a high degree of economic growth is the result of a rapid transformation. Such economic growth is not at all the quick result of transformation from a planned to a market economy. It is full of risks such as “a market economy with many traps of subsidies,” making all growth impossible.9 If social hardships (that might result in riots) for large parts of the society or for regions are to be avoided or minimized, there cannot be a sudden privatization and shock-like installation of a market economy. It is necessary to introduce market factors very slowly. The government has to decrease social hardships and guarantee a certain kind of social security. In general, most Chinese economists do not subscribe to Western scholars’ theory that shock therapy followed by destabilization is the price that has to be paid for liberalization and modernization. Obviously, the rather spontaneous social change in particular has set free capacities that lead to less complicated changes than planned processes of transformation that are found in once socialist societies. And perhaps John Kenneth Galbraith is right in saying that privatization is dangerous “as long as it follows a theory or a formula.”10 The Chinese leadership attempted to use the Soviet model of a planned economy to design the new socialist system on a drawing board and to plan all the details. That did not work, and the Chinese leaders learned that capitalism out of a cookbook, designed by Western economic experts on the basis of theoretical models without considering regional characteristics, cannot be realized.11 The party leadership12 knew about the interdependence of economic development and political power. In many ways its reform policies followed spontaneous economic tendencies of the peasant and urban population. The agrarian reform (land given to households) and private economic activities in retail trade and industry in poor regions had spontaneously come into existence. After having proved to be extremely productive and successful, these methods of reform were taken over by the party leaders and introduced all over China as a “reform program.” The sudden process of change went overboard in its dynamism and caused a process of social change not only not intended by the party but also considered heretical right up into the 1980s. Specific factors of Chinese development are responsible for the relatively successful process of economic and social (not political) change in the PRC after 1978. These factors are altogether different from the transformation processes in Eastern Europe and the former Soviet Union: • the nationalist character of Chinese communism; • no export of revolution by the Soviet army, but “homemade” takeover of power by the Chinese Communist Party (CCP); • the search for a distinct Chinese way of development, not an imitation of a foreign one like the Soviet way;

INTRODUCTION

7

• specific processes of social interaction and inclusion due to historical and cultural concepts; • the trauma of the Cultural Revolution as a negative experience for elites and the general population; • weakening of the traditional elites by the Cultural Revolution and consequently the weakening of the antireform potential; • a sociocultural disposition (e.g., a specific enterprise culture) that causes socialism’s deformed relationship toward property to have less influence in China than in the postsocialist countries of Eastern Europe. Description and evaluation of these theses are beyond the scope of this book. These theses, however, do explain the distinct process of change in China. In the following chapters, we will first explain the term “social change.” We will then examine the process of social change via economic alterations at the zhen level. Modifications in the structure of ownership lead to a new social stratification and to the rise of new local elites. The economization of politics alters the functions and procedures of the local bureaucracy. Attitudes and values are converted. The dissolution of rural structures of organization to some extent leads back to traditional ways and creates a growing potential for conflict. Decentralization promotes regionalism as well as localism. The result is a pluralization of local society that results in an alteration of the economic and political power capacity of the central government. Social Change China is characterized by rapid economic change. This is to be seen not only in the extraordinary economic growth that turned the Chinese economy into one of the most rapidly developing economies in the world and in the significant improvement of the living standards of many Chinese during the past two decades but also in the high degree of regional, sectoral, and social alterations. Economic change leads to social change. Economic change and social change are interdependent. On the one hand, economic alterations cause political and social modifications; on the other, economic change depends on social alterations. When we talk of social change, we refer to modifications at the macro level, that is, changes that comprise the whole society as well as regional and local structures, such as urbanization, the modernization of institutions, the change or rise of new elites, social differentiation (stratification of society, income gaps), division of labor, migration, and geographical mobility. Such modifications are responsible not only for technical changes but also for the development of new attitudes toward life (changes in values). Sociologists point out that the creation of modern economic structures and institutions is accompanied by a change in attitudes.13 It was Arnold Gehlen who explained that the transition to a modern society leads not only to a transformation of economic behavior but also to a complete reform of all attitudes.14

8

CHAPTER 1

We understand by “social change” what Karl W. Deutsch called “social mobilization,”15 in other words, a comprehensive process of change that can be found in all countries, where modern ways of life are substituted for traditional ones. The term not only refers to the “process of modernization” but is an essential aspect in this very process, influencing its direction and development. Change is the result of external as well as internal factors.16 It may come about by guidance or just spontaneously. One has to differentiate between alterations that do not question the system and change of the system itself,17 the latter being the proper social change from a sociological point of view. Parish and Whyte differentiate among three kinds of change mechanisms: (1) indirect change by structural transformation, for example, in the economy, (2) direct change due to administrative measures, and (3) direct change by normative influence.18 From our point of view this differentiation seems to be one-sided. It takes for granted that processes of change are initiated by a central power; as a rule, the government. The spontaneous change from below due to economic and social conditions is neglected. Parish and Whyte do not take into consideration that all three factors can be combined and that—as is the case in China—the spontaneous change from below can go hand in hand with the intended one from above. The Chinese leaders speak not of social change but of modernization, mainly understood as economic modernization. The concept of the Four Modernizations does not include political and social modernization. In line with traditional etatist socialist ideas, the Chinese term for “socialism” refers only to a “modernization without modernism” (Dahrendorf). Economic-technical development is intended, not political and social change. This position is explained by the necessity of political and social “stability” as the basis for successful economic reform. The alteration, however, is spontaneous, due to the process of economic change influencing—as we will see—its very direction. As Rostow showed, the phase of economic takeoff requires certain social suppositions, such as fundamental alterations of institutions, the law, the system of education, the structure of families, and the system of values and rules.19 The voluntaristic position of the Chinese leaders does not meet reality. Zimmermann rightly points out that it is not sufficient to want “the fruits of social change alone,” that is, a technical and economic modernization, but that one has to recognize and want the social change in itself as an “instrument to win these fruits.”20 Numerous studies in developing countries reveal the connection between economic development and political change.21 China’s political leaders tried to erect barriers to transformation with the Four Cardinal Principles (sige jiben yuanze)22 laid down in the constitution and of first priority for every citizen. They are meant to block fundamental political change, but even these principles allow certain escape options as neither of the terms “socialism” or “democratic dictatorship of the people” is defined. The term “socialist market economy” reveals the possibilities of interpretation. Obviously, these principles are not strong enough to prevent the loss of central power capacity, a stricter localization, and local deviations from central policies.

INTRODUCTION

Figure 1.1

9

Interdependence of Economic, Social, and Political Change Economic Change Diversification of Ownership System

Economic Privatization

New Strata/ New Elites

Regionalism/ Communalism

Migration

Individualization

Opening Toward World Market

Decentralization

Division of Labor

Urbanization/ Industrialization

Economic Change of Values

Development of Market

Economic Pluralization

= Social Change

New Interest Groups

Urge for Participation

Participation in Economic Decision Making

Participation in Political Decision Making

Market Behavior Competition/Responsibility

Political Change of Values

Change of Elites

Social Pluralization

= Political Change

Economic change consequently produces social as well as political change (see Figure 1.1), and social change does not lead to social and political stability but rather to the opposite. Economic growth is connected to an erosion of traditional social structures (family, clan); the rise of a stratum of “newly rich” people that due to their economic position are also interested in political participation; an increase in geographical mobility and in rapid migration from rural to urban areas; a growing disparity between poor and rich; a general limitation of consumption to allow the use of capital to foster investments; the improvement of educational standards and general access to the mass media, leading to expectations that cannot be met; an increase of regional and ethnic conflicts in terms of the allocation of investments and consumptive goods; and a growing ability to organize groups and consequently an increase of group expectations toward government that cannot be satisfied. Thus, material improvements are accompanied by social frustration. 23 Although the consequences of this process vary from country to country (due to the degree of government control and intervention in economic and social processes), the loss of order is a typical

10

CHAPTER 1

feature of current reform; in China this is manifested by considerable regional differences in development.24 In addition to the internal aspects of change, there is also an external aspect, which is due to globalization processes, new technologies, access to the World Trade Organization, new media and the global market economy, the policy of opening the country, the influx of foreign investment, sojourns abroad, and tourism, but also due to the increasing economic and cultural processes of linkage among the PRC, Taiwan, and Hong Kong and the resulting passenger traffic. In spite of its importance, this external aspect will not be considered in this study.25

2

Zhen Settlements Between Urban and Rural

At first glance, it seems to be impossible to analyze all the dimensions of the economic, social, and political processes of change discussed in Chapter 1 in relation to China’s reforms since 1978. Therefore, we try to demonstrate the process of rural urbanization with the help of a type of settlement that has its place between the urban and the rural. To properly describe such a type of small town, we used a complex procedure based on numerous indicators and variables. To simplify this process, we have chosen examples of officially designated small towns (jianzhi zhen). There exist four types of small towns in China: seats of county governments (xian zhengfu suozaidi), seats of city governments at the county level (xian [shi] zhengfu suozaidi), towns under a county government (xianxiazhen), and towns under a county-level city government (shixiazhen).1 Of course, some might object to this classification, saying that on the one hand, numerous rural market towns (jizhen), mostly seats of township administrations (xiangzhengfu suozaidi) or towns not possessing a jianzhi zhen status, show equally urban elements, while on the other hand, so-called fully developed cities (shi) in some regions still bear rural traits. However, there is no question that the majority of those jianzhi zhen possess certain urban features, and thus the precondition is given to select seven case studies (see Chapter 1) from a comparatively homogeneous category of settlements. Two of our selected zhen are the xianxiazhen type, and five are the shixiazhen type. For centuries the Chinese urban hierarchy has been characterized by a high percentage of low-rank cities. The basis of this system was and is formed by thousands of small market towns below the shi level. Since the seventeenth and eighteenth centuries these centers of local market areas have grown in size because of an increasing rural trade and a growth in the rural population.2 Skinner, investigating the Chinese rural settlement system in several of his publications, decided on the following classification for the upper-Yangzi region.3 • • • • • • • •

Central metropolises Regional metropolises Regional cities Greater cities Local cities Central market towns Intermediate market towns Standard market towns 11

12

CHAPTER 2

To a certain degree this hierarchy is valid for the whole of China. According to Skinner, about one-third of the central market towns fall under the category of zhen, and about one-third under the category of xiang. There is, however, no doubt that this classification refers to a more or less dispersed settled rural area at the lower levels of an urban hierarchy. In the surrounding areas of large cities, there are a number of zhen that do not fit into this system. Before our case studies are discussed, it seems necessary to give some explanation concerning the administrative definition of the officially designated zhen. The growth of the urban population was and is influenced not only by various conceptions of the residents’ urban or rural status but also by the changes and different definitions concerning the urban administrative system. Preconditions for the Designation of Zhen As already mentioned, in the PRC cities (shi) and towns (zhen) are distinguished according to their administrative-political status.4 So far in China the conditions for the assignment of a town status have been changed three times: 1. In 1955 the State Council laid down a number of criteria for the designation of cities and towns.5 According to these norms, settlements could be granted zhen status • either if they were the seat of a county’s people’s committee or a local government at the county level that had at least 2,000 inhabitants, and were made up of more than 50 percent nonagrarian population;6 • or if they had between 1,000 and 2,000 inhabitants and were made up of more than 75 percent nonagrarian population. The latter regulation applied in particular to industrial and mining centers, railway and other traffic junctions, trade centers, and so forth. These zhen could be raised in status to shi when they had more than 100,000 nonagrarian inhabitants or when they had fewer than 100,000 inhabitants but became the seat of an administrative unit at the provincial level or were turned into a center for industry, mining, or trade. 2. In December 1963 the State Council tightened the preconditions for zhen status as in general the opinion prevailed that “during the last years the urban population had grown too quickly and that there had been too many new shi and zhen.”7 The new norms were valid until 1984, providing the following criteria for the designation of towns: • There had to be more than 3,000 inhabitants, and the percentage of the nonagrarian population had to be higher than 70 percent. • If there were between 2,500 and 3,000 inhabitants, the percentage of the nonagrarian population had to be over 85 percent. These threshold values were not strictly compulsory in frontier regions, in areas inhabited by national minorities, or in mining districts, oil fields, and forest regions.

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

13

Obviously, the regulations, valid from January 1, 1964, were based on former norms, because by about 1920 a place with more than 2,500 inhabitants was defined as an urban settlement (market town). Still, today there exist numerous settlements with central cultural and economic functions that are placed below the level of officially designated towns. They are frequently called market towns (jizhen), small market towns (xiao jizhen), or rural market towns (nongcun jizhen). 3. After the people’s communes had been completely dissolved, the preconditions for the status of a zhen were modified again. In a report from October 1984 the Ministry of Civil Affairs (minzheng bu) complained that the development of towns did not follow a straight line and that the main problem was the absence of uniform norms to install zhens.8 This had a negative effect on the development of industry, services, and leisuretime activities. To remove these obstacles the following changed norms were proposed. Now all townships (xiang)—more or less comparable to former people’s communes— could receive the right to become a zhen if they • were the seat of a state authority at the county level; • had less than 20,000 inhabitants, but at least 2,000 nonagrarian inhabitants; or • had more than 20,000 inhabitants, with at least 10 percent belonging to the nonagrarian population in the seat of the township administration. The stipulation of “2,000 nonagrarian inhabitants” was subject to discussion in areas containing national minorities, in remote regions, in mountainous and frontier areas, in mining and industrial regions, and in harbor and tourist areas. The new criteria led to a unification of zhen and township administrations that previously had existed side by side. In former times, the township administration had been responsible for the villages in its region; now the zhen governments within the administration area—according to the principle that “town manages villages”—administered the villages. The new criteria seemed to be understood by the provinces as regulations not absolutely obligatory, as there were many differences in interpretation. Nevertheless, the regulations, which are still valid today, reflect Chinese urbanization policies, and that especially applies to the norms for the designation of cities (shi), the alterations of which during a period of more than four decades cannot be discussed here in detail. In principle, a 1955 decree by the State Council concerning the designation of shi is still in effect; according to that decree, urban settlements (chengzhen) with more than 100,000 inhabitants are allowed to apply for shi status.9 Since 1986, however, zhen can receive the status of a shi when they have more than 60,000 nonagrarian inhabitants and their yearly income surpasses 200 million yuan, in other words, when they are the economic center of their region.10 Certain exceptions are again allowed in towns located in areas containing minorities, in border regions, in important mining and industrial areas, in well-known tourist resorts, and in traffic junctions. Development of the Number of Zhen The various criteria concerning the designation of shi and zhen reflect the shifting political evaluation of their role since 1949 and thus also explain the changing number of

14

CHAPTER 2

officially designated zhen (see Table 2.1). Until 1984 the data regarding the number of zhen are not very reliable. Only in rare cases is it clear whether all zhen are included, that is, also those within the administration area of cities and city districts, or only the zhen under the administration of counties. Most authors, as, for example, Chan, Kirkby, and Kojima, ignore this distinction.11 Also, because the data for single years differ conspicuously, we have used only selected years.12 It is remarkable that the number of zhen—having reached more than 5,000 at the beginning of the First Five-Year Plan (1953–1957)—has decreased since the beginning of the 1960s and then stagnated at a level between 2,800 and 2,900 for about two decades. The reason for this number of towns might have been the policy of the central government—formulated in 1963 and kept unchanged for a long time—that the urban population had grown too quickly compared to the development of agricultural production, and that only such places should obtain zhen status in which trade, handicraft activities, and industry played a relatively important role and consequently a great number of employees worked in nonagrarian sectors.13 At the same time, the stagnation in the number of zhen was also an indicator of the precarious economic situation in rural areas. The collectivization of agriculture, the monopolization of rural trade by a state supply and marketing system for grain, edible oil, cotton, and many other products, the prohibition of free markets, and the prohibition of all private economic activities robbed the market towns, so far quite prosperous, of their basis.14 The zhen kept their administrative functions, and as the seat of a people’s commune or—in some cases—production brigade offered medical, educational, and other state facilities. Their traditional market and exchange functions, however, were cut down, for the supply of goods by the state was reduced to cover basic needs, and thus they became rather unattractive for the population. At the end of the 1950s the zhen experienced some industrialization. These factories, however, mainly focused on the needs of agriculture.15 After the proclamation of the so-called Four Modernizations, the relatively strict attitude toward zhen was criticized during the Third Plenary Meeting of the Eleventh Central Committee of the CCP. The development of zhen had fallen victim to the “left wing.” Especially since the end of the 1950s, the development of “highly collectivized” people’s communes had abolished townships and towns (cunzhen, i.e., village markets) as independent units. During the Cultural Revolution the construction of residential buildings and the improvement of the infrastructure in small towns (xiao chengzhen) were seriously neglected. The situation was only improved after the introduction of the economic reforms.16 The modified norms of 1984, the campaigns by ministries, exhibitions, and competitions obviously created a better atmosphere for zhen designations to increase in number. Of the great number of centrally organized activities, only some examples can be mentioned. By 1983 the Ministry of Urban and Rural Construction and Environmental Protection had started a competition to award the best land utilization plans for small towns all over China; in April 1984 the same ministry held a conference during which experiences with the planning of zhen were discussed; in November 1985 an exhibition in Beijing showed the development of zhen.

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

15

Scientists criticized the new policy of designating zhen, first because the population number as the only criterion seemed inadequate, and second because the term “nonagrarian” referred only to the hukou (household registration) and not to the kind of employment.17 In spite of such objections, a rapid increase in the number of zhen began, the number growing by more than six times from almost 3,000 to over 19,000 between 1980 and 1999, the first doubling of the number of zhen having already taken place between 1983 and 1984. In Table 2.1, the figures for 1999 (a) refer to those zhen that are administered by a county or county-level city government. All our case studies are taken from this group. The numbers for 1999 (b) also include zhen that are the seats of county governments. The difference between these two figures allows the conclusion that there exist around 1,440 county seats at the zhen level.18 The rapid development of zhen was mainly due to the economic reforms in rural areas; administrative acts by themselves would not have been sufficient. Some of the main changes that revived zhen were the introduction of the production responsibility system for peasant households, a diversification and specialization in agriculture, the increase of peasant part-time jobs, the reopening of private markets, and, last but not least, the industrialization. Definition and Development of the Urban Population in Zhen In the 1953 and 1964 censuses, the total permanent population (shizhen renkou) belonging to the administrative areas of cities and towns was registered as urban.19 Due to the relatively narrow defined administrative areas, this description may in fact have correctly reflected the actual situation. At least the statistics published until 1963 do not differentiate between the total urban population and nonagrarian inhabitants. Between the 1964 and 1982 censuses, the official term used for the urban population was “city and town population” (chengzhen renkou). This classification included all inhabitants of the “city proper and its outskirts.” In these two types of areas, the nonagrarian inhabitants were called “urban population” (chengshi renkou), and the agrarian inhabitants “rural population” (xiangcun renkou).20 With the census of 1981 the definition was extended and “all inhabitants of cities and towns” (shizhen zong renkou) within their administrative areas were classified as “urban.”21 The population of towns (zhen), belonging to the city districts or administrative areas of shi (without city districts), was counted among the shi population. In towns (zhen), as far as they were subordinate to counties, all inhabitants of the administrative area of a town belonged to the urban population.22 At the end of 1982, the total population of zhen was up to 62 million, and the nonagricultural population to 46 million.23 All in all, these numbers seemed to reflect the actual situation.24 The rapid growth of the total zhen population during the 1980s led to a quadrupling of the number of officially registered zhen inhabitants because—as already mentioned— especially since 1984, numerous townships have received the status of zhen. The increasing

16

CHAPTER 2

Table 2.1 Number of All Chinese Zhen and Their Populations, 1952–1999 (selected years) Number of zhen Administered by Total number Cities Counties 1952 1953 1958 1963 1964 1965 1973 1980 1984 1987 1991 1994 1998 1999a 1999

Total population (in millions)

Nonagrarian population (in millions)

5,402 d 33.72 3,621d 4,032 a 3,148 e *3,146 a *2,863 *2,874 a 7,320 b 11,103 a,c 12,152 c *16,210 f 19,060 g 17,805 19,244 h

612 1,982 2,844

6,708 9,121 9,308

7,467 7,467

11,777 11,777

36.33 37.93 47.30 56.93 134.47 236.66 271.71 316.12 367.33 640.32 376.37 j

29.41 30.83 36.59 44.15 52.28 61.43 65.36 64.88 72.30 129.62 74.74

Sources: a Pan, Zhongguo xiao chengzhen jianshe. b Zhongguo Gong’anbu (1985), p. 1 gives the number of 6,211 zhen; 612 zhen, administered by cities, and 497 zhen, controlled by counties, however, were not included in the statistics because of the lack of data. c Unpublished material of the Ministry of Public Security for the years 1988, 1991, 1992. d Manual for Urban Construction and Administration in China, Beijing (1987), p. 888. e Kojima, Urbanization and Urban Problems, p. 9. f Hu, “Prosperity, Policy Reform and Town Development,” p. 5. g Zhongguo renkou tongji nianjian, 1999, p. 353. h Zhongguo nongcun xiangzhen tongji gaiyao (Outline of Statistics of China’s Rural Towns and Township Enterprises (2000). i Zhongguo renkou tongji nianjian, 1999, pp. 448–449. *No information for the total number of zhen or only for zhen dependent on counties.

difference between the total zhen population and the nonagricultural zhen population since 1984 can be explained by the fact that the population in all villages administered by the zhen government has been included. For instance, if all the villagers belonging to the administrative area of a zhen are included, the total population in 1999 comes to more than 640 million, while the nonagrarian inhabitants amount to only about 130 million. In other words, nearly half of China’s total population lives within the administrative area of the officially designated towns. If we consider only the population

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

17

inside the zhen proper, then the difference between the total population (376.37 million) and the nonagricultural population (74.74 million) in 1999 was much smaller (see 1999 in Table 2.1). Perspectives on the Process of Urbanization and the Functions of Zhen The process of urbanization in China follows patterns quite common in third world countries. In all of them, the workforce engaged in agriculture was set free by the increase in productivity and the development of a market system, and the members of that workforce took up employment in nonagrarian sectors, especially in manufacturing. Also of note is the growing discrepancy in the living standards between city and countryside, further increasing the push and pull factors of migration. The still very effective consequences of the household-registration system (hukou system) must not be neglected; it was introduced in the 1950s and strictly enforced since the beginning of the 1960s until recent years. For decades this control system forced the rural population to stay in their hometowns or counties, as only an urban hukou received assistance with food, housing, and employment. Migrants with only a rural hukou never received any food or housing. Although during the past decade this system has lost effectiveness, nevertheless, it is still a considerable barrier against unrestricted migration into cities.25 The position and especially the functions of zhen in the urban hierarchy are not only conditioned by their administrative status and the number of their agrarian and nonagrarian inhabitants; in many cases their role and position are also determined by either proximity to or distance from large urban agglomerations or by special functions such as mining or tourism. These special functions are limited to a quite small number of zhen; the main function of most zhen is to supply rural areas with market goods and services. Xu and others gave a rough classification of zhen and shi (with fewer than 200,000 inhabitants).26 The authors suggest the following groups, partly modified by us: • zhen with primary service functions, such as a seat of administrative institutions; • zhen or county administration; usually administrative tasks are combined with market functions; • resource-orientated zhen, as, for example, in mining areas, and in industrial regions dependent on raw materials, or in areas with tourism because of cultural or scenic attractions; • traffic- or transport-oriented zhen close to railway lines or junctions, ferries, and river or sea harbors, and zhen in frontier regions; • zhen close to big metropolises, whose development is mainly determined by their orientation toward the central city; as satellite towns they either take over a relief function for the resettled population and the factories transferred from the central city, or their rural industries profit from the cooperation with urban enterprises or from the proximity of the urban market.

18

CHAPTER 2

Rural industrialization led in a number of cases to prosperous zhen. This aspect is discussed in detail in Chapter 3. The majority of zhen today are characterized by rural industry, and are therefore altogether different from those that existed in 1949. At present the economic functions of zhen in well-developed regions in China go far beyond their traditional role as markets; that is, they are not only centers for the collection and distribution of goods; they have also become pivots of rural industrialization. Following economic change, the zhen infrastructure was often improved (schools, hospitals, cinemas, libraries, agro-technical centers); in addition, new technologies and innovations were brought into the zhen, a fact that led as well to an extension of their traditional role as mediator between city and countryside.27 “Small towns in China also function as cultural centers in the countryside and as vehicles for the diffusion of modern values and technology. They are the places where festivals are held, where most of the peasants make their first contact with the urban way of life, and where they find basic health, educational, recreational and social facilities.”28 In light of our fieldwork experiences, we cannot share the undifferentiated and optimistic opinions by Lin and Courtney, especially with regard to the mediation of cultural values; nevertheless, there is no doubt that the intermediary position of zhen is well described. The significance of zhen does not only consist in their role as a mediator between countryside and city; in fact, their significance is mainly due to their function as a focal point for the workforce that left agriculture and found employment in the nearby rural factories or for the peasant-workers who combined agricultural and nonagrarian activities (yi gong yi nong renkou). The permanent decrease of arable land per head of rural population has certainly contributed to the growing differences in income between city and countryside, as has the often-deplored tax and fee burdens placed on peasants. Because of varying estimated numbers of migrant workers, it is difficult to ascertain the share of workers who stay in their hometowns or home regions and do not migrate into larger urban centers because they have found employment in local rural enterprises. It is certain that the annual rates of increase in the size of the industrial labor force of about 70 percent in the first half of the 1980s are no longer reached. Nevertheless, the annual increase in employment in rural factories was more than 4 percent higher between 1991 and 1995 than it was between 1986 and 1990 (0.6 percent per year). This also applies to other economic sectors: In construction, transport and traffic, trade and catering, and other sectors, the annual increase in employment during the second period lay between 9 and 12 percent and thus as a rule was twice as high as in the preceding five-year period.29 At present it is difficult to predict whether the “progressive role” of rural industry and of the zhen in general represent only an “intermediary process” in the development of Chinese industrialization and urbanization.30 Concerning the role of zhen in rural areas, all the positive aspects discussed thus far, and frequently described by Chinese authors, are very similar to the arguments generally used in third world countries. Development strategies for small towns in the third world are often characterized by a “bottom-up” approach or “decentralized decision-making and self-reliance.”31 In spite of a great number of positive effects that result from this extremely quick process of rural urbanization, there are also problematic aspects. The conditions for regional development still vary significantly. The frequently cited “bottom-up” development in rural areas is mainly to be found in well-developed coastal regions, for example,

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

19

Table 2.2 Typical Features of Zhen in the Surveyed Provinces, 1999 Guizhou Total number of zhen Shi-administered zhen Total population per shi-administered zhen Nonagrarian population per shi-administered zhen County-administered zhen Total population per countyadministered zhen Nonagrarian population per county-administered zhen Ratio of townships to zhen Zhen per 100,000 inhabitants

Hebei

Heilongjiang Jiangsu Ningxia

Sichuan China

685 139

893 221

433 160

1,073 729

61 11

1,705 540

19,184 7467

32,428

42,088

39,579

34,058

32,235

28,098

35,350

5,802 546

7,792 672

15,471 273

9,951 344

18,650 50

5,669 1,165

7,350 11,777

28,854

34,167

26,811

40,383

22,631

26,563

31,958

3,516 1.14 2.24

4,864 1.21 1.67

11,953 1.68 2.32

9,954 0.79 2.07

8,202 3.90 1.60

4,931 1.96 2.46

6,346 1.33 2.08

Source: Document from the Ministry of Public Security; Zhongguo nongcun tongji nianjian (1993); Zhongguo tongji nianjian (2000); Quanguo fen xianshi renkou tongji ziliao (2000).

in the Pearl River Delta, at the lower Yangzi, or near metropolises. So far the development of zhen has often been directed from outside, for instance, by spillover effects of big centers, by foreign investment, by funding from superior offices, or by the relocation of urban enterprises. This dependency on exterior conditions is often called the exogenous character of economic success.32 Later chapters contain descriptions of why the competition among zhen for industrial enterprises frequently ends in an unreasonable multiplication of production branches that at the outset were quite successful. Industrialization at a low technical level in some regions has already led to disastrous consequences for the environment. Insufficient planning as well as almost no coordination among neighboring zhen have often resulted in poor allocation of factories, mostly at the cost of land previously used for agriculture.33 In many cases the one-sided preference for rural enterprises has prevented a modernization of agriculture; in this context, Tan talks of a peripherization of agriculture.34 Due to an unfavorable income situation, many peasants have either given up agriculture—“social fallow land” is quite common in coastal regions—or they have handed it over to the old and weak family members or even to children. Since the mid-1990s, the previously high growth rates in agricultural production in fact have gone down. When we look at the characteristics of the zhen in the provinces where we did our investigations, we find some typical differences: Ningxia, where the ratio between the number of townships and the number of zhen is still around 4:1, seems still to be the most rural province, while in the coastal province of Jiangsu there are already more zhen than townships. Other than in Jiangsu, the majority of the zhen are still administered by county governments and dominated by inhabitants with an agrarian hukou. Most zhen show a total population between around 25,000 and 40,000, not much different from the Chinese average (see Table 2.2).

20

CHAPTER 2

There is no doubt that in the near future the trend of recently designated zhen must slow down, as there are normally not sufficient financial means for the integrated development of an average county. At present, nationwide there are already between nine and ten officially designated zhen per county; in the future it might be wise to concentrate financial means on two or three zhen to improve the infrastructure and the living standards and thereby reach coordinated economic development. For the future development of rural areas, at least at a regional level, more than ever the following slogan is true: “maximum concentration of industry with maximum conservation of productive agricultural land.”35

3

Field Research Fieldwork Procedures and the Surveyed Zhen

Methods in Our Fieldwork Procedures in 1993–1994 and 2000–2001 Seven case studies in 1993–1994 and six case studies in 2000–2001 were selected to examine the role of zhen in the process of economic and social change in regions at different stages of development. Of course, this study could not mirror a representative cross section in a statistical sense. The basic conditions for selection were, however, the same: choose localities in provinces with varying economic power, but also include coastal and interior regions, and ensure that the selected zhen varied in their distances from megalopolises and varied in the amount of influence exerted on them by those large urban centers During the fieldwork in 1993 and 1994 we were able to select zhen according to our criteria. In 1993 our Chinese partner was the Development Research Center of the State Council (Guowuyuan fazhan yanjiu zhongxin) and 1994 it was the Geographical Institute of the Academia Sinica. In the zhen, we worked with subbranches of the Development Research Center and the urban and provincial planning and construction commissions. The interviews and surveys took place at three levels: national,1 followed by provincial and county, and finally local.2 At the provincial and local levels (cities, counties, zhen) we visited the offices in charge of our subjects of interest, for example, the Administration for Industry and Trade, statistical offices, administrative authorities for public security, local labor offices, and authorities for agriculture and rural enterprises. In zhen and villages we contacted “companies” (gongsi) responsible for the local economy as well as committees responsible for the administration of villages and their inhabitants. As a rule in 1993–1994 we sent a catalog of questions beforehand, with the help of which we hoped to get information and data for our chosen topics. The interviews themselves followed this catalog of questions. After an introductory orientation, we discussed further details, we drew attention to contradictions, and we attempted to discuss matters in depth. At the local level in particular we often asked for second and third interviews if we discovered too many discrepancies in the information provided. Of course, our informants were frequently not amused when we expressed doubts and insisted on getting contradictions explained. During our talks we usually asked for further unpublished and internal documents.3 21

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Map 3.1

Analyzed Towns

Heilongjiang

Yuquan

Jilin Xinjiang Liaoning

Beijing

Nei Mongol

Jinji

Qinghai

Tianjin

Hebei

Zongshizhuang

Shanxi

Ningxia

Shandong

Gansu Shaanxi

Tibet

Henan

Jiang-

Dongting

su

Xiangyang Hubei

Anhui

Shanghai

Sichuan

Pingle

Zhejiang

Xin-

Hunan

Jiangxi

zhou Guizhou

Fujian

Yunnan Guangxi

Guangdong

National Border Provincial Border

Xinzhou

Analyzed Towns (zhen)

Hainan

Design: M. Scheibner

In the zhen, in addition to local offices and experts, the workforce of representative collective enterprises (xiangzhen and cunban qiye) was also interviewed with the help of standardized questionnaires. The selected enterprises were asked to allow all their personnel to take part in written interviews. Before the interviews began, the questionnaires were explained in detail by Chinese colleagues. At times we encountered great difficulties, as the managers first had to learn the meaning of cluster samples. And of course we disturbed the process of production—our interviews meant an interruption in piecework. For this reason we decided to pay the employees for interviews to compensate for their loss of pay. This method resulted in our receiving of more completed questionnaires. In 1993 and 1994 we interviewed 2,204 employees in thirty-eight enterprises. In addition, in all firms we interviewed the managers about the development and economic situation of their enterprise and we analyzed the annual balance sheets when permission to do so was granted. Finally, in the seven surveyed zhen in 1993 and 1994 market traders and customers were interviewed with the help of two different questionnaires. As the parent populations were unknown, in every marketplace at least one hundred customers and traders were questioned.4

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

23

One of us (Fan Jie) was able to repeat the main parts of the first fieldwork in 2000 and 2001 using comparable methods. He and his staff interviewed a total of 1,950 managers and workers in fifty-four factories in six of the seven zhen. Dongting was excluded due to reasons that will be explained below. In 2000–2001 the interviews and surveys were carried out at the same three levels as the 1993–1994 study: at the national level the Ministry of Agriculture, the State Development Planning Commission, the Commission of State Economy and Trade, and others were visited, and at the provincial level the above-mentioned institutions were contacted, as was the Bureau of Township Enterprises and the Bureau of Construction. A parallel procedure was applied to the county or city and finally to the local level. While the Volkswagen Foundation generously sponsored the first phase of our research project, the National Foundation of Natural Sciences of China supported the second one. Empirical Problems, Especially During Our First Fieldwork Period, 1993–1994 There are still quite a number of problems left to be resolved, though since the beginning of the reform and open-door policy the fieldwork conditions have improved considerably. As far as the length of time, localities, and research methods are concerned, there are still restrictions on fieldwork in China—especially when foreign scientists are involved. Officially, fieldwork in China by foreign scientists is not allowed without permission from the responsible authorities—especially not the distribution of questionnaires and collection of unpublished data. Chinese colleagues usually prefer research work in big cities and more advanced regions. Many social scientists dislike doing fieldwork in rural areas and in poor or remote regions. There were also methodological difficulties to overcome. Research work is often performed at the behest of higher authorities. Research results are normally used to realize political ideas in practical life and to solve concrete problems, not so much to support and extend theories. Therefore, Chinese and foreign scientists are often of different opinions as far as methods, expected results, and the evaluation of foreign research aims and content are concerned. These differences explain why we had an ever-recurring problem: Critical questions, rechecking answers and data, and insistence on details and concrete information were in many cases understood to be the results of a negative attitude toward China. Chinese interviewees are prone to the impression that foreigners are interested only in negative aspects and intend to write critical and pessimistic reports. In 1993 representatives of local governments suspiciously asked our Chinese research partners whether we had in reality “completely different, nonscientific intentions,” because we were so very keen on detailed data and insisted on complete answers. As in some cases we were even perceived as “spies,” the informants tried to keep us away from detailed information. Such reactions led by suspicion are understandable, as outside the big cities contact with foreigners is still rare, and there is not much knowledge of foreign countries and almost no understanding of scientific research, as far as pure cognition and methods are concerned.

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It proved to be wise to inform all institutions with which we intended to work of the exact context leading to our questions and the necessity for exact data and information, though this procedure did not necessarily eliminate the above-mentioned doubts. Spending some days working with the interviewees and getting to know them better did much to improve the atmosphere and to improve cooperation.5 Furthermore, well-educated and trained Chinese partners were very helpful in explaining the context of our study and obtaining information. However, one must always be aware of the fact that the Chinese usually conceal problems and as a rule represent developments only in a positive way, free of conflict. A general knowledge of the problem areas of the research subjects is absolutely necessary. In many cases this information can be found in international and Chinese publications. In some cases it is also possible to learn about more sensitive topics by studying Chinese materials, including local newspapers. When carrying out research projects in China, one is also confronted with an increasing amount of corruption, which sometimes leads to extra expenses. In 1993–1994, Chinese workers from local offices quite often demanded “subsidies” and “daily allowances” from us, in addition to any former arrangements we had made with them, and handed over statistical material only upon receipt of extra payment. One also has to take into account that social gatherings add to expenses. In rural regions in particular, the representatives of offices and institutions expect their invitations to be returned by foreign scientists. Such gatherings are useful, however, as they improve mutual understanding and cooperation. During our fieldwork in 1993 and 1994 we found it necessary to host a number of social gatherings, in which the representatives of the main authorities at each level as well as local colleagues took part. The situation and research climate were different in 2000–2001 because in four cases Chinese colleagues carried out their fieldwork without foreign colleagues. This meant that local officials had fewer reservations regarding releasing internal data. This also meant that the long discussions we had in 1993–1994 were much less necessary during the second period of fieldwork. The 1993–1994 and 2000–2001 Case Studies: Zhen Regional Conditions of Development Before we present a detailed and comparative analysis of the economic and social development of the zhen, a short description of each zhen seems to be appropriate. Some introductory statistical data will illustrate the basic conditions. When the surveyed regions and selected zhen are arranged according to macro, meso, and local levels, it is obvious that Jiangsu province with a gross domestic product (GDP) of 11,542 yuan per person in 2000 (5,779 yuan per person in 1994) belonged to the leading group among the Chinese provinces. The GDPs of the provinces of Heilongjiang (4,427 yuan per person in 1994 and 8,815 yuan per person in 2000) and Hebei (3,439 yuan per person in 1994 and 7,527 yuan per person in 2000) were above the national average (3,923 yuan per person in 1994 and 7,078 yuan per person in 2000), while the

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

GDP of surveyed provinces as a percentage of the Chinese average

Figure 3.1

25

Rural per Capita Income in GDP, 1952–2000, in the Surveyed Provinces in Relation to the Chinese Average (100)

250

Hebei Heilongjiang

200

Jiangsu Sichuan Guizhou Ningxia Total China

150

100

50

19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00

0

Source: Quanguo gesheng zizhiqu zhixiashi lishi ziliao huibian 1949–1989; Zhongguo tongji nianjian, according to the annual publications; China Statistical Abstract 2001.

economic power of the Ningxia Autonomous Region (GDP of 2,685 yuan per person in 1994 and 4,715 yuan per person in 2000) and of the province of Sichuan (GDP of 2,481 yuan per person in 1994 and 4,822 yuan per person in 2000) fell considerably behind the average. The province of Guizhou (GDP of 1,553 yuan per person in 1994 and 2,817 yuan per person in 2000) is at the bottom of all the provinces surveyed (see Map 1). It is quite informative to consider the long-term per capita income—GDP per head— of the surveyed provinces between 1952 and 1994 as a percentage of the Chinese average income. The per capita GDP of the northern frontier province of Heilongjiang, obviously having been supported considerably financially by the central government in the 1950s and 1960s, since 1970 has continuously come closer to the national average, though in 2000 it rose again to 124 percent. Jiangsu, however, is the only one of the surveyed provinces whose GDP per head in the 1950s reached only 80 percent; since the economic reforms, though, its GDP has consistently grown more quickly than the national average—with the result that the GDP in 1994 reached about 150 percent and in 2000 163 percent of the national average. The development of the GDP in Ningxia, obviously also financially supported by the central government until the economic reforms, has fallen significantly below the national average (67 percent in 2000). At the beginning of the economic reforms the economy

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of the two interior provinces of Sichuan and Guizhou improved; however, since at least the middle of the 1980s the GDP per person in these provinces has grown more slowly than the national average; since the mid-1990s, though, there has again been an aboveaverage increase. Hebei achieved above-average data for the first time in 1997. Of course, inside the provinces there are also conspicuous differences in development. The variable “rural net income per person” serves as an indicator. In the selected provinces, the ratios between the poorest and richest counties/cities were between 1:2 and 1:4; the income of the poorest counties in Heilongjiang, Hebei, Ningxia, and Guizhou lay considerably below the official poverty line. However, Guizhou Province showed the smallest disparity between the highest per capita income (1,989 yuan in 1999) and the lowest (1,045 yuan in 1999).6 The surveyed zhen are situated in counties/cities that in all cases belonged to the economically stronger areas inside their provinces. In 1993 the former county of Wuxi was sixth in GDP rank among the sixty-two counties and cities in Jiangsu Province;7 that is, economically it was very strong. As a matter of fact, this former county was one of the richest in Jiangsu and in the whole of China. Within the province there was a clearly marked difference in income from south to north. The most prosperous cities and counties are located along the axis of Nanjing, Zhenjiang, Changzhou, Wuxi, and Suzhou, one of the most dynamic economic regions in China, with a high degree of industrial employment in rural areas. About 60 percent of the rural industrial output of the province of Jiangsu was concentrated in the cities of Suzhou, Wuxi, and Changzhou, including the counties under their jurisdiction.8 The city of Acheng, with a per capita net income (PCNI) of 2,628 yuan for its rural population, held a relatively strong position in the province of Heilongjiang, the value being more than double the median. In 1999 the highest PCNIs in this province were around 3,000 yuan. Richer counties and cities were to be found mainly in the north of Heilongjiang, whereas the incomes in the south, in the region between Harbin and Mudanjiang, for example, were just average. The high incomes in the sparsely populated regions of the far Northwest and in the area of the Small Hinggan Mountains might be due to forestry. The regional income distribution in the province of Hebei shows two distinct clusters of high values: primarily in the triangle of Beijing–Tianjin–Tangshan and secondarily along the axis of Shijiazhuang–Hengshui, on which the selected city of Jinzhou (formerly Jinxian county) and the sub-zhen Zongshizhuang are situated. In the province of Hebei the regional income gap is more severe than in Jiangsu. As far as the PCNI is concerned, the city of Jinzhou ranks substantially above the median (see Table 3.1). The city of Wuzhong in Ningxia, with a PCNI of 2,675 yuan, has improved significantly since 1993 and in 1999 approached nearly the top value of all counties and cities (fourth out of eighteen). The median income level in Ningxia is still much below that of Hebei and Heilongjiang. In Ningxia, too, we find a clearly marked decline in PCNI from north to south. Some of the southern counties still belong to the poorest regions in China. In Guizhou, the poorest province in China, the internal income gap has improved

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

27

Table 3.1 Rural per Capita Net Income in the Surveyed Provinces, 1999 Highest per capita net income Jiangsu (1993) 1,983 Heilongjiang 3.088 Hebei 4.127 Ningxia 2.854 Guizhou 1.989 Sichuan 5.081 Sichuan —

Lowest per capita net income Median 499 841 988 2.242 1.085 2.508 946 1.391 1.045 1.250 503 1.025 — —

Surveyed county/district principal town Wuxi (1993) Acheng Jinzhou Wuzhong Zunyi Guanghan Qionglai

1,697 2.628 3.449 2.675 954 745 2.571

Rank of the surveyed county/town among all counties/ towns in the province — 12th of 66 11th of 138 4th of 18 4th of 76 6th of 144 12th of 144

Source: Respective annual publications of the statistical yearbooks for the provinces.

considerably since 1993, though the southern and eastern counties in this province are still below the official poverty line. The highest incomes are in the central region, along the Guiyang–Zunyi axis. Zunyi county, one of our research areas, with a 1999 PCNI of 1,954 yuan, had a rural per-head net income very near to the maximum value (1,989) within the province (ranked fourth out of seventy-six cities and counties). This region— also called Central Guizhou—is partly characterized by a market-oriented agriculture and partly by forestry and pasture land. As there is but a limited area for arable land— where wet rice, wheat, rape, corn, and potatoes are cultivated—the possibilities of increasing the income by agricultural activities are very restricted.9 In Sichuan province the two surveyed cities (Guanghan and Qionglai, near Chengdu), with a 1999 gross national product (GNP) of 2,745 and 2,571 yuan per person, respectively, were among the most economically successful counties/cities in the province. Guanghan profits especially from its favorable location between Chengdu and DeyangMianyang. Qionglai, southwest of Chengdu, near the highway to Tibet, is still somewhat less developed than Guanghan. At the beginning of the 1980s both counties (now cities) functioned as models for the separation of economic organizations from political administration in rural areas.10 Some variables of the selected zhen show that they meet the chosen basic conditions and therefore represent the type of zhen settlements we intended to analyze. Regarding the locations of the analyzed zhen, see Map 1. The zhen Dongting in the former county of Wuxi (about 39,700 inhabitants in 1992, situated about 10 kilometers east of the city of Wuxi) had without doubt the most promising development opportunities in 1992 among all case studies. It was not only one of the leading zhen in the county and a model for successful rural industrialization in welldeveloped South Jiangsu (Sunan) in the 1980s.11 Dongting was a classic example of a zhen in the so-called extended metropolitan zone. Within the former county of Wuxi, the zhen Dongting also held a top position with a per-head income of the rural population of

1999 31,924 31,049 97.3 17,118 6,999 40.8 6,416 37.5 722 948 1,295 738 3,743 8.53 40,620 1.27 115.10† 3,707 285.87 8,956 298 3,499 3,548 3,474 13

2000 23,293 18,828 80.8 5,983 3,048 50.9 990 16.5 632 351 329 180 2,060 11.31 19,015 1.01 47.22† 2,508 241.58 10,371 1,654 3,356 — — 7

Zongshizhuang

72.64 1,025 1,406 1,324 2,219 529 36

— —

1999 70,823 66,776 94.3 33,685 31,520 93.6 620 1.8 218 172 332 479 2,037 34.77 61,815 0.99

Xinzhou

Source: Economic and statistical data of the zhen (2000–2001 and 1993). Notes: *1 mu = 1/15 ha; — = no data †1998 data

Survey year Inhabitants Rural inhabitants Percentage of rural to total population Rural employees Agriculture Percentage Industry Percentage Building industry Transport Trade/services Other Total area (hectares) Inhabitants/hectare Utilized agricultural area (UAA) (mu)* UAA per inhabitant (mu) Agricultural value of production (million yuan) Per rural inhabitant (yuan) Industrial value of production (million yuan) Per inhabitant (yuan) Number of enterprises Income per rural inhabitant Highest per capita income Lowest per capita income Number of administrative villages

Jinji

74.21 1,901 — 1,231 1,504 966 8

11.22 287

2000 39,419 12,145 31.1 4,794 3,171 66.1 689 14.4 275 176 77 130 1,909 20.12 26,821 1.58

Yuquan

Basic Data Regarding the Economy and Population of the Surveyed Zhen, 1999–2000

Table 3.2

220.29 9,593 1,486 2,896 1,324 827 17

31.04 1,525

1999 22,925 20,350 88.8 13,820 10,507 76.0 1,339 9.7 556 226 528 605 3,860 5.95 16,370 0.80

Pingle

784.10 50,015 611 2,940 1,386 968 9

36.00 2,625

1999 15,677 13,713 87.5 8,486 3,980 46.9 3,075 36.2 212 202 267 700 1,600 9.80 12,345 —

Xiangyang

1,480.31 37,285 848 2,005 2,338 882 17

33.29 838

1992 39,703 31,851 79.7 17,869 933 5.2 13,714 76.7 366 305 320 1,649 29.34 13.53 20,705 0.65

Dongting

28 CHAPTER 3

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

29

more than 2,000 yuan per year. Among all zhen studied, Dongting had the highest degree of industrialization. In 1992 almost 77 percent of the employees worked in industrial enterprises. Support of rural industry in the former county of Wuxi has a long tradition; as early as the 1960s, the county government tried to combine industry and agriculture in the rural areas—contrary to general policy. By that time as well, factories (shedui) were founded by production teams and brigades, mainly for repairing agricultural tools and machinery, for producing bricks and cement, as well as for processing metal and plastic. The general industrialization, since the economic reforms, has led to a mechanization and reorganization of agriculture: at the end of 1994 the percentage of industry in the total industrial and agricultural gross output of the county was 98.5 percent.12 Almost all villages in the former county in the meantime have implemented the so-called land cultivation to a reasonable extent; that is, about two-thirds of the so-called responsibility land is cultivated by village-owned farms and no longer by individual households. When the income and infrastructure are compared, Dongting and the former county of Wuxi (for some time the city of Xishan) were an exception among all other places studied. Dongting was not included in the second phase of field research because of its specific development: The former county of Wuxi was transformed into a city (named Xishan) at the county level in 1994, and Dongting became the seat of the urban authority, which previously had been located in the city of Wuxi. However, at the beginning of the Tenth Five-Year Plan the central government decided to accelerate and to guide the process of urbanization in China. As far as the province of Jiangsu was concerned, it was determined that urban development should be concentrated on the metropolitan areas of Nanjing, Wuxi, Suzhou, and Xuzhou. Because the city of Wuxi was surrounded by the former county of Wuxi—later called the city of Xishan—it suffered from a severe shortage of land for further urban expansion. As a consequence of this contradiction, the city of Xishan was abolished in 2000 and was incorporated into the city of Wuxi, forming two urban districts. Today Dongting is the administrative center of Xishan district and a part of Wuxi shi. Zongshizhuang, with 31,924 inhabitants in 1999, nearly all of them possessing a rural hukou, is administered by the city of Jinzhou, situated about 50 kilometers east of the provincial capital of Shijiazhuang. The zhen, located 20 kilometers southwest of the county-level city of Jinzhou, is well connected by a county road to the general transportation network. The marketplace came into existence through the merging of two villages in 1941. Its position in the southern part of the county, where roads to the neighboring counties meet, has doubtlessly supported the development of its market functions. The zhen comprises thirteen administrative villages. At this time, Zongshizhuang is still dominated by agriculture; that is why its structure is different from that of Dongting. While in Dongting only 5 percent (1992) of the employees still worked in agriculture, in Zongshizhuang the number was about 41 percent (1999) (see Table 3.2). Jinzhou and Zongshizhuang are situated in the Hebei lowlands. The temperate continental climate permits the cultivation of wheat and corn, turning this area into an outstanding agricultural region in China; in addition, cultivation of fruit

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(especially pears, grapes, and plums) is an important factor in agricultural production. In the second half of the 1990s great efforts were made to restructure the town’s agriculture by enlarging the planting scale of fruits and vegetables. For example, for vegetable cultivation some 250 greenhouses were erected. The vegetables from this area are exported to Japan, Hong Kong, and Singapore. Rural trade in Zongshizhuang is dominated by individual enterprises. Taking the gross output of the rural industry per employee as a standard, this zhen belongs to the economically stronger ones within the administrative area of the city. As compared to China as a whole, the percentage of industrial workers among all employees has grown considerably (from 15 percent in 1993 to 37.5 percent in 1999) (Table 3.2). However, structural development has made only slow progress because of the lack of capital resources, and the zhen’s appearance has remained nearly unchanged during the past ten years. Parts of the infrastructure have improved significantly, though. The number of residential and commercial telephones in Zongshizhuang reached 2,000, the electricity supply was extended, and rural roads were upgraded. Jinji has 23,293 inhabitants (2000), 4,465 of them with an urban hukou, and it is considered a model zhen within the city of Wuzhong as well as within the province. The zhen has a long tradition as a seat of administration and as a marketplace. Before 1960, Jinji was the administrative center of a county with the same name, which in 1960 was incorporated into two neighboring administrative units. Jinji became the seat of a people’s commune and in 1984 an officially designated zhen, though responsible only for its own inhabitants. Jinji also had a township administration responsible for the rural inhabitants of the neighboring villages. In 1986 the zhen and township governments were united. Today Jinji is in charge of seven administrative villages and two resident committees. As will be described later, its model function is founded on its seemingly dynamic industrial and trade development and on the ambitious development plans of the zhen government. Jinji is one of the favored places in the province, situated in the so-called Yinwu (Yinchuan, Wuzhong) lowland of the Yellow River, a cereal-growing area with a highly developed irrigation system. The zhen has a good traffic connection to the county-level city of Wuzhong, 12 kilometers away from Jinji and 60 kilometers south of the provincial capital of Yinchuan. Rural enterprises employ 16.5 percent (2000) of all employees. In a regional context this percentage is relatively high; in comparison to the other study cases, however, it is rather low. Nevertheless, Jinji was nominated as a pilot town for the “construction and comprehensive reforms of small towns” in the Ningxia Autonomous Region and honored for its extraordinary economic success as “the first town in Ningxia” in the year 2000. Yuquan (39,703 mainly urban inhabitants in 2000), situated in the administrative area of the county-level city of Acheng/Heilongjiang near the Harbin–Mudanjiang railway line, is in many ways different from the other surveyed zhen (Map 1). Railway stations were established every 10 kilometers along the railway line, and Yuquan is one of those stations. Yuquan has a short history; before 1909 only a few families lived here. Yuquan was originally called “Sanzhan,” which means “third railway station after Acheng.”13

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31

During the Japanese occupation, the mining of natural resources had priority (especially stones and related mineral products). Yuquan grew quickly, as most immigrants settled in Yuquan proper. The rural inhabitants—those having a rural hukou—made up only 27 percent of the total population. This percentage was between 80 and 99 percent of all the other zhen surveyed during our fieldwork. There are two more reasons for the high percentage of people with an urban hukou in Yuquan: a considerable number of state-owned enterprises and their employees, that is, firms probably originally founded by the Japanese, and an extended concentration camp, with state guardians, on the west side of the zhen (see Map 1). To create a valid comparison between Yuquan and the other surveyed zhen, all state institutions in Yuquan had to be ignored. The degree of nonstate industrialization was relatively low. Disregarding the employees in state enterprises, the share of the industrial workforce among all employees was just 14 percent (1993). The buildings within the limited area of the zhen proper were modernized, but the built-up area itself was hardly extended. In Xiangyang, which belongs to the county-level city of Guanghan/Sichuan, the income per rural inhabitant (2,940 yuan per head in 1999) is just below the average of the analyzed zhen.14 The zhen is very favorably situated near the railway and highway between Chengdu and Deyang in the central plain of the Red Basin, about 28 kilometers north of Chengdu (Map 1). This traffic axis was at the same time the main development line of the province, running from Chongqing via Chengdu to Mianyang. Like Guanghan, Xiangyang was a model in introducing the household responsibility system and in building up a zhen settlement. This zhen is said to be the first in China to have been transferred from a people’s commune into a township and by that to have begun to separate the economy and administration. In 1986 Xiangyang became an official zhen and a participant in the so-called Spark program—a project initiated by the National Commission of Science and Technology to support innovation in selected places. That explains the quite high level of development in Xiangyang. The share of industrial employees, at 36 percent (1993), is ranked immediately behind that of Dongting, for the zhen had a relatively well-developed collective industry in the early 1990s. With 15,677 (1999) inhabitants, Xiangyang was the smallest among all of our analyzed places. Compared to Xiangyang, Pingle, which is 18 kilometers southwest of Chengdu, situated in the administrative area of the county-level city of Qionglai (Map 1), has kept its more traditional agricultural structure. The marketplace looks back on a long history, as it was already a prosperous market town during the Song period (960–1279).15 The market functions for a long period were supported by the favorable position of Pingle, lying between the plains of Chengdu and the mountains in the west. Nevertheless, Pingle is located far away from the main transportation line. Therefore, some enterprises have been moved to the urban area of Qionglai city, while others were relocated to an area near the provincial road. Production traditionally concentrates on goods made of alcohol, bamboo, paper, or textiles. With 22,925 inhabitants in 1999 (89 percent of them rural), the place is slightly bigger than Xiangyang; the percentage of employees working in factories, however, is considerably lower (9.7 percent). Probably because of its position at the edge of a basin,

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Pingle has less farmland per rural inhabitant than does Xiangyang (0.82 mu compared to 0.95 mu in 1993). Because of its long history, the zhen possesses a considerable amount of ancient architecture. Therefore, the proper protection of the ancient portions of the town is an essential point for the intended development of tourism. In a regional context, the zhen Xinzhou, located in the province of Guizhou, had 70,823 mostly rural inhabitants in 1999, belonging to the richer townships (PCNI of 1,324 yuan in 1999) in a nationwide comparison; however, it ranked right at the bottom of our selected places. Xinzhou lies northwest of Zunyi county, its administrative seat being the zhen Nanbei south of the city of Zunyi. Though by road it is only 35 kilometers away from the city of Zunyi, it takes more than two hours to get there by bus or car because of the terrible road conditions. Xinzhou has been an important local trade market since the beginning of the nineteenth century due to its position in the middle of a small basin. Among other agricultural products the place is known for its specialization in chili. Of all the places in which we performed fieldwork, Xinzhou was the zhen in which agriculture still strongly predominated. In 1994 about 94 percent of all employees still worked on the land (see Table 3.2).

4

Settlements and Population Development of Settlements, Infrastructure, and Public and Commercial Institutions Development of Settlements, Land Utilization, and Infrastructure The amazing housing boom in China’s countryside has been described again and again as one typical feature of rural urbanization in the PRC. This boom has different sources: First, at certain intervals peasant or rural households invest a considerable part of their income in the improvement of their housing conditions. As a rule, this means the construction of a new house beside the old one, as renovations usually play but a minor role. Second, local governments or development agencies are the building contractors for residential houses, for public buildings, and for the improvement of the local infrastructure. Finally, rural enterprises are also important developers for enterprise extensions and in some cases also for residential houses belonging to the enterprises.1 Data in statistical yearbooks provide information about the building activities of rural households. While in 1984 every rural family in China on an average spent just 127 yuan for house building, in 1994 that number rose to 580 yuan and in 1999 to 756 yuan.2 In 1995 and 1999 there were remarkable differences among the provinces in our study area; in other words, building activities of rural households corresponded with the economic development standard of a province. A rural household in Jiangsu in 1994 on average spent 1,368 yuan for house building, whereas in Guizhou an average of only 202 yuan was spent. Heilongjiang (616 yuan) and Ningxia (600 yuan) came close to the national average, whereas the numbers for Sichuan and Hebei were rather modest. Interestingly, the two latter provinces had the fastest increase; Hebei especially seemed to have a backlog of rural housing demand. (See Table 4.1.) These data, though, do not give sufficient characteristic information on zhen, as construction activities took place in zhen as well as in townships and villages. Zhen differ from market towns and villages by a considerable extension of the town area proper (zhen qu) and by a further developed functional and spatial differentiation of the settlement area. For instance, an analysis of 190 zhen in Jiangsu for 1985 showed that a county seat on average had a settlement area of 900 hectares and a population of about 64,000 inhabitants, an officially designated zhen had a settlement area of about 200 hectares and 14,000 inhabitants, whereas a township had an area of just 100 hectares and about 5,000 inhabitants.3 Most studies show that the extension of a settlement goes along with an increasing internal differentiation. (See Table 4.2.) 33

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Table 4.1 Expenditure of a Rural Household for Private Housing Construction in Selected Provinces, 1994 and 1999 (in yuan)

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China (national average)

1994

1999

341 616 1,368 277 202 600 580

835 516 1,530 495 257 934 756

Source: Calculated from data provided in Zhongguo tongji nianjian (1995), pp. 185, 385; (2000), pp. 215, 371.

The above-mentioned data for Jiangsu are more or less verified by unpublished statistics from the Ministry of Construction for 2000. For the national average, officially designated zhen had a settlement area of 102 hectares, though there are many regional differences. In Jiangsu the area was roughly 149 hectares, in Heilongjiang about 188 hectares, and in Sichuan and in Guizhou just 41 and 51 hectares, respectively. During our own research work in the zhen we came to similar results.4 We do not share the opinion of Li, however, who says that every zhen with a settlement area of under 200 hectares has too small a cost-benefit ratio with regard to its infrastructure.5 Such a statement must be evaluated, we believe, according to the structure of each settlement. It must be determined whether only a few zhen in a county should in the future be the centers for a further developed infrastructure, as far as investment and personnel are concerned. Zhen differ notably from market towns (of which there were a total of about 27,550 in China in 2000), whose average settlement area just reached 33 hectares in 2000, but had a regional size variation similar to that of zhen. The settlement area and the number of local inhabitants roughly corresponded: zhen had about 6,860 inhabitants and market towns on a countrywide average just about 2,100 in 2000. Zhen today have a standard of infrastructure only slightly higher than that of market towns. While in 1992, 66 percent of all zhen, but just 36.8 percent of the market towns, possessed a water supply system, in 2000 the figure was 87 percent for both types of settlement. This indicator, like other infrastructures, clearly shows regional differences, representing at the same time the general economic development level: The zhen in Jiangsu were at the top (99.6 percent had their own water supply), while the zhen in Ningxia (72 percent) and in Heilongjiang (83 percent) had the lowest standard of infrastructural development. However, the differences were much less distinct compared with 1992. In 2000 about 92 percent of all zhen (57 percent in 1992) and 83 percent of all market towns (49 percent in 1992) had land utilization plans, usually developed by local offices or by the responsible county administrations; in some cases the plans had been created by university institutes or provincial-level institutions. Jiangsu was also top among the compared provinces as far as development plans were concerned.

1,123 8,637 49.70 149.40 4.40 7.10 99.60 100.00 368 4,192 34.70 64.36 11.60 6.10 88.30 100.00

913 3,221 60.30 91.14 1.50 1.20 67.90 93.50

Jiangsu

406 7,377 60.30 188.03 1.80 1.60 83.30 98.00

Heilongjiang

78.60

652 38.60 9.68 12.60 9.20 80.60

2,761

1,579 4,174 55.90 40.88 9.40 8.30 95.60 96.50

Sichuan

93.20

1,447 16.50 10.30 8.30 4.70 35.00

1,633

611 5,477 27.90 51.50 4.20 2.60 93.50 87.40

Guizhou

94.40

1,273 28.00 27.10 5.20 1.70 48.10

231

53 4,232 52.70 86.57 5.10 4.90 71.70 92.50

Ningxia

83.20

2,106 24.90 32.90 5.00 3.10 87.30

27,552

17,892 6,856 42.80 101.71 5.00 4.50 86.70 92.20

China*

Source: Ministry of Construction, Cunzhen jianshe tongji ziliao 2000 (Statistical Material on the Construction of Zhen and Villages) (Beijing: Ministry of Construction, 2001). *National average.

Officially designated zhen Number of zhen in the selected province 758 Total population per zhen 6,306 Nonagrarian inhabitants (in percent) 20.70 Built-up area per locality (in hectares) 105.61 Percentage of area for public institutions 3.80 Percentage of area for manufacturing 3.40 Zhen with water supply system (in percent) 94.10 Zhen with development plan (in percent) 83.60 Other market towns Number of market towns in the selected 1,116 province Total population per market town 2,924 Nonagrarian inhabitants (in percent) 11.90 Built-up area per settlement (hectares) 50.57 Percentage of area for public institutions 2.90 Percentage of area for manufacturing 2.60 Market towns with water supply system 87.70 (in percent) Market towns with development plan 61.40 (in percent)

Hebei

Land Utilization and Infrastructure in Officially Designated Zhen and Market Towns in the Selected Provinces, 2000

Table 4.2

SETTLEMENTS AND POPULATION 35

36

CHAPTER 4

Between 3 and 10 percent of the settlement area was generally used for public institutions and for factories. It is remarkable that Sichuan, with about 17 percent, had the top position among all surveyed provinces, ahead of even Jiangsu, which had 11 percent. This data might be explained not so much by development standard but more by specific settlement structure; in other words, the relatively dense population in the Red Basin led to the fact that the settlement area of the zhen was more or less identical with that of the villages administered by them. As will be shown later, Xiangyang is a good example of such a settlement type. It can be seen, however, that zhen sometimes unrealistically tend to over-project the public infrastructure in their development plans, for example, by planning roads and squares that are far too large. Such an inappropriate layout not only leads to high followup costs, but in many cases also destroys the traditional settlement structure and wastes precious farmland. As the location of rural enterprises is frequently chosen haphazardly, areas used for production are often spread all over the settlement. The land utilization plans that create more or less coherent industrial land for the most part become available only after the actual rapid area expansion. For instance, Xiangyang zhen had already transformed 54 percent of its agricultural land into industrial areas in 1999. With a stricter spatial concentration of the areas not used for agriculture, it is likely that about 5–10 percent of the land resources and 10–15 percent of the investment costs for infrastructure could be saved.6 In addition, there are constant complaints about the drain on farmland due to the unrestricted growth of settlements.7 Within their scope, local governments often play a central role as land developers or land managers, besides being traditionally in charge of supply, services, and administration. In regions where the zhen are growing quickly economically as well as in population, it is common that local governments with the help of their development and real estate agencies want to sell as many building sites and buildings as possible to private customers in order to increase their income.8 At the same time, however, they do not possess sufficient financial means to meet the growing demand for public infrastructure. In zhen, most of the land is collectively owned. As far as state land (nationally owned) is concerned, it is normally used by state institutions or state-owned industrial enterprises. An extension of the settlement area in a zhen as a rule implies that the local government has to buy collective (farm) land from the surrounding villages. As we could observe in Dongting or in Xiangyang, for example, the zhen government buys the collective land from the village (mostly by compensation); the land then becomes the collective property of economic organizations subordinate to the local government, for example, development agencies or industrial companies.9 At the beginning of a land development plan, those agencies often have only limited financial means, so they try to sell, for cash and in advance, land or real estate to trade enterprises or private individuals that intend to build. Frequently, the enterprises must also compensate the former peasant owners, or they must find employment for the peasants who have lost their land. A decisive method used to enable local governments to act as land developers or to

SETTLEMENTS AND POPULATION

37

monopolize settlement development is the acquisition of extra financial means to develop towns and to improve their infrastructure. That necessarily leads to permanent conflicts of interest with general development planning. If political interests or the actual financial situation make it necessary, local development or construction plans are often changed. Frequently, changes in land use are not in line with the general plan for local development.10 In addition, there often exists a black market for the allocation of land-use rights. For instance, peasants or village committees illegally lease their land directly to rural enterprises, and by that means they secure royalties higher than those they would obtain from the zhen government.11 Aside from the development plans, since 1987 there has existed in China a general land administration law.12 According to this law, at least officially, certain regulations with regard to land-use changes have to be observed, especially when farmland is transferred to nonagricultural use. In rural areas, for instance, households with up to five members are allowed to use 140 square meters of land for housing; those with more than five members can use 170 square meters. Residential buildings are supposed to be erected only on areas reserved for that purpose by general zoning plans. With the permission of the county administration, private enterprises are allowed to use up to 3 mu of farmland for industrial buildings. If more land is necessary, permission must be obtained from prefecture or province authorities.13 A fee is charged for the new use of farmland, paid into a fund for the cultivation of new arable land.14 While in former years many of the above-mentioned regulations were not heeded, currently the transformation of arable land into building land is strictly controlled by the responsible authorities. The assigned areas in many cases are insufficient to fulfill the local development targets for industrial and housing areas. To fund infrastructure, financial transfers by superior authorities or bank credits are usually used in addition to the income received from leasing land and the fees and charges, such as those for local products, cars, town construction, and slaughtered livestock. For public institutions such as schools, hospitals, green spaces, public toilets, streets, and so forth, the central authorities have set up a standard area per person, though it is unlikely that the allowances by the county offices are in line with such recommendations. A zhen’s selection for certain special programs is an important factor.15 Participation in special programs makes it easier to get subsidies for special projects. If bank credit is granted at all, it is more likely to be for infrastructure projects that bring in money, for example, water works or energy supply. In general, however, zhen governments have difficulties in obtaining medium- and long-term credit, as state banks traditionally prefer urban (shi) and state enterprises.16 Yuquan and Xiangyang are typical examples of the present settlement structure of zhen. As already mentioned, Yuquan, having started to develop along the Harbin– Mudanjiang railway line at the end of the nineteenth century, owes its growth primarily to its function as a railway station and to the exploitation of neighboring quarries. The zhen spreads along the railway line and a road running parallel through a valley. The relatively low degree of land development—the result of a late in-migration—corresponds with the high concentration of the population (81 percent of all inhabitants of Yuquan) in the zhen itself, which gives Yuquan a very clear predominance over the village

38

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settlements in the surrounding areas, compared to all other examples. The high percentage of an “exterritorial” (state) area must also be noted, for example, the previously mentioned concentration camp at the northwestern outskirts of the central settlement and a hunting area in the northeast, which is under the administration of the city of Harbin and available to high-level functionaries or well-to-do Chinese and foreigners. The zhen of Xiangyang is a very different example from Yuquan. Xiangyang is located in an administrative area of only 16 square kilometers. With 980 inhabitants per square kilometer, the settlement structure is extremely dispersed. The settlement area of the zhen is almost equal in size to that of neighboring villages. Fairly regularly scattered small settlements or farm groups characterize the rest of the administrative area. Xiangyang clearly demonstrates the great dispersion of industry and trade over the whole administrative area. Land utilization plans pursuing ambitious aims exist for all surveyed zhen—except for Zongshizhuang, which has a very simple, sketched plan. The settlement area of Xiangyang is supposed to grow ten times by 2010, in other words, from 60 hectares to 600; the settlement area of Xiangyang during the same period from 40 to 240 hectares, that of Jinji from 140 to 400 hectares, that of Pingle from 85 to 310 hectares, and that of Yuquan from 440 to 590 hectares.17 All plans follow more or less the same design. Following the description of the actual situation, a very optimistic analysis of the potential is given, in which the future area sizes, dominant functions, and inhabitant numbers are fixed.18 According to the plan, Yuquan, for instance, shall become the political, economic, scientific, and cultural center of its administrative area and become a modern industrial zhen, with building material, vineyards, and tourism as the dominant branches of production. It is more likely, however, that only the cement industry and the quarries have a realistic chance for further expansion. Vineyards and tourism were marginal until 1994, especially since cement production, causing extreme pollution, conflicts with the two other development projects. In the past years, tourism has slowly developed, mainly because of improved opportunities for skiing and hunting. Another feature of municipal development plans is the subdivision of the settlement area into certain functional zones or dominant forms of land use. In Yuquan, for instance, the zone north of the railway line is reserved for quarries and tourism. The central zone along the railway line is left for administrative, educational, and cultural institutions, as well as trade, and the zone south of the traffic lines is also reserved for quarries. In other words, the proposed land use more or less follows the current conditions. Possible conflicts resulting from incompatible uses are not even mentioned.19 As a second example, the development plan of Pingle again shows the usual scheme: The zhen will be developed as the “political, economic and cultural center of its administrative area.”20 In the future, trade, processing of rural raw materials, and tourism are to be expanded as dominant functions. As in Yuquan, the settlement area is divided into four functional zones: a central zone for administration, trade, culture, leisure, and living; north of it a zone for industry, and two other zones for housing, tourism, and leisuretime activities.

SETTLEMENTS AND POPULATION

39

Both examples demonstrate that development plans follow a conventional scheme and keep close to the existing usage of the areas. The methods by which certain almost nonexistent functions (tourism, for example) are to be developed often remain unspecified. Frequently, the unrealistic timing for achieving the projects is amazing; in Pingle, for instance, the population projection is extended as far as to the year 2050.21 Public and Commercial Institutions Most zhen of our study area had similarly structured public institutions. These varied, however, in number and quality. In addition to the general administration, public institutions usually were primary schools, lower-middle schools, sometimes upper-middle schools, kindergartens, homes for elderly people, branch banks or credit cooperatives, in some cases hospitals, a post office, a cultural center or hall, a cinema, and a library.22 The quality and scope of these institutions usually correspond to the number of nonagrarian inhabitants and the zhen’s budget. In the villages within the administrative area of a zhen there were usually only basic institutions for the use of the inhabitants themselves (primary school, village shop, health care facility). With the exception of the economically favored zhen in the Pearl River Delta or at the Lower Yangzi, according to our observations many of the public institutions dated from the time before the economic reforms; in the majority of the zhen, basic services had not changed much. In the county of Wuxi, though, there were quite a number of zhen with recently built primary or middle schools, new city halls, or cultural centers; in the zhen of the interior provinces, however, the majority of schools, clinics, or administration buildings were erected before 1980. The decisive changes in the services provided to rural inhabitants by small public and commercial institutions are mainly to be found in the revival of (private) trade and the reintroduction of a differentiated market system.23 According to Fei Xiaotong, the decline of many zhen between the 1950s and 1970s was caused primarily by the loss of their trade and market functions.24 The reason for this was the monopolization of the entire domestic trade by the state. Private marketing was made almost impossible, and retail trade was socialized or closed down. The domestic trade system, organized by plan, was strictly divided into two branches: The urban population was supplied by a complicated state trade system consisting of three levels; the rural population, including the inhabitants of the zhen, was supplied by the so-called collective trade, that is, the supply and marketing cooperative (SMC). In fact, however, the state trade in the cities as well as the collective trade in the rural areas were organized by the Ministry of Trade.25 Though both supply systems exchanged some goods, they chiefly worked independently, though side by side.26 Until the economic reforms, the SMC (founded at the beginning of the 1950s) more or less had a monopoly in rural areas. It was in charge of buying agricultural and so-called sideline products, for example, cotton, silk, tea, fruit, and animal products, and it supplied the farmers with pesticides and other producer goods and the rural population with consumer goods for everyday life. As the SMC was supposed to replace traditional markets

40

CHAPTER 4

and private trade, the new net was tied so tightly that, like the traditional market system, it could also supply the village population. At the national average one village shop can supply 300 households, and in better developed regions 100 households. This system not only made all rural flows of goods very slow, but for the most part it also provided rural areas with uniform consumer goods of low quality that by no means met the needs of the rural population. In addition, the system was entirely oriented to the state’s planning goal. Furthermore, illegal trade and black market activities were supported by the constant shortage of a number of goods. The peasants were especially frustrated because in spite of their low income they did not have permission to sell agricultural and sideline products to rural markets. Yuquan is a good example of the desolation of zhen under the state trade monopoly. Before 1978 Yuquan had one store belonging to the SMC, a second shop for tools and other items, and one restaurant. Private trade and a market were prohibited. In and after 1994, however, there were more than 300 private retail stores and restaurants beside a lively market extending for several hundred meters along a street. Without doubt, the state trade monopoly in rural areas also seriously affected free market trade. The data on the development of rural markets are unreliable, though, because until 1978 no complete statistics exist.27 There is no doubt, however, that, during the Cultural Revolution, for example, the number of markets further decreased because free market trade, peasants’ private lots, and household private production activities were severely attacked. With the introduction of the production responsibility system and the sanctioning of private trade in 1978 as well as further “easements,” for example, the abolition of the state buying and selling monopoly in 1985, the number of rural markets increased considerably and private trade grew to a previously unknown extent. In 1979 there were about 36,800 rural markets throughout China, and by 1985 the number had risen to 53,000; since 1993 the number has remained more or less constant at about 64,000 to 66,000.28 Since the beginning of the economic reforms, rural markets’ turnover grew by fifty-five times—17.1 billion yuan in 1979 grew to 938.2 billion yuan in 1999—and during the same time the percentage of special and wholesale markets increased conspicuously. This specialization of the rural market system became obvious in the great variety of new goods available. For instance, in 1979 industrial products made up just 1 percent of the turnover, but by 1993 their share had risen to about 25 percent. The appearance of consumer goods of all kinds on rural markets is of course the result not only of increasing urban–rural flows of goods but also of extended product diversification in rural industrial enterprises and of the growing purchasing power of the rural population. Wholesale markets, sometimes trading all over China, also promoted exchange between city and country or among regions. During the period of the state-monopolized trade system it could take weeks or even months until new products—fashionable clothes, for instance—reached the rural markets or the shops of zhen and market towns, whereas nowadays new products, sold in the big cities at the coast, are also available within a few days in rural regions. In addition, rural markets have become more and more important for the selling of the majority of agricultural products. Whereas in 1978 between 30 and

SETTLEMENTS AND POPULATION

41

40 percent of agricultural products could be sold on private markets, by the beginning of the 1990s the number had risen to about 65 percent. Currently, vegetables, fruits, meat, and fish are sold predominantly on rural markets. This increase in rural markets went hand in hand with the development of the individual and private economy in China, for only the sanctioning of private trade made the increasing variety of goods possible. At the county level in 1995, 92 percent of all socalled retail trade points, such as shops and market stalls, were privately owned; at the township and village level in the same year, the number was 94 percent.29 As these enterprises mostly were very small, the percentage of employees—70.5 and 85 percent, respectively—was somewhat lower. In the mid-1990s a very low percentage of all retail shops and employees at both the county and the township or village level were collectively organized or state-owned. In the wholesale sector, there were more state-owned and collective trade institutions,30 because, among other reasons, state trade organizations at the county level and SMCs (officially collective, but in fact working for the state trade system) at the township and village levels held the selling monopoly for certain products, such as fertilizers, pesticides, petrol, and plastic sheets, and they alone had the right to purchase other products, for example, cotton, cocoons, oil seed, and tobacco. In some economically developed zhen—Dongting, for example—at the beginning of the 1990s companies for the tertiary sector were founded, and were, like the industrial companies, subordinate to local governments. These companies also directed retail enterprises, restaurants, and transport companies, that is, enterprises of the collective sector. In spite of the progress of the private trade in rural areas, the organizations from the planned economic period are still active, which explains why at present there exists a mixed system of state, collective, and private elements, with a relatively complicated structure (see also Figure 4.1). All private and market trade—at least the officially registered individual and private enterprises—is supervised by the regional administrative offices for industry and commerce, which are also responsible for maintaining a sufficient infrastructure of market equipment (stalls, halls, water supply, etc.) and for controlling market procedures. Though the SMCs (as we have seen) still hold a buying and selling monopoly on certain goods and though they still maintain a network of shops and trade institutions at least at the level of zhen and townships, they are approaching a serious economic crisis. The system, characterized by its immobility and no longer competitive with private traders as far as style, service, and products are concerned, is still supported by the state for ideological reasons. Nevertheless, it is unlikely that the SMCs—originally called “voluntary trade organizations of peasants”—will survive in zhen, townships, and villages in the consumer goods sector. Between 1978 and 1988 alone, the percentage of SMCs in rural trade decreased from 68 to 28 percent. SMCs are now trying to establish shops, restaurants, and hotels in county seats or midsized and large cities to compensate for their tremendous losses in rural regions. State trade bureaus, however, originally located only in cities, have expanded their sales’ institutions into county towns and bigger zhen, though still in small numbers. Without question, the state and collective trade organizations have been forced by the competitive private sector to give up the originally strict separa-

42

CHAPTER 4

Figure 4.1

Organizational Structure of the Rural Supply System in China

tion of their market areas. The organizational scheme (see Figure 4.1) still shows the intermediate administrative level of the so-called county districts (qu), placed between the administrative levels of townships/zhen and counties/cities. In some provinces— Sichuan, for example—in every rural and urban county there are still between four and five districts responsible only for administrative tasks, among them the state and collective trade. When the traditional collective trade in rural areas is viewed against the backdrop of our case studies, the situation of the SMC in Jinji, for instance, is shown to be very typical. In 1993 the SMC in this zhen still had one small department store and five shops (selling, for example, pesticides, plastic sheets, smaller agricultural tools, consumer goods, pharmaceutical products) and a purchase station for agricultural raw materials and scrap metal. All the SMC shops in the villages within the administrative area of the zhen in the meantime had been closed because of constant losses. For the surviving institutions in the zhen, the cumulative losses ran to 1.48 million yuan between 1990 and mid-1993.31 The reasons for this disastrous situation were inflexible prices, poor service from employees with a guaranteed job, and growing competition from the private sector. The local SMC could survive only with the help of subsidies from higher-level offices because

SETTLEMENTS AND POPULATION

43

Table 4.3 Free Market Trade and Retail Turnover, 1978–1999, various years (in billion yuan) 1978

1985

1990

1995

1999

Total retail turnover (RT) 126.5 RT in rural regions (in percent) 40.8 Total turnover of free markets (FMT) 12.5 FMT in rural regions (in percent) 100.0 Percentage of FMT in RT 8.0 Percentage of FMT in RT in rural regions 15.0

380.1 53.0 63.2 80.9 16.6 25.4

725.0 48.5 216.8 61.4 29.9 37.8

2,062.0 43.2 1,159.0 46.7 56.2 60.8

3,113.5 38.7 2,170.8 43.2 69.7 77.9

Source: Zhu, “Das System der ländlichen Märkte in der Volksrepublik China,” p. 30; Zhongguo tongji nianjian (1996), pp. 560a, 563; (2000), pp. 553–54.

not only did 110 regular employees have to be compensated, but 55 retirees had to be paid pensions as well.32 Zongshizhuang had similar problems. There the SMC introduced the so-called responsibility system because of permanent losses in 1992; in other words, the employees were more or less forced to lease, as a group, the shops for a fee. The SMC received rent regardless of the success of the shops, while the incomes of the employees were entirely dependent on profits and losses. As the enterprise results were mostly poor, many employees could survive only by engaging in part-time farming. In Pingle, Xinzhou, and Yuquan there were similar structural problems: too many employees, an uninterested workforce, a great number of pensioners, debt overload, and often an inventory of lowquality goods that had been bought too expensively via state channels.33 Again, only Dongting was an exception, as the SMC generated a small profit in its twenty-one zhen shops in 1992.34 In addition to the revival of the private retail trade, the growing importance of rural markets for the supply of the population is remarkable. The percentage of the market trade in the total retail turnover in rural areas increased from 15 percent in 1978 to 78 percent in 1999. Also, rural markets influence the turnover of permanent shops because on market days thousands of visitors from other places come to the zhen. (See Table 4.4, below, which shows in detail the development of the percentage of the turnover of rural markets.) Table 4.3 shows that the turnover of all free markets—also in the cities—developed especially since 1985; at present, however, they play an important role in the supply of the urban population.35 Today rural China usually has a four-level market system: central markets, intermediary markets, standard markets, and small markets (compare Figure 4.1).36 Central markets have developed for the most part in county seats, intermediary markets are mainly to be found in zhen, standard markets are mostly in townships or smaller market towns, and small markets are found in larger villages. Of course, there are considerable differences in the spatial distribution and form of markets—differences caused mainly by the density of the population and the level of regional economic development.

44

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Figure 4.2

Hierarchy of Markets

Zhu showed that a development index he calculated (density of markets per square kilometer multiplied by the average turnover per market divided by 10,000) for the eastern provinces, with a score of 13.5, was quite above the national average of 2.88; in the central region it was slightly below the average (2.21) and in the west of China very low (0.7).37 The provinces we have analyzed were found to be on a scale of four levels developed by Zhu: level 1 (Jiangsu), 2 (Hebei, Heilongjiang), 3 (Sichuan), and 4 (Ningxia, Guizhou). There are several studies on the number of visitors to and the turnover of selected market towns. As the figures for turnover and visitors do not properly represent exact size classes, it has not been possible to show a clear connection between the four-level market system and the size of markets (see Figure 4.2). In the provinces of Guizhou and Hebei, for instance, most markets had a daily turnover of less than 5,000 yuan and fewer than 5,000 visitors. As regional differences are very distinct, it is hardly possible to grade those markets that are in the hierarchy at a higher level, as far as turnovers and visitors are concerned. The sequence of market days in rural China still often follows the traditional time system. In less-developed provinces, schedules according to the twelve zodiacs of the

SETTLEMENTS AND POPULATION

Space-Time Connections Among the Markets of Xinzhou/Xiaxi and the Neighboring Markets, 1994

main road

M-market

Suiyang

road

(5–10)

m

S-market

Qingyuan

20 km Street distance

12

14

km

(1–6)

Maopo

(9–8)

Feiyun

(3–8)

(1–6)

4k

(5–10)

m

Lutang

8k m

m

Hebao

Luxin

Simianshan

8 km

12 k

Zhengchang

km

Laobo (3–8)

K-market

(2–7)

(3–8)

17 km

Zunyi

Yumen (1–6)

(5–10)

(1–6)

(2–7)

Yanglu (2–7)

Baohe

Xiaxi

18 km

29 km

Xinbo

Lilong

12 km

Jiulong

18 km

12 km

12 km

km 20

km 21

1

km

m 7k

km

m

15 k

m 10 k

8

7

(2–7)

(4–9)

8 km

(4–9)

Tuanze

Xinzhou

11 km

11 k

(5-10) market days

8 km

Figure 4.3

45

(5–10)

Sandu (2–7)

(3–8)

Source: Authors’ field survey.

Chinese time system are still found. The most frequent rhythm follows the ten-day cycle (xun) in line with either the traditional Chinese lunar calendar or the modern one.38 Most markets are held on two or three fixed days during a ten-day cycle: on either the first and sixth days, the second and seventh days, the third and eighth days, the fourth and ninth days, or the fifth and tenth days. Especially between intermediary and standard markets, the cycle of neighboring markets is frequently complementary, which gives traders the chance to move from market to market. A good example is the intermediary market formerly located in Xinzhou and now in Xiaxi, held on the days 4 and 9, respectively 3 and 8 of a xun, whereas the nearby standard markets take place on the complementary days, 1–6, 2–7, 3–8, or 5–10 (see Figure 4.3). According to Zhu, so-called market rings often occur that consist of up to five periodic markets, each having its own rotation of market days.39 For instance, Xinzhou, with the market days 4–9 forms a complementary system with Sandu (2–7), Xiazi (3–8), Xinbo (1–6), and Suiyang (5–10). In the region of Xinzhou, 25.3 percent of the marketers went to two markets, 16.9 percent to three markets, and 9.7 percent to four or more. Interviews with traders in the periodic markets in Jinji, Zongshizhuang, Xiangyang, and Pingle yielded similar information. Between 50 and 60 percent of the marketers trade on two or more neighboring markets. This rotation permits them to go to another market

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Table 4.4 Characteristic Features of Surveyed Markets Zhen

Hierarchical level

Visitors

Yearly turnover (million yuan)

Rhythm of market days

Xinzhou Xiangyang Pingle Jinji Zongshizhuang Dongting Yuquan

Intermediary market Intermediary market Intermediary market Standard market Intermediary market Standard market Standard market

15,000 to 25,000 10,000 to 14,000 up to 20,000 5,000 to 10,000 up to 25,000 1,000 to 2,000 up to 5,000

about 22 11.1 about 10–11 11.6 about 6 17.5 about 12

4–9 (xun)* 2–4–6–8–10 (xun)† 1–4–7 (xun)* 2–5–7 (xun)† 2–7–4–9 (xun)* daily daily

Source: Zhu, “Das System der ländlichen Märkte in der Volksrepublik China”; authors’ field survey. *Ten-day cycle (xun) according to the lunar calendar. †Ten-day cycle (xun) according to the modern calendar.

every day and in this way to enlarge their trading area. Peasants have the chance to sell their products, which are easily perishable, more quickly on different markets, rather than waiting in just one location for the next market day. In addition to the ten-day cycle there also exists a system of weekly markets that are held on one or several days of a seven-day cycle. Sunday markets are the most frequent ones in China. During the final stage of the process of modernization, daily rather than periodic markets have become the norm, mainly in developed regions and places with a broad variety of retail goods. Daily markets mainly offer food and thereby complement local retail trade. As Table 4.4 shows, in Dongting and Yuquan such markets took place every day. The periodic markets in our study area are frequently subdivided into smaller specialized markets and extend over several streets and locations. For instance, in Xinzhou there are special markets for chili, bamboo articles, eggs, poultry, vegetables and meat, fruit, tobacco, cereals and edible oil, textile and shoes, consumer and general goods, as well as small cattle. The comprehensive goods offered at these markets show that the market of Xinzhou— like other markets—has various functions in collecting and distributing goods. It serves primarily as a collection place for products from the surrounding area (chili peppers, tobacco) that later, with the help of intermediate dealers, are also sold in distant regions; it functions secondarily as a distribution center for urban consumer goods. For example, peddlers buy textiles and clothing at urban wholesale markets and sell them on the market in Xinzhou to the people from surrounding areas. Finally, the market is the distribution place for local products, for example, vegetables, bamboo articles, meat, and small cattle. Traders and buyers come from the surrounding areas of the market town. There is a close functional connection between the market and the business of permanent shops: On market days, when thousands of peasants from the surrounding areas

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come into the market town, the turnover of the shops grows conspicuously. Zhu, for instance, has found that in Xinzhou on market days, 328 shops were open, while only 216 were open on other days.40 During the market days the shop owners—93 percent of them private traders—often had their own booths in front of their shops. In Xinzhou on days without a market, other shop owners, especially those dealing in textiles, closed their shops and went as traders to nearby markets, following the above-mentioned market rotation. Local shops’ goods and marketers’ goods are partly complementary. The permanent trade mainly supplies a broad variety of consumer goods and agricultural means of production, while at periodic markets, aside from articles for everyday use and haberdashery, agricultural products and goods produced by people outside their regular jobs are available. In Pingle, too, there was a similar structure of goods. At this lively market, with up to 20,000 visitors, taking place on days 1–4–7 of the xun and split into numerous submarkets, agricultural products (vegetables, poultry, eggs, cattle, etc.) as well as textiles, consumer goods, and shoes were available. The latter goods, though, were put up for sale mainly by stands belonging to stationary shops. In Jinji the market structure was quite similar. On market days (2–5–8 of the xun) the stands with consumer goods, tools, or food, as well as hawker stalls, mostly belonged to the shops behind them. As already mentioned, the more frequent the markets, the more obvious the complementary functions of the market and the local permanent trade. In Xiangyang, markets took place on every second day (2–4–6–8–10) of the xun, and even on days without a market numerous stands offered goods for sale. Whereas the market functioned mainly as a collection point for agricultural goods and a place where agricultural products, agricultural means of production, and consumer goods for peasant households were put up for sale, the retail shops specialized primarily in consumer goods and services. The daily market in Yuquan mainly supplied the nonagrarian population of the zhen itself with vegetables, fruits, cereals, meat, and fish. The roughly 360 traders also offered textiles, haberdashery, and general goods; the main focus, however, was on the sale of food and agricultural products. Permanent trade enterprises offered, aside from food, mainly consumer goods, and the service trade primarily consisted of hairdressers, tailors, restaurants, and various repair services. The different combinations of rural markets and local shops is dependent, on the one hand, on the degree of modernization of the retail trade and, on the other hand, on the market tradition. In zhen, where traditional markets for the surrounding population still have a vital function as collection and distribution centers for local products, as sales places for industrial and handicraft products, and as forums for information and communication, the stationary retail trade is closely connected to the market. On market days, the turnover increases conspicuously—often it is five or even six times higher than on days without a market—and the retailers themselves have stalls on the market, or they visit nearby markets as peddlers when there is no market held in their own location. In zhen with a differentiated stationary retail trade and significant local demand, daily markets have specialized in supplying local inhabitants with fresh food.

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Still, today the central position of a zhen is determined by its traditional market system, at least when the size of the related area is a criterion. When the periodic market draws people from an extended surrounding area, the local retail trade is in a much better position. Other institutions of the zhen, such as a post office, bank, outpatient facility, or primary and lower-middle school, for the most part serve the population in the zhen or the people who live in the villages under its administration. Only the upper-middle schools, as far as they are located in the zhen, as in Zongshizhuang or in Jinji, attract pupils from a farther-reaching area. Population Growth and Migration Development of Population and Migration in Chinese Zhen One of our hypotheses was that the population increase in zhen is due mainly to inmigration—a result of a prosperous zhen’s ability to function as labor markets for the workforce no longer engaged in agriculture. We assumed that in economically less developed regions, migration is directed toward larger cities outside the migrants’ home region; in average zhen, the number of inhabitants increases primarily by birth surplus, if at all. These suppositions could more or less be proved empirically, though at the local level the data for comparable periods of time were mostly missing. On the whole, the aggregated official migration data have to be interpreted with care, even if the great migration streams from rural areas in inner China to the urban centers at the coast are a well-known and frequently described phenomenon. There is no doubt that locational differentiations of economic opportunities are one of the decisive reasons for Chinese domestic migration streams.41 Almost all migration models are based on the thesis that migration is a more or less direct reaction to regionally varying wages or employment opportunities—this, at least, is a valid supposition for labor-orientated migration.42 Numerous push and pull factors of rural–urban migrations have been described by others. Besides the locational differences of opportunities, other reasons are the lack of agricultural land, diminishing incomes in agriculture, and an increasing tax burden.43 The professional and locational mobilization of rural society in the PRC as a consequence of the economic reforms at present is a popular paradigm of social research, as far as China is concerned. In our context, however, analyzing the general causes and conditions of migration processes is not of foremost interest; we intend to differentiate the rural–urban-migrations on a macro level according to migration streams that move toward zhen and shi, and we will try to explain the influence of in-migration on the growth of zhen, at least with regard to their size. On the basis of our case studies—as far as data are available—we will analyze to what extent in-migration contributes to the growth of zhen, whether the manner of migration has changed during the years, what the motives of the migrants are, and finally how local communities react to migrant workers.

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Migration Streams into Zhen and Shi The 1 Percent Population Sample Survey of 1987 and the 1990 Population Census are valuable sources that provide information on the intra-provincial migration streams between rural areas (counties) and shi or zhen. According to the Sample Survey of 1987, in the five-year period between 1982 and 1987, 30.53 million people migrated (temporary migrants are not included), 51 percent of whom moved from rural areas into shi and zhen. Of this group, 55 percent moved to zhen and 45 percent to shi.44 The results of the 1990 Population Census seem to confirm the number of migrants found in the 1987 survey, for between July 1, 1985, and July 1, 1990, the date of the census, 34.1 million people migrated.45 It must be mentioned, though, that these two data records are not really comparable.46 The 1990 census found that a similar share of migrants moved from rural townships into shi and zhen—49 percent—though in this group the percentage of those who moved from rural townships into zhen was much lower: 24 percent instead of 55 percent. Some scientists have interpreted the seeming shift of migration streams from zhen to shi as a significant change in Chinese rural–urban migration. In fact, however, this “change” should be explained by a new definition of migration (not published by official statistics). Unlike the 1982–1987 period, between 1985 and 1990 only migrations that went beyond county borders were registered, whereas migrations within a county were ignored. Because the majority of the in-migrants into zhen came from a relatively short distance, the migration volume into zhen was only partly registered. According to a sample taken in thirty-six zhen in the most developed provinces in China in 1988, 59 percent of all in-migrants came from a distance of less than 20 kilometers;47 in other words, a great number of the in-migrants into zhen definitely came from the same county and were not registered by the census of 1990. More recent and more comprehensive sample surveys exist for rural–urban migrations; however, their validity is difficult to assess because of missing information on their methodological background. The Green Report refers to a survey from December 1993 and January 1994, carried out among more than 14,000 rural households by the Agricultural Bank of China and the Chinese Academy of Social Sciences (Rural Development Institute).48 According to that report, about 11 percent of the rural workforce had left their hometown at least once a year to work somewhere else. That percentage represents about 50 million permanent and temporary migrants, of whom about 79 percent worked in shi or zhen. Unfortunately, no distinction is made in the report between shi and zhen. A sample survey from 1994 finds 13 percent of migrants among the rural employees who during their migrations crossed the county border.49 In 1994 there were about 60 million rural migrant workers. According to the survey, about 8 out of 10 migrant workers moved into towns; of them, almost half (about 47 percent) moved into small and rural towns (including county seats). The percentage distribution of emigrants from rural areas in 1994 is shown in Table 4.5.

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Table 4.5 Distribution of Rural Temporary Migrants by Destination, 1994 (in percent) Into big cities Into medium-size cities Into small cities (including county seats and rural towns administered by counties) Into other rural areas Total

33.5 9.3 37.8 19.4 100.0

Source: Nongcun shengyu laodongli liudong he laodongli shichang xiangmu yanjiuzu, “28 ge shi xian nongcun laodongli de diqu liudong,” pp. 19–28.

It is likely that the highest percentage of in-migration from rural areas into “small towns” is concentrated in smaller shi. A survey cited by Gu Shengzu shows that only 12.1 percent of all temporary and long-term rural migrants moved into zhen and county seats, while 29.4 percent chose small and medium-size shi as their destination. These data are from a sample survey carried out by the Chinese Academy of Social Sciences concerning migration between 1978 and 1986.50 There is one survey about rural migrants in Henan Province for the year 2000. According to this investigation, there were 13.98 million rural migrants, 11 million of whom moved away from their hometown for more than one year. Of these migrants, 3.85 million left their home province, which represents an increase of 52.3 percent over the previous year. The number of migrants within the province decreased by 15.7 percent, especially migrants into zhen (-33.3 percent). The changes in destination of intra-provincial migration—compared with the previous year—were as follows (in percent):51 • • • • •

provincial capital +8.9 cities at the prefectural level –12.0 cities at the county level –26.8 zhen –33.3 villages and townships –8.8

On the whole there is no satisfactory answer to the question of size and percentage of migration into zhen. As a rough estimation, one might say that about 60 to 80 percent of the approximately 50 to 60 million rural migrant workers move into urban areas, and of them, 40 to 50 percent choose small cities and towns as the destination for their permanent or temporary migration. The latest official statistical data (2000) for temporary population report on 44.8 million people: 37.9 million of that number migrated into cities; 6.9 million migrated into counties. Most of them—15.8 million— came from counties and crossed provincial borders.52 The most frequently chosen destination seems to have shifted from smaller to larger cities, since the latter offer better employment opportunities. The capacity of small towns, in particular their rural enterprises, to absorb additional members of the agricultural

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workforce has dwindled since the mid-1990s. During the same period the share of migrants who crossed provincial borders has increased. Percentage of Net Migration in the Increase of Population in Zhen Between 1984 and 2000 Let us first consider the increase in the zhen themselves. The number of zhen between 1984 and 2000 grew from 7,320 to 19,692. Unfortunately, only population figures for zhen under the administration of counties exist—a fact mostly overlooked in the literature.53 This explains why in the following analysis we concentrate on zhen under the jurisdiction of counties. The total population of county-dependent zhen increased by 173 percent between 1984 and 1998 (from 134.47 million in 1984 to 367.33 million in 1998), whereas the number of nonagrarian inhabitants only grew by 37.3 percent (from 52.28 million in 1984 to 72.30 million in 1998). At the same time, the percentage of the nonagrarian population among the total population of county-dependent zhen decreased from 38.9 to 19.7 percent.54 The following factors are relevant to the population growth in zhen: • • • •

transformation of townships into zhen administrative changes in existing zhen natural population growth positive net migration balance

As already mentioned, a considerable percentage of the population growth in zhen can be explained by the designation of new zhen. In order to exclude these administrative reasons, we carefully established a cohort of 5,439 county towns55 that existed in 1984 as well as in 1992. The total population of this urban cohort grew by 61.8 percent (from 119.64 million in 1984 to 193.62 million in 1992); the number of nonagrarian inhabitants increased by 44.3 percent (from 44.23 million in 1984 to 63.80 million in 1992). When analyzing the population growth of these places, we come to the following results: The small zhen in particular—those with fewer than 5,000 inhabitants—and—to a lesser extent—those with between 5,000 and 15,000 inhabitants are the places where total population has experienced extreme growth. The reasons for this dramatic growth are administrative changes. Until 1984, zhen and township (xiang) governments existed side by side. The zhen government was responsible for the zhen proper, while the villages in the surrounding administrative area were subordinate to the township governments, also domiciled in the zhen. As previously mentioned, after 1984 township and zhen governments were frequently united. In this way, the rural inhabitants of the surrounding villages came under the jurisdiction of the zhen government. Statistically, this union meant a considerable increase in population, though in fact nothing much had changed. For larger zhen—those with more than 20,000 inhabitants—this process as a rule had already ended before 1984, or such a separation never existed.

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Table 4.6 Factors of Population Increase in Zhen, 1984–1992 Migration gain Natural population increase Administrative extension of existing zhen Newly designated zhen Total increase

14 million 30 million 49 million 98 million 191 million

7% 16% 26% 51% 100%

Consequently, we can deduce that zhen with unchanged administrative conditions, that is, those with more than 20,000 inhabitants, had grown by approximately 30 percent between 1984 and 1992. Thus, the increase in births and net migration came to 36 million people for the larger zhen and—extrapolated—to about 44 million for all countylevel zhen for the year 1984. We have only one figure for 1992, however, which refers to the percentage of population increase from migration and natural population growth; 56 according to that figure, the ratio between natural population growth and net migration for 1992 was 69:31. Presuming unchanged conditions for all of 1984–1992, the constant in-migration was approximately 14 million, the natural increase about 30 million. Based on the analysis above, Table 4.6 shows the estimated ratios of the various influencing factors on the growth of county-dependent zhen between 1984 and 1992.57 It can be postulated with a relatively high probability that the population increase in zhen during these eight years resulted mainly from administrative measures (77 percent), while the permanent in-migration58 was of minor relevance and responsible for only one-fourteenth of the total increase. There are considerable regional differences in the percentage of migrants in relation to the total population increase. The data for 1992, for example, showed that as a rule the provinces near the coast had a higher percentage of migration in the natural and social population movement than did the interior provinces. In Guizhou, Heilongjiang, Jilin, and Liaoning, some rural towns even registered migration losses. For instance, many employable inhabitants in Guizhou, the poorest among the Chinese provinces, left their hometowns in search of a job. The three northeastern provinces lost inhabitants who had been in northeast China since the 1960s as a result of former resettlement campaigns, and who now returned to their home regions.59 Population Development and Migration in the Selected Zhen Percentage of Permanent In-Migration in Population Growth Considering only the effect of permanent net migration in our case studies, that is, migration in connection with a change or transfer of the household registration (hukou), immigration compared to natural population growth was of minor importance. Even the zhen Dongting in the county of Wuxi, which had grown quickly during the previous years and which had been designated as the seat of the county government,

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showed a conspicuous population increase by migration only at the beginning of the 1990s; altogether between 1978 and 1992, the net migration made up 53 percent of the total population increase.60 With the exception of Dongting, in the zhen we studied, the natural population growth dominated the reasons for the overall population increase. In Jinji/Ningxia, for example, between 1980 and 1992 natural growth was responsible for almost 84 percent of the total population increase, in Zongshizhuang/Hebei for 86 percent (between 1985 and 1992), and in Xinzhou for 92 percent (between 1970 and 1993).61 In the twenty-four years between 1970 and 1993 there was a declining though still quite high natural population increase, whereas the cumulated net migration gains were relatively small. The total migration gain during this period consisted of 1,791 individuals; the natural increase, however, consisted of 23,099 individuals. We began with the hypothesis that the process of economic development might become obvious through a study of changed migration behavior of both permanent inmigrants and emigrants. As far as data were available, we tried to collect for each of the zhen migration documents for the years 1993–1994 and 2000–2001 to analyze the migrants’ age, profession, origin, and migration distance.62 Several points, however, spoke against the original hypothesis. Additionally, it was impossible to find complete data records for all zhen. Therefore, we had to be content with a comparison of different zhen in 1993–94 (Zongshizhuang, Dongting, Jinji) and 2000–2001 (Jinji, Pingle, Xiangyang). We therefore have decided to analyze the migration data as a whole. The Structure and Motives of Individuals Who Moved In and Out Remarkably, about one-third in 1993–1994 and one-half in 2000–2001 of all out-migrants were younger than twenty years, while the in-migrants were also mainly young, though not as concentrated in the lowest age group. (See Table 4.7.) There were no significant differences in gender for 1993–1994; the number of female migrants was only slightly higher than that of male migrants (54.1 percent female in-migrants, 55.1 percent female out-migrants). In 2000–2001 the gender proportions were quite different: the female inmigrants dominated (71.5 percent), while the share of female out-migrants was only 40.8 percent. The differences in numbers of in- and out-migrants based on age and gender can partly be explained by the migrants’ occupation or their educational level and by their motives for migration. Police documents, which provide detailed information about migration motives, illustrate these facts. Table 4.8 shows the five most important reasons for migration, taken from a total of twenty-four (in-migration) and twenty-two (outmigration) categories of migration incentives. In 1993–1994 the main motives for in-migration were clearly marriage and job assignment or job transfer. For out-migration the reasons were similar. On the whole, however, the concentration on a few motives for out-migration was not as clearly marked as for in-migration into a zhen.

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Table 4.7 Age of the Migrants in the Surveyed Zhen, 1993–1994 and 2000–2001 (in percent) In-migrants Age structure

1993–1994

20 and younger 21 to 25 26 to 30 31 to 35 36 to 40 41 to 45 46 and older Total Number No data

18.1 20.2 13.8 12.5 8.9 6.2 20.3 100.0 3,030 40

Out-migrants

2000–2001 11.3 50.5 25.2 7.1 1.9 1.2 2.8 100.0 424 0

1993–1994

2000–2001

33.2 20.6 14.8 9.2 7.2 4.5 10.5 100.0 3,003 202

50.1 25.4 12.6 4.5 3.1 1.6 2.7 100.0 1,002 0

Sources: Original documents from the zhen police stations in 1993–1994 and 2000–2001. Notes: All migrants had their hukou transferred. In 2000–2001: Jinji, Pingle, Xiangyang, Xinzhou (inmigrants); Jinji, Pingle, Xiangyang (out-migrants). Table 4.8 Important Motives for In- and Out-migration, 1993–1994 (in percent) In-migration (1) Marriage (24.3) (2) Job assignment/transfer (23.2) (3) Family reunion (11.8) (4) Special treatment (11.3)* (5) Living together with relatives, friends (5.4)

Out-migration (1) Job assignment/transfer (17.8) (2) Attending a university or college (16.5) (3) Marriage (16.1) (4) Family reunion (12.5) (5) Living together with relatives, friends (9.7)

Sources: Original documents from zhen police stations, 1993–1994. Notes: All migrants changed their hukou. *Permission for hukou transfer probably due to political reasons. Table 4.9 Important Motives for In- and Out-migration, 2000–2001 (in percent) In-migration

Out-migration

(1) Marriage (69.1) (2) Hukou change (8.9) (3) Job assignment/transfer (5.2) (4) Living together with relatives, friends (4.0) (5) Private move (3.8)

(1) Attending a university or college (39.4) (2) Marriage (25.3) (3) Private move (8.9) (4) Living together with relatives, friends (7.0) (5) Family reunion (6.0)

Sources: Original documents from zhen police stations, 2000–2001. Note: All migrants changed their hukou.

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The motive for migrations changed significantly in 2000–2001. Marriage became the dominant reason for in-migration (69.1 percent), while job assignment or transfer lost its former importance. Private moves had a certain weight in 2000–2001, since people moved due to better or more favorable housing conditions. Hukou change caused in-migration in 9 percent of all cases; a teacher, for example, might move into a zhen if he or she was able to get an urban hukou. In 2000–2001 the dominant reason for out-migration was the opportunity to enter a university or college. This figure mirrors the statistics for improved educational facilities. There was a higher proportion of places available at universities, and their accessibility had become easier. If applicants did not pass an entrance examination to a state university or college, they could attend private ones. (See Table 4.9.) When comparing places of destination and origin for in- and out-migration in 1993– 1994 and 2000–2001 as a whole, we have come to the following conclusions: Clearly the distance of migration increased: 53.1 percent of all out-migrants headed for places within their own county in 1993–1994; in 2000–2001 this share fell to 36.5 percent. There was a similar though weaker trend for in-migrants. The share of in- and out-migrants who came from or headed to other counties within the same province, however, increased: inmigrants from 28.6 percent in 1993–1994 to 46.4 percent in 2000–2001, and out-migrants from 32.1 percent in 1993–1994 to 47.4 percent in 2000–2001. The share of out-migrants who headed for places outside the province during the same period of time increased less dramatically. Migration over longer distances could be observed only for those who got a new job, attended a university or college, took over a parent’s job, or entered the army. (See Table 4.10.) Temporary Migrants The data discussed to this point do not include so-called temporary in-migration, that is, the nonpermanent population in counties or zhen. In Chinese rural areas, mobility in the form of temporary or circular migration is an element of employment or of the search for employment. According to a sample survey by Mallee, in almost 200 villages in seven provinces 17 percent of all interviewed individuals worked, for a short or long period, outside their own township. Longer absences—more than a year—are quite rare (1.6 percent of all respondents).63 The data from the Ministry of Public Security for 2000 indicate that of the temporary population (6.9 million) in counties, 16.2 percent stayed less than one month, 57.3 percent between one month and one year, and 26.5 percent more than one year.64 The figures indicate to a certain extent that the annual return of migrant workers to their homes seems to be one of the essential features of the circular migration in China. All migrants appear to have a strong, lifelong attachment to their hometowns.65 The police register temporary in-migrants separately from permanent in-migrants. All in-migrants must be registered within three days of their arrival, and if they want to stay longer than three months and are older than sixteen years, they must apply at the local police station for a certificate for a temporary stay (zanzhu zheng).66

56.6

53.1

In-migrants

Out-migrants

36.5

47.2

2000– 2001

32.1

28.6

1993– 1994

47.4

46.4

2000– 2001

Other county within the province

14.8

14.8

16.1

6.4

2000– 2001

Outside the province 1993– 1994

Sources: Original documents of zhen police stations, 1993–1994 and 2000–2001. Note: All migrants had their hukou transferred.

1993– 1994

Origin/ Destination

Same county

Origin and Destination of In- and Out-migrants, 1993–1994 and 2000–2001 (in percent)

Table 4.10

100.0

100.0

1993–1994, 2000–2001

Total

3,003

3,030

1993– 1994

1,002

424

2000– 2001

Absolute

56 CHAPTER 4

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It is obvious from our review of the data that not all migrants observe these regulations; therefore, there are quite a few undocumented cases. In places particularly affected by migration, for instance, south Jiangsu, rural industrial enterprises and construction firms are very reluctant to register their migrant workers. Unregistered workers can easily be dismissed. Furthermore, they are more willing to work and live under often practically unbearable conditions. Our investigation has shown a clear correlation between the number of permanent and the number of temporary in-migrants. The percentage of registered temporary inhabitants among the total population, with the exception of Dongting (22 percent) and Yuquan (9 percent), was low or even very low: in Jinji, Zongshizhuang, Xinzhou, and Pingle only 0.5 percent to 1.5 percent of all inhabitants belonged to the temporary population. The origin and social structure of the temporary inhabitants can be represented by the example of Dongting, as in this flourishing town within two years the number of temporary inhabitants more than doubled (from approximately 3,800 in 1991 to approximately 8,900 in 1993).67 The county of Wuxi, which is located in China’s economically leading region, had 103,300 inhabitants with a temporary hukou (zanzhu hukou or linshi hukou) in June 1993, which represented about 9.5 percent of the registered permanent population. The percentage in Dongting surpassed more than double the county average. The temporary migrants’ attitude toward migration and of course their living conditions were quite different from those of permanent in-migrants. In 1992, for instance, 75.6 percent of Dongting’s in-migrants with a hukou transfer had come from Wuxi county itself, whereas almost all temporary in-migrants moved in from outside the county. Forty-seven percent of the temporary migrants came from other counties in Jiangsu, mainly from north Jiangsu (Subei), and 53 percent came from outside the province.68 The occupational composition of the temporary inhabitants in Dongting was very much like the structure in all other surveyed zhen, though there the percentage of the temporary population was much lower. (See Table 4.11.) Almost 90 percent of the temporary inhabitants in Dongting worked in rural enterprises or on building sites. In some textile enterprises, up to 50 percent of the workers came from outside the zhen. These data, too, were very similar to those in the sample survey by Mallee.69 According to other studies, the 500 largest rural enterprises in China, mainly situated near the coast, recruited about 60 percent of their employees from among migrant workers.70 Of China’s total temporary population in 2000, 58 percent worked in industrial firms or on building sites.71 Besides migrants with jobs in industry and trade, in-migrated peasants were also very important. In Wuxi county, agriculture was largely run by peasants from outside the region. Forty-nine percent of the employees and tenants of so-called village-farms, cultivating a great part of the so-called responsibility land, that is, land on which grain is grown that has to be delivered to the state, came from outside the county.72 Given this occupational structure, it is not astonishing that the majority of the temporary inhabitants were living either in dormitories and hostels belonging to local enterprises (43.5 percent), or in huts on the building sites (37.6 percent). Not even one-fifth had rented a

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Table 4.11 Occupations of Temporary Inhabitants in Dongting and in Wuxi County, June 1993 (in percent) Occupation Rural enterprises Construction work Street cleaning, garbage collection Transport, traffic Agriculture, agricultural sideline Others Total Number

Wuxi County 63.3 26.0 1.3 1.5 3.3 4.6 100.0 103,322

Dongting Zhen 52.9 36.3 5.2 1.9 0.1 3.6 100.0 8,797

Sources: Dongting police station, September 1993; Wuxi Bureau for Public Security, August 1993.

local room, flat, or house. These mostly inadequate and poor lodgings of the migrant workers in the county of Wuxi and in Dongting are the norm in China, as are the described forms of occupation. In the zhen of Zunyi county in Guizhou, the poorest province in China, 53 percent of the temporary inhabitants were workers; the percentage of traders and private handicraftsmen, however, was 22 percent, higher than that in Dongting.73 As the pressure on the housing market in Zunyi is less severe than in the expanding regions in the East, more temporary in-migrants find flats outside hostels and lodgings on building sites. In the zhen of this county, 25 percent of temporary in-migrants lived in factory hostels, 22 percent in huts on building sites, but about 33 percent in rented houses or in homes of their own. (See Table 4.11.) A comparison of the data for Dongting (1993) and that for Xiangyang and Yuquan (2000–2001) might be of limited informative value because of the different designations of the professional groups; however, the share of employees in rural enterprises among the temporary residents is still the highest of all occupations. Also, the proportion of service providers seems presently to be more important than it was seven to eight years ago. (See Table 4.12.) That these local data seem to have a certain significance is obvious when we compare them with the data from the respective provinces and from China as a whole. (See Table 4.13.) The share of employees in industrial enterprises is still quite high—between 40 and 50 percent. However, the employment opportunities within services and trade seem to be limited in small towns compared with the figures for the respective provinces. In-Migration Policies and the Attitude of Zhen Governments Within general political aims, zhen governments can to a certain extent and through different strategies direct in-migration into zhen, especially with regard to permanent in-migration.

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Table 4.12 Occupations of Temporary Inhabitants in Xiangyang and Yuquan, 2000–2001 (in percent) Occupation

Xiangyang

Yuquan

78.4 7.4 7.4 6.7 100.0 283

50.4 0.0 0.0 49.6 100.0 369

Rural enterprises Trade Service Others Total Number

Sources: Material from the Xiangyang and Yuquan police stations. Table 4.13 Occupation of Temporary Inhabitants in Selected Provinces, 1997 (in percent) Occupation Enterprises Agricultural workers Trade Services Maids Others* Total Number (in millions)

Hebei Heilongjiang Jiangsu 50.30 1.70 22.60 9.40 0.56 15.44 100.00 0.48

38.10 17.30 14.50 8.20 0.40 21.50 100.00 1.03

47.30 2.60 12.60 5.30 0.30 31.90 100.00 3.40

Sichuan

Guizhou

45.70 1.20 17.30 10.80 1.40 23.60 100.00 1.05

45.60 3.10 25.50 10.10 1.10 14.60 100.00 0.34

Ningxia 48.30 7.50 18.40 9.30 0.40 16.10 100.00 0.10

China 54.70 4.10 14.30 7.80 0.56 18.50 100.00 37.27

Source: Ministry of Public Security, 1997 nian quanguo zanzhu renkou tongji ziliao huibian (Statistics of Temporary Inhabitants 1997). *Others includes business trips, education, hospital treatment, family visits, tourists.

As a rule there are three strategies zhen governments can use: • Active settlement and hukou change of in-migrants who are welcome in the town. This policy can often be observed in connection with the sale of real estate and the allocation of a hukou. • Change of an agrarian hukou to a nonagrarian one (feinongye hukou). Such a transfer can be made either in connection with in-migration or for people who are already living in the zhen. This policy is usually beyond the scope of action of zhen governments. • The hukou for so-called grain self-providers (zili kouliang hukou), introduced in the middle of the 1980s by the central government. During the past years, this hukou has been applied differently by zhen governments. Presently this policy is no longer in use.

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Quite often different instruments were used at the same time. In some of the zhen we investigated, we could observe an extremely active recruitment policy by the zhen governments, which were trying to win in-migrants who could afford to buy a house for themselves. This strategy could be combined either with buying a nonagrarian hukou or with the transfer of a rural household registration. For instance, in 1992 the zhen government of Xiangyang could increase the number of nonagricultural inhabitants from fewer than 300 to more than 1,400 with the help of a special quota by selling a nonagrarian hukou for between 2,500 and 5,000 yuan per head to about 1,170 peasants, usually from other regions.74 At the same time, the government expected the in-migrants to establish a permanent home by buying a house.75 This policy was carried out with the help of a special program (Integration of City/Town and Countryside-Hukou Change). Peasants from outside the zhen could purchase a house built by the local development agency at a cost of at least 250 yuan per square meter of living space and between 80 and 90 yuan per square meter of building plot. Several families could also join together and build or have built semidetached houses, though within the regulations of the plan. A peasant family of four, having come from another region, had to pay a total of about 70,000 yuan for the hukou and a living space of 100 square meters as well as 300 square meters of land. In cases such as this, the local development agency also fulfilled the function of the work unit (danwei) and applied for the urban housing entitlement (feinongye hukou) necessary for peasants who wanted to in-migrate. According to a 10 percent sample survey we selected from the application forms, all applicants came from other regions: 19 percent came from other townships within the urban administrative area of Guanghan, 78 percent from other counties of the province, and 3 percent from other provinces. All were peasants or their family members who had found an employment in Xiangyang (80 percent) or had started their own business (20 percent). A development policy similar to that in Xiangyang was also found in Dongting, Jinji, and Xinzhou. The main idea of this policy was to attract new local enterprises or peasants from surrounding villages, not so much to link a hukou change to the purchase of real estate. Peasants who bought a house in the zhen proper could transfer their rural hukou to their new residence; usually there was no change of hukou from a rural to an urban one. Hukou Change from an Agrarian to a Nonagrarian Status The change of an agrarian to a nonagrarian hukou is not handled independently by the zhen government, but is subject to the permission of superior offices (this also applies to the example of Xiangyang). At the local level, there is no scope for decisions such as this. As a rule, the change of a hukou needs permission from the corresponding provincial office or at least the prefecture. A county government, for instance, is not allowed to sanction hukou changes.76 It is official practice to handle hukou changes very selectively. For skilled workers, technicians, or their family members, such changes can often be made possible, whereas unqualified migrant workers and other floating people are discouraged from getting their

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rural hukou changed to an urban one; as we have seen, they receive at best a temporary resident card.77 This practice for the most part is also the rule at the zhen level. The annual quota of hukou changes is set by the State Planning Commission and the Ministry of Public Security and is distributed among the provinces, which then pass on their quotas to lower levels. In 1992, for instance, the quota of the province of Jiangsu came to 100,000 (0.14 percent of the population).78 Extra quotas are often granted if special measures (e.g., railway construction) make it necessary. In Dongting, for example, in 1992, 718 hukou changes were permitted that had only a small effect on population development, because 600 local peasants who had been forced to give up their land in favor of state enterprises or institutions received a nonagrarian hukou. One hundred seventy-eight hukou changes were granted to scholars and students, who usually left to attend institutions of higher learning or universities in cities. In Hebei in 1992, the quota of hukou changes came to 180,000, or 0.29 percent of the total population. The zhen of Zongshizhuang, in our research area, in 1992 had only 76 hukou changes, often in connection with the in-migration of technicians who worked in rural enterprises and of their family members. Notwithstanding the limited number of regular hukou changes, in townships and zhen rural hukous are from time to time changed into nonrural ones in cases in which farmland is used for nonagricultural purposes, and the peasants concerned receive some kind of compensation by the hukou change. This was the case in all surveyed zhen. In Ningxia province, the quota was almost equal to that of the two other provinces, about 0.2 percent per annum, though it had gone down considerably since 1986 (71,800 hukou changes in 1986 decreased to 13,200 in 1992). The development in the counties/ towns and zhen was proportional. In Jinji in 1986 there were 605 hukou changes; in 1992 there were just 110. In Jinji, the average rate between 1980 and 1992 was 272 hukou changes annually, the reasons for which can be seen in Table 4.14. Most hukou changes consequently are issued for qualified employees and their family members. In many cases the necessary qualifications and preconditions for such a change are outlined in greater detail in internal documents. In Jinji and in the zhen belonging to the city of Wuzhong, teachers in rural regions can, for instance, receive an urban household registration (feinongye hukou or chengshi hukou), if they had received at least one award for their work by the shi or province government and had worked for fifteen years. Workers or employees can get a feinongye hukou if they were honored as exemplary workers or model workers by the provincial or central government. In this case also, workers’ spouses and children receive an urban hukou. Engineers and managers of rural collective enterprises can apply for a feinongye hukou if the enterprises possess fixed assets of at least 400,000 yuan and if they have paid at least 30,000 yuan in taxes for three consecutive years.79 Individual entrepreneurs (getihu) and private entrepreneurs (siying qiye) who possess fixed assets of 300,000 yuan and who have paid more than 30,000 yuan in taxes for three consecutive years can apply for an urban hukou for three individuals. If the individual’s fixed assets exceed 500,000 yuan and taxes paid exceed 50,000 yuan for three consecutive years, a feinongye hukou for five individuals can be requested.

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Table 4.14 Reasons for the Change from an Agrarian to a Nonagrarian Hukou in Jinji, 1980–1992 (in percent) Employment of cadres, technicians, workers Family members of cadres, technicians Family members of workers Family members of army members Change in politics* Released soldiers Released criminals Total

11.4 8.7 41.4 24.4 11.5 2.0 0.6 100.0

Source: Jinji police station, 1993. *Refers to young people transferred to the countryside during the Cultural Revolution or to politically rehabilitated individuals.

Although it is officially stated that in such cases no fees are assessed, according to internal documents, in fact, quite significant sums must be paid. For instance, employees in rural collective enterprises as well as individual and private entrepreneurs pay 3,000 yuan for a nonagrarian hukou. Obviously the sale of nonagrarian hukous in many zhen and shi has developed into a more or less illegal but lucrative source of income. There are complaints that frequently a hukou is sold to an individual who does not fulfill the official criteria.80 All in all it can be stated that the change of an agrarian into a nonagrarian hukou only in exceptional cases accelerates the population increase in zhen. A nonagrarian hukou is mainly presented as a compensation or as an attraction to the inhabitants, who already are residents of the zhen. Summary All things considered, the ability of zhen to attract the population from both near and distant surrounding areas seems to be limited. For all Chinese rural towns administered by county offices, the percentage of in-migration in the total increase of the population was considerably under 10 percent. With the exception of Dongting, which is economically far advanced, in the towns of our fieldwork in the 1980s and early 1990s the percentage of permanent in-migration was, with 8 to 16 percent of the population increase, rather low. Almost the same applies to temporary in-migrants and inhabitants: In Pingle and Xinzhou in 1992–1993, the percentage was under 1 percent, in Xiangyang, Yuquan, and Jinji 2 to 5 percent, but in Dongting it was 22 percent. Regarding the above-described instruments of zhen governments, one cannot but conclude that the possibilities at the local level to decisively influence migration are rather limited. Effective results are to be seen only if, for instance, a zhen has been included in

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a special program of the province or central government and has received special rights to make exceptions. As a rule, however, a zhen only becomes part of a development program if it has already reached a standard above the average. In such a case, of course, this zhen is more attractive for rural in-migrants than are most of the others in China. In spite of their relatively small percentage in the population increase, in-migrants play a very important role in the economic development of the zhen. As we have seen by the example of in-migrants with a transfer of their hukou, the percentage of trained workers is relatively high; that is, they had and have an important function in the development of rural industry. Insofar as the in-migrants bought land and real property, they have become an important factor for the development of the settlement. The migrant workers without a change of their hukou frequently make up for the local shortage of workers and take over jobs the locals do not like to perform.

5

Economic Structures and Economic Change Process of Privatization Nationwide Development During the economic reforms, the predominant method of ownership changed from socialist (state and collective ownership) to private ownership as well as mixed forms. One can thereby discern a process of privatization. While privatization is in general defined as a change from public activity or public ownership to private forms thereof,1 a number of authors have stated that such a process is initiated by political decision makers and enforced from the top down by active state intervention.2 Such a definition does not comprise the experiences of postsocialist countries or developing societies, which are characterized by a planned or spontaneous bottom-up privatization. In China we find a dual process of privatization: a spontaneous one from below and a directed one from above. In rural areas the spontaneous process consisted of the return to family-run farms; on a national scale, it appeared in the emergence of new strata of self-employed people (traders, handicraftsmen, and other small businessmen) enlarging their businesses. The state had to tolerate this development, legalize it, and provide a general setting for the development of this sector. The directed process, a result of the desolate condition of state-owned enterprises, consisted primarily of the sale or lease of small, medium-size, and in some cases even large state- and collectively owned enterprises to individuals or to management by contract (chengbao), the contractors mainly taking on the role of owners. The cessation of state funding for larger enterprises, for example, by turning them into stock corporations, has been discussed since the early 1990s. Minxin Pei differentiates between total privatization, on the one hand, in which the state gives up its property rights and management, and partial privatization, on the other hand, in which the property rights are not changed, but the management is let out to private individuals. In the first case, a one-time transfer payment is made; in the second case, rent or regular fixed fees are paid.3 In the latter case, the individual who assumes the contract owns the decision-making rights in the enterprise, the fixed assets are not sold, and there is no change of ownership by law. The profit, however, goes to the individual who assumes the contract, who also must pay rent. The ability to decide freely what will be done with an enterprise’s profits is an important feature of ownership.4 65

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The initial impetus for development of the private sector was poverty in the countryside. By the mid-1970s, that is, several years before the first political reforms began, a spontaneous shadow economy had evolved, particularly in poorer areas. Consequently, many “free” markets that emerged at that time were considered illegal. During the economic crisis in the second half of the 1970s, the pressure for reform from the countryside increased, and some provinces (Anhui, Sichuan) tolerated this development. The return to a family-based economy led to the revival of the private small individual business sector in 1979, as in the countryside the economic crisis had eventually resulted in redundancy for 150–200 million workers (according to Chinese data), who had no access to urban job markets or to the state sector. The only sphere in which they could be absorbed back into the workforce was the informal sector, that is, self-employment. Therefore, the peasants’ first step in the process of privatization was the abolishment of the collective economy and the return to family-run enterprises. This decollectivization set free an enormous number of workers who could not find a job in state-owned enterprises or in the cities and therefore had to find work in the private sector.5 For these reasons, the party and the state could not prevent the development of the private sector and had to tolerate all stages of privatization.6 As far as our study is concerned, this privatization process was to be found in all research areas, and ranged from retail trade and handicraft to wholesaling and larger agrarian and industrial enterprises. Initially, the employment of workers as paid labor was prohibited. However, as more and more small businesses took on employed workers under the guise of “family members” or “relatives,” paid labor became an increasingly standard practice. Hesitatingly the state permitted first the employment of two, then five, and finally seven workers per enterprise during the first half of the 1980s. The real state of affairs was, however, always one step ahead of the decisions made by the state. The development of the private sector was no longer under state control, especially since the advantages the private sector offered in terms of providing employment, consumer goods, and income for local communities were rather obvious. Finally, the party leadership was confronted with the question of whether the private sector should remain restricted, with the effect of hampering further development and increasing employment pressure in rural areas and state-owned enterprises. Social unrest would have been the consequence. Therefore the party decided to tolerate larger private enterprises, opening by that decision a Pandora’s box. In June 1988 the State Council decreed the “Provisional Regulations for Private Enterprises in the People’s Republic of China.” Employee limits were removed and with them the main restriction on the development of the private sector.7 What does private economic activity currently include? Let us first refer to the official registered private sector in China as a whole, based on figures from 2001: • 24.33 million individual companies (getihu, with fewer than eight employees), for a total of 47.60 million employees • 2.0285 million private companies (siying qiye, with more than seven employees), for a total of 21.14 million employees8

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.1

67

Number of Individual Companies, China, 1990–2001

Source: Gongshang xingzheng guanli tongji huibian (1989–2001).

Increase (in %)

Figure 5.2

Growth Rate of Individual Companies, China, 1989–2001

30 25 20 15 10 5 0 -5 -10 -15 -20 -25 1 98 9 1 9 9 0 1 9 9 1 1 9 92 1 9 9 3 1 9 9 4 1 9 9 5 1 99 6 1 99 7 1 9 9 8 1 9 99 2 0 00 2 0 0 1

Source: Gongshang xingzheng guanli tongji huibian (1989–2001).

If we add the informal sector, namely unregistered private enterprises, family members who help out, individuals with a second job that yielded the majority of their income, the great number of enterprises with a state or collective status though they are in fact private (especially in rural areas), joint-stock companies, the more than 120,000 private scientific-technical firms (mostly in the sphere of consulting) with around 2.1 million employees, as well as 220,000 companies with foreign capital employing about 25.1 million people (these likewise must be classified as private companies), then the private sector at the end of 2001 might have included between 250 million and 280 million people. This figure is equivalent to more than 35 percent of the workforce, although it does not include any kind of mixed forms of ownership, state and collective enterprises run quasi-privately (hidden private activities), or letting and leasing, even though the letting of public enterprises by contract must be regarded as a form of privatization.9 Figures 5.1 through 5.4 show the development of the private economy in China in recent years.

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Figure 5.3

Number of Private Companies, China, 1989–2001

Source: Gongshang xingzheng guanli tongji huibian (1989–2001). Figure 5.4

Growth Rate of Private Companies, 1990–2001

Increase (in %)

90 80 70 60 50 40 30 20 10 0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2 001

Source: Gongshang xingzheng guanli tongji huibian (1989–2001).

The zone in which the private sector had its genesis was the countryside, although growth in urban areas has continually risen more quickly than in rural areas. It must be noted, however, that there are differences between private and individual companies: In 2000, less than 40 percent of the private companies and somewhat more than 50 percent of the individual firms were located in the countryside. (See Table 5.1.) Yet, how big the hidden private sector is might be shown by means of a few examples. In the second half of the 1990s, the Bureau for the Administration of Industry and Commerce from the national level right down to the local level estimated that the number of individuals working in the private small-business sector without a business license was on average just as high as the number of individuals working in the registered workforce. This was confirmed by local studies. But there are also reports noting that the informal

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Table 5.1 Urban–Rural Distribution of the Private and Individual Sectors in China (in percent)

Private sector Firms Urban Rural Employees Urban Rural Individual sector Firms Urban Rural Employees Urban Rural

1991

1996

1998

2000

47.3 52.7

59.4 40.6

62.9 37.1

61.3 38.7

41.8 58.2

51.4 48.6

56.9 43.1

52.7 47.3

31.1 68.9

34.6 65.4

37.7 62.3

43.8 56.2

30.0 70.0

34.1 65.9

37.0 63.0

42.1 57.9

Source: Gongshang xingzheng guanli tongji huibian (1989–2001).

economic sector is much bigger. For instance, a representative from the Bureau for the Administration of Industry and Commerce in Zhejiang told us that in his administrative area practically everyone in one way or another was engaged either full-time or parttime in the private sector. Accordingly, only 5 percent of the total labor force in the private small-business sector was registered.10 The same applied to the private sector for larger businesses; for instance, in Wenzhou (Zhejiang province) in the first half of the 1990s, only 40 out of the 12,000 larger private enterprises were registered as such. All the others were to be found under various categories such as “street factories” (jiedao qiye), “labor companies” (laowu gongsi), or “enterprises belonging to townships or towns.”11 Studies from various counties revealed that in the 1990s in the private sector for large-scale businesses, more than one-third of the enterprises were private, though they were declared as collective.12 Furthermore, there are underground enterprises (dixia zuofang), the number of which might be rather large but cannot be estimated accurately. All this explains why official numbers do not provide much information about the real state of development in the private sector. In rural areas, private enterprises are registered as collective ones, an important factor that veils the actual state of privatization. This registration anomaly has to do with collective and private firms and their positions in the hierarchy of enterprises: state enterprises are at the top, private ones at the bottom. The higher the status of an enterprise, the easier it is to buy required materials. Though the bureaucracy can more easily become prevalent in enterprises at a higher position in the hierarchy, at the same time this higher position makes it easier for the enterprise to procure required materials and to get up and running.13

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Furthermore, collective enterprises can more easily obtain bank loans. As a rule, banks and credit institutions provide no credit to private firms, as they cannot count on being paid back (there are no guarantors and no considerable assets). Raw materials are frequently monopolized by the state. In contrast to private firms, collective firms can ask for help from state materials companies in the event they encounter difficulties procuring raw materials and products. A serious problem for private firms is obtaining suitable locations for their businesses. Not only state and collective enterprises, but also jointventure firms (with foreign capital) and completely foreign private enterprises receive preferential treatment over local private enterprises.14 Private entrepreneurs frequently do not get certificates of quality for their products, and they have difficulty penetrating markets controlled by the state. As there are no autonomous institutions representing the interests of the private sector, and as the local bureaucracy frequently blocks or squeezes private enterprises, private entrepreneurs have to rely primarily on informal networks of social connections (guanxi) and on corruption.15 A frequently heard complaint is that private entrepreneurs do not correctly pay their taxes (nor, we found, do state and collective enterprises). If this is true, it might have to do with the high charges and fees local authorities levy on them. Another crucial point is that of “political security.” From the political point of view, it is less risky to be part of the collective economy than to be a private entrepreneur. Collective enterprises are protected by the local administration, not so the private sector. In rural areas, industry and the tertiary sector are basically private, and this structure is also becoming more prevalent in urban areas. Even the privatization of land seems to happen spontaneously. During our field research in several provinces in a great number of villages we came across slogans against the “illegality” of buying or selling land. This shows, however, that the buying and selling land was increasing. The peasants we interviewed were quite willing to talk openly about leasing, sale, or bond of land to get credits; that is, to some extent they consider the land to be private property. Undoubtedly, many changes have emerged regarding the private sector. Political leaders now politically and legally accept this sector, restrictions on its development are to be reduced, and its right of existence has become part of the constitution. Furthermore, numerous regulations were passed for its legal status. However, one central problem has not yet been solved: free execution of established rights. There is still a high degree of arbitrary legal actions against private enterprises by the party-controlled court system, with no constitutional or administrative recourse. Property, however, needs legal security, and private entrepreneurs need the ability to take legal steps if necessary to avoid arbitrary actions against them. It is not surprising that a number of entrepreneurs demand an “improvement of the legal system.” By requiring legal safeguards, this sector will finally advance legal security for all enterprises.16 Private Sector in the Regions Studied in 1993–1994 The number of officially registered employees in the private sector (individual and private enterprises) as a percentage of all employees was above the national average in

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three provinces and below the national average in three; Hebei was at the top (7.5 percent), followed by Jiangsu (7.1 percent) and Heilongjiang (5.7 percent). Development in Hebei was promoted by a relatively well-developed infrastructure and a short distance to the megalopolises Beijing and Tianjin. Furthermore, the party leaders in these provinces were willing to support the private sector in order to reduce migration and to replace the underdeveloped rural collective enterprises. In Jiangsu, the private sector only began to develop during the 1990s. In the poorer northern part of the province, the private sector was promoted much earlier. In the wealthier southern part of Jiangsu, the collective sector was reduced to prosperous sectors, while particularly in the tertiary sector the private economy gained more freedom. The so-called Sunan model (southern Jiangsu model), which concentrated on collective economic structures, therefore can be regarded as a failure. A flourishing collective economy could not be established in all sectors and regions of southern Jiangsu. Where public funding is insufficient and trained civil servants as well as market access are lacking, the private sector is the only alternative. In southern Jiangsu until the mid-1990s small-scale industry and the tertiary sector became the primary realm for private economic activity. Right up to the end of the 1980s, the development of the private sector in southern Jiangsu was restricted by local authorities because the private sector was regarded as a competitor to the relatively well-developed collective economy. Increasing economic problems, for example the desolate situation of many small village and township enterprises and the deficits in the tertiary sector, forced the officials to change their minds. This new policy change can be seen, for instance, in the advice from the provincial leadership that southern Jiangsu should learn from Wenzhou (the model of private economic development), which demonstrates that support for the private sector must be given more attention.17 In practice, this change of structure can be seen in the considerable growth of the number of employees in this sector (from 3.0 percent in 1986 to 7.1 percent in 1992). The small amount of arable land and the labor surplus in agriculture that could not be absorbed by the rural collectively owned enterprises made the development of the private sector necessary. This growth is further promoted by the proximity of the metropolises Shanghai and Nanjing and the industrial centers Wuxi, Suzhou, and Changzhou, by the state and collective enterprises needing suppliers and componentsupplying enterprises, by the flexibility of small private firms, as well as by the welldeveloped infrastructure of the southern part of the province (railway system, highways, airports). Therefore, as a first step, smaller and less-profitable enterprises were sold or leased to private individuals.18 The county government increasingly focused its interest on well-run collective enterprises. This development started in 1992 with village enterprises and was later continued at the zhen level. As a rule, village officials or former managers bought or leased such enterprises. In 1994, one-quarter of the private firms were former collective enterprises that had been privatized.19 Despite this relatively rapid restructuring around 1990, privatization during the 1990s was relatively slow. According to information provided by the director of the Center of Economic Research in Wuxi, in 1993 a change in the form of ownership of rural collective enterprises had already been generated, with the aim of privatizing one-third of the firms, turning

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one-third into stock companies, and turning one-third into joint ventures. Actually, this development will end in the total privatization of the Sunan model, especially since in the future only a small number of enterprises will be run collectively. The step in between collective ownership and privatization was, of course, leasing (chengbao) enterprises. The party secretary of Jiangsu declared in 1993 that the only way out of the economic crisis the collective enterprises were experiencing was the transformation of the collective enterprises into stock corporations, calling them “the combination of private and collective economy.” The realization of this suggestion, including selling enterprises to individual shareholders, had to be taken as a further step toward privatization. In Heilongjiang the situation was rather different. A reduction of staff and workers at state farms and the economically difficult situation of state enterprises, particularly in heavy industry, forced the province to support the private sector. In the second half of the 1980s, Heilongjiang still had the least-developed private sector among all provinces, and even in 1994 more than half of all the private enterprises in the province were to be found in the capital, Harbin. Within the province there was still major resistance to a more rapid development of private economic activities. However, this position changed rapidly between 1994 and 1998. The fastest restructuring happened in Hebei during that time. There is no doubt that the main factor in this rapid restructuring was the proximity to metropolises like Beijing and Tianjin that stimulated development in that province. Particularly in less developed areas, development of the private sector was below the national average. Aside from infrastructure problems and factors such as shortage of capital, lack of market information, and a weak economic structure, psychological reasons have to be taken into consideration. In Guizhou and Ningxia, for instance, the peasant population was not yet interested in self-employed handicraft or trade activities, especially because information and stimuli were lacking and because of family and social obligations. Family bonds, traditionally the basis of subsistence, had just begun to lose their priority. As long as subsistence is guaranteed, people are not willing to leave their family or village. Almost none of the six provinces we investigated reached the national average in terms of investment amount, production value, and turnover or trade volume. (See Table 5.2.) The only exception was Heilongjiang, which surpassed the national average in the private small-business sector by three factors and in the large-business sector by two. As far as private and individual enterprises were concerned, the poorer areas of Ningxia and Guizhou were at the very bottom, and in terms of the smallbusiness sector, Sichuan was right at the bottom. Shortage of capital and a weak economy motivated the rural population of that province to decide to join the migrant workforce rather than attempt self-employment. (See Table 5.3.) In the small-business sector, only Hebei, with a ratio of 1:2.14 between enterprises and labor force, was above the national average of 1:1.66; in the large-business sector, three provinces were above that average. The difference between urban (1:1.6) and rural areas (1:1.7) was relatively small. The majority of individual businesses were indeed run

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Table 5.2 Investment, Production Value, Turnover, and Trade Volume per Enterprise in the Private Sector—Small and Medium-Size Businesses, 1993 (in yuan)

China (total) Guizhou Hebei Heilongjiang Jiangsu Ningxia Sichuan

Investment

Production value

Turnover

Trade volume

4,838 (0) 3,572 (5) 5,634 (2) 6,304 (1) 3,689 (4) 4,824 (3) 2,161 (6)

18,729(0) 5,176 (3) 10,630 (1) 6,237 (2) 5,142 (4) 3,677 (5) 3,154 (6)

18,729(0) 11,556 (4) 14,443 (3) 30,299 (1) 15,839 (2) 10,167 (5) 9,903 (6)

15,337(0) 9,787 (4) 12,450 (3) 24,588 (1) 12,933 (2) 8,891 (5) 8,104 (6)

Source: Authors’ calculation based on Gongshang xingzheng guanli tongji (1994). Note: The numbers in parentheses refer to the rank among the six provinces. Table 5.3 Investment, Production Value, Turnover, and Trade Volume per Enterprise in the Private Sector—Large-Scale Enterprises, 1993 (in yuan)

China (total) Guizhou Hebei Heilongjiang Jiangsu Ningxia Sichuan

Investment

Production value

Turnover

286,028(0) 153,884 (6) 225,794 (3) 258,264 (1) 205,567 (4) 179,046 (5) 237,643 (2)

177,264(0) 120,713 (4) 250,325 (1) 116,551 (5) 142,257 (3) 68,853 (6) 187,868 (2)

129,974(0) 51,061 (5) 45,546 (6) 142,793 (1) 104,134 (2) 59,117 (4) 74,653 (3)

Trade volume 80,057(0) 32,765 (5) 40,403 (4) 103,961 (1) 44,351 (3) 16,305 (6) 82,283 (2)

Source: Authors’ calculation based on Gongshang xingzheng guanli tongji (1994). Note: The numbers in parentheses refer to the rank among the six provinces.

by individual individuals. Only every second one had an employee. Certainly there were differences, depending on the nature of the work. Taking the type of work into account, we see a range from 1:5.8 in the construction sector up to 1:1.4 in the repair and transport sector, though variations between urban and rural areas were small. In the large-business sector an enterprise had at least two owners on average. Nationally, the average ratio of enterprise to labor force (including enterprise owners as part of the labor force) was 1:15.7; excluding owners from the total labor force results in a ratio of 1:13.5. In the provinces, these ratios are as follows: Hebei (1:22.9 and 1:20.1, respectively), Guizhou (1:19.0 and 1:16.5), and Sichuan (1:16.0 and 1:13.7) were above the national average; Ningxia (1:14.1 and 1:12.0), Jiangsu (1:13.5 and 1:11.7), and Heilongjiang (1:12.6 and 1:10.6) were below. The ratio for urban enterprises (1:14.1 respectively 1:12.0) was slightly below the rural one (1:17.6 and 1:15.4). The various

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branches of employment showed bigger differences, the range moving from 1:23.2 and 1:21.1 (industry) up to 1:11.4 and 1:9.3 (trade). The difference between urban and rural areas was rather inconspicuous. That proves that the officially registered “private enterprises” were relatively small. In Jiangsu in 1993, only 84 (of 8,901, or 0.9 percent) private enterprises had more than 100 registered workers and staff, the largest one employing more than 2,600 individuals. In Hebei in 1992, 115 (of 7,414, or 1.6 percent) of such enterprises had more than 100 employees, the largest private enterprise employing more than 500 people. Seventeen private firms had a joint venture with overseas Chinese enterprises. In Jiangsu, there were 79 enterprises, 56 of them cooperating with a firm in Hong Kong or Macao. As far as the rural-urban ratio of enterprises is concerned, since 1986 the urban smallbusiness sector has developed more rapidly than the rural one. In 1985, 23.9 percent of the enterprises (22.1 percent of employees) were urban; in 1993 this percentage rose to 32.6 percent (31.6 percent of employees). In the large-business sector in 1993, 55.5 percent of registered enterprises were concentrated in the cities, engaging 23.1 percent of the employees. In terms of the urban-rural ratio there were considerable differences among business segments. Industry, construction, and transport enterprises were located primarily in the countryside, while the tertiary sector was to be found in urban areas. The development at the county and zhen levels was similar to that described above. As far as the ratio of total labor force to labor force in the private sector is concerned, three counties were below the provincial average (Wuxi, Jinzhou, Zunyi), and four were above (Wuzhong, Acheng, Guanghan, and Qionglai). In the two Sichuan counties (Qionglai, Guanghan) the number of those working in the private sector was 6.0 percent and 6.1 percent respectively, almost double compared to the average of the province (3.4 percent). In Wuxi (which at that time was subordinate to Dongting) the collective sector dominated, limiting the private sector to the tertiary one with a small number of staff and workers. The lack of private economic activity was obvious in the streets of that part of the town where the administration offices were located: few service businesses and retail shops, and dreary streets with no evening activities. The Sunan model, promoting collective economic activity, brought about a one-sided economic structure. In Jinzhou (with 6.1 percent) the development of the private sector was influenced by the weak urban large-business sector and considerable differences among the various zhen and townships. In one zhen the pre-1980 collective economy had survived; only a few individuals had received permission to engage in private economic activities. In Zongshizhuang about 25 percent of all staff and workers were officially active in the private sector. A large number of private fruit plantations and the privatization of run-down zhen and village enterprises might have favored this development. In Pingle and Xiangyang the percentage was double compared to the average in Sichuan Province. Zunyi county still had a rather underdeveloped private sector, whereas Xinzhou zhen had a well-developed one, not least due to the zhen and village administrations’ shortage of capital. In the zhen we investigated, the situation was different: In one exceptional case (Jinji), the zhen’s percentage of workers active in the private sector (3.4 percent) was below that

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of Wuzhong county (5.8 percent). The reason is to be found in the fact that the zhen administration favored the collective sector, giving larger private enterprises no chance. This was the only zhen we studied without larger private firms. All factors were below the province average (ratio of enterprises to employees, capital amount, value of production, turnover), though the zhen was one of the leading towns in Ningxia as far as the development of the collective economy was concerned. The private sector at the zhen level was particularly affected by political changes, as can be seen in quantitative changes following the suppression of the urban protest movement in 1989. Restrictive policies toward the private sector in Jinzhou caused a decline in small business from 6,784 individual businesses with 27,117 workers (1988) to 4,524 businesses with 12,328 workers (1989), a decrease by 33.3 percent and 54.5 percent, respectively. In the large-business sector, the numbers decreased from 441 enterprises and 14,681 employees (1988) to 152 enterprises with 657 people (1989), a 65.5 percent decrease in enterprises and a 95.5 percent decrease in employees. In 1990 the number of enterprises decreased to 67, but the number of workers increased to 1,246. Neither the large- nor the small-business sector recovered from these blows until 1993. A number of private enterprises were closed down. They became collective-owned enterprises, or were collectivized by force. In Wuxi the individual enterprise sector went down from 18,574 household businesses with 28,046 workers (1988) to 15,964 household businesses with 24,444 workers (1991), a 14.1 percent decrease in household businesses and a 12.8 percent decrease in workers. The number of private firms decreased from 219 enterprises with 28,046 individuals (1988) to 128 enterprises with 1,383 employees (1990) (a 41.6 percent decrease in enterprises; a 95.1 percent decrease in employees). This development was typical for all investigated counties and zhen. Though not all enterprises were closed, some of them being collectivized by towns and counties or declaring themselves collective enterprises, these numbers show the disastrous effect political changes can have on private economic activities. The closing down of private firms means an increase in unemployment and consequently a growing inclination to social conflicts. At the same time, towns and counties lose income as well as supply channels, and this was the reason the restrictions from 1989 were soon repealed, giving the private sector new opportunities. In the private small-business sector tertiary businesses dominate; in the large-business sector the dominant field is manufacturing (industry). Private economic activity is seen best in the tertiary sector. Official data show that the percentage breakdown of tertiary enterprises at the province level was as follows: retail, between 96.7 percent (Heilongjiang) and 74.0 percent (Sichuan); catering, between 95.8 percent (Heilongjiang) and 87.1 percent (Jiangsu); service, between 92.6 percent (Hebei) and 88.1 percent (Jiangsu). At the county level the situation was similar. Wuzhong was at the top (perhaps due to the great number of Muslim Hui traders), Wuxi at the bottom. Typically for all branches, the number of employees in the private sector was much below that for firms with all forms of ownership. The number of employees in the retail trade ranged from 63.3 percent (Hebei) to 41.7 percent (Sichuan), in the catering trade from 80 percent (Sichuan) to 57.3 percent (Jiangsu), and in the service trade from 62.6 percent (Hebei) to

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50.1 percent (Jiangsu). In the catering and service trades, the percentage of employees in the private sector at the county level was higher than that at the province level (catering, 80.0 percent versus 57.3 percent; service, 83.0 percent versus 66.2 percent). Our findings reveal that the tertiary sector almost everywhere was in private hands. With the exception of Dongting, the percentage of private businesses in the catering trade, retail trade, service trades, transport, and to a certain extent the construction sector in all zhen was between 95 and 100 percent, the percentage of the employees between 80 and 100 percent. Only in the manufacturing sector was the percentage lower. Here it ranged between 80 and 90 percent as far as enterprises were concerned and between 25 and 55 percent with regard to employees. In the manufacturing sector private enterprises functioned as suppliers. Either they were part of light-industry manufacturing (food and timber processing, textile and garment industry, paper producing, handicrafts, and fodder production) or they had taken over commission work from collective or state-owned enterprises. In terms of the total volume of retail trade turnover in 1993, the private economic sector had a share of 22.6 percent of the total. If we add mixed forms (joint ventures) as well as the officially registered market turnover of peasants (15.6 percent), in 1993 the nonsocialist sector came up to 40.5 percent (1978: 0.2 percent stemming from the private economy, 3.7 percent from sales by peasants). Our surveyed provinces reached the national average, Jiangsu having the lowest percentage (15.0 percent private; nonsocialist sector in total 24.7 percent), Guizhou having the highest (28.3 private; 42.7 percent total nonsocialist sector). The data in Figure 5.5 verify the above-described structure. In the province of Sichuan and the city of Guanghan, the figures reveal that the number of enterprises and of employees, as well as the trade volume, were higher at the xiang (township) and zhen levels than at the city level, while the catering trade and services were concentrated in urban areas. The supply and marketing cooperatives funded by the state, which had organized and covered the trade in rural areas since the 1950s, were unable to react to the competition from the private sector and its attractive products. Their losses were so dramatic that the state increasingly withdrew from rural areas, leaving trade to private businessmen. Private enterprises contribute considerably to the taxes obtained from the rural economy. Between 1989 and 1993 in the 100 economically leading counties, 30 percent to 60 percent of the taxes came from the private sector, e.g. in Hebei about 25 percent of the most important tax, namely the industry and trade tax (gongshangshui), and in poorer areas of that province between 70 and 80 percent. In the less prosperous regions of Sichuan, these taxes locally ranged between 35 and 50 percent; in Guizhou, at the county level the average was 20 percent (in 1992, the entire province’s share was 8.3 percent). The poorer a county, the more it had to rely on taxes from the private sector and the larger was its share in the total tax receipts. The county of Sinan (Guizhou) in 1992 received 55.2 percent of all taxes from the private sector, almost the highest percentage. Let us demonstrate this by means of the county and zhen levels: In Qionglai the percentage of taxes from the socialist sector was 74.2 percent, from the private sector 13.9 percent, and from zhen and village enterprises 11.9 percent. In Zunyi the private sector

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.5

Private Sector’s Share of the Tertiary Sector, Sichuan Province, 1993

a) Share of retail trade in private sector

b) Share of wholesale trade in private sector

c) Share of catering trade in private sector

Source: Authors’ calculations based on data provided by the responsible authorities.

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supplied 12.0 percent, in Acheng 15 percent (20 percent when joint ventures and enterprises running on foreign capital were included). At the zhen level in Xinzhou, 32.2 percent of the industry and trade tax was derived from the private sector. All these examples show why the private sector is indispensable for local planning. Local interest in extending this sector is constantly increasing, as its share in the rural economy and consequently its contribution to local income is growing from year to year. Furthermore, the local authorities do not have to subsidize or finance these enterprises and their employees. During recent years, numerous provincial authorities have developed programs supporting the private sector. In 1993 the party secretary of Hebei propagated the policy of the Five Nonlimitations (wuge bu xian): not to reduce the percentage of the private sector in terms of GDP, not to hinder the growth of development, not to decrease the number of employees, not to limit the extent and content of economic activities (excluding defense and other sensible goods and services), and not to limit forms of operation.20 In October 1993 a conference at the provincial level decided on tax preferences for private enterprises, support in the form of providing loans and suitable manufacturing areas, as well as the grant of urban hukous for private entrepreneurs in cases in which there was a certain amount of investment in urban areas. In Guizhou, too, in 1993, such a strategy was implemented. The provincial party committee ordered all county and city authorities to install administrative commissions for the rapid development of the private sector. In Sichuan in September 1994 a province-level conference decided on the rapid development of the private sector and demanded suitable measures for its realization.21 Unfortunately, such plans frequently are counteracted by the previous “ton ideology,” which is concerned only with growth rates and ignores other indicators such as quality, market demand, or costs. For instance, in Guizhou in 1994, the party secretary raised the growth rate of township and village enterprises (TVEs) by 50 percent, arguing that Guizhou was well behind other provinces. This led to a number of conferences in all counties discussing the realization of this target, an idea far from the real situation for resources and therefore unrealistic. Structure of Ownership in Rural Areas in the Mid-1990s As shown above, town/township- and village-owned enterprises are considered collective-owned enterprises, as are joint-stock companies (gufenzhi qiye) and rural joint ventures (lianban qiye), though the latter company form is private, as two or more families, often relatives or clan members, invest privately. Therefore, the investment and assets are private property. Furthermore, the terminology for private companies varies from province to province, for example, huban (household enterprises), lianhu (joint household enterprises), and heban (cooperative enterprises). At the village level it made almost no difference whether an enterprise belonged to the village or was privately run. The village administration committee frequently did not know whether the enterprises in the village belonged to the village or to a private owner. In fact, this distinction seems to be irrelevant for the village administration, as both types of enterprise have to pay fees and provide donations to the village administration. This

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distinction is also unimportant to the village inhabitants, since clans, families, or village cadres and their relatives own a number of village enterprises, and only those of the village community belonging to these groups profit from these firms. The same applies to “share enterprises,” in which as a rule the same groups have invested. Such enterprises, classified as “collective enterprises,” in general only employ relatives of the investors or individuals from families whose land was used for their economic activities.22 “Shares” (gufen) are investment fund shares that usually have to be bought by employees (the purchase is obligatory for employment, or the sum is deducted from wages). The shares are not offered on the market, and their payout depends on the amount of money invested. During our fieldwork we discovered that private enterprises at the village level were sometimes dependent on administration by competing offices. In principle, the Bureau for the Administration of Industry and Commerce is responsible for the private sector. It registers enterprises, issues business licenses, and controls this sector and its development. The local Bureaus for the Administration of Xiangzhen Enterprises were in charge of the rural enterprises as well as of the unregistered private activities at the village level, where no business license was necessary. Difficulties ensued when industry and commerce administration bureaus asked for registrations and business license applications and the xiangzhen bureaus pointed out that no licenses were necessary, as the economic activities in question were at the village level and just rudimentary. This situation could lead to double registrations and “administration fees” that had to be paid twice, that is, to both offices. No agreement between the two administrations could be found, as both were interested in the highest possible fees. Investigations in Sichuan between 1999 and 2002 revealed that these competing administration structures still existed. As far as town and township enterprises are concerned, no clear definition of ownership is possible. Enterprises were frequently leased or contracted out to the manager, with certain demands that had to be fulfilled by the operator vis-à-vis the local government. As they were frequently run as private firms and the formal owners (town, township) just expected the payment of a lease or part of the profit, allowing everything else to be decided by the manager, there was no strict separation between collective and private enterprises. As mentioned above, quite a large number of collective enterprises were collective in name only; in fact, they were private. Rural enterprises possess different forms of ownership, and there was no clear distinction between private and collective. Also, there were mixed forms of ownership, that is, common ownership of town/township and private enterprises as well as other joint ventures among various forms of ownership (together with foreign enterprises). Thus, the term “rural enterprise” is inexact as far as ownership is concerned and its definition confusing. In the following discussion, the official data on ownership will be represented down to the zhen level to discern clearly the ownership structures of this sector. As there is no exact term in current use, we are going to call these enterprises xiangzhen enterprises (XZEs), or township and village enterprise (TVEs).

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Table 5.4 Employed Persons per Enterprise, by Ownership, 1992–1993 Ownership

China 1993 Ningxia 1992 Wuzhong 1992 Jinji 1992 Jiangsu 1992 Dongting 1992 Hebei 1992 Jinzhou 1992 Zongshizhuang 1992 Heilongjiang 1992 Harbin Sichuan 1992 Xiangyang 1993 Chengdu 1993 Qionglai 1993 Pingle 1993 Guizhou 1993 Zunyi 1993 Xinzhou 1993

Total

Zhen

Village

Lianban

Private

5.0 3.1 2.9 4.1 9.9 20.0 4.8 7.1 6.6 3.1 3.6 4.0 8.2 5.4 4.7 3.3 2.9 3.3 3.2

66.4 49.5 96.0 87.5 116.1 35.0 53.6 77.1 125.4 42.9 56.6 51.1 123.0 88.5 45.0 93.4 40.4 55.9 75.3

23.1 16.4 22.9 — 40.2 40.7 26.5 38.9 73.9 14.2 25.5 12.5 110.0 21.9 12.5 8.5 16.9 2.5 —

2.9 13.6 10.5 — 6.2 — 8.1 12.2 17.2 5.6 4.2 7.2 3.3 2.5 6.4 18.6 8.3 — 2.2

— 2.0 1.7 1.6 2.5 1.5 2.6 3.2 2.5 2.1 2.2 2.3 — — 3.3 2.2 2.2 — —

Source: Authors’ calculation based on data provided by the Bureau for the Administration of Rural Enterprises. “—” indicates no data available.

With the exception of Wuxi and Dongting, the private sector dominated in all regions of our research. We have mentioned above that Wuxi, preferring the Sunan model, had for a long while concentrated on the development of collective enterprises and had restrained the private sector. This, however, was the exception. Everywhere else the ratio of the private sector to all enterprises in the regions we investigated was equal to the national average, that is, 93.1 percent. (See Figures 5.6 through 5.8.) The number of joint enterprises (lianban) was relatively low. Only in Hebei was the average number above 10 percent, as in Hebei authorities had attempted to promote the transformation of private enterprises into stock companies or mixed enterprises. In poorer regions, zhen and village enterprises were of no great significance, primarily due to the lack of capital, infrastructure, and know-how. However, they were strong where the collective sector was well developed and functioning (Dongting, Yuquan). With the exception of Jiangsu and Sichuan, the standard of development for such enterprises was below the country’s average (where rural enterprises were meant to help reduce out-migration). (See Table 5.4.)

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.6

Share of the Private Sector in the Tertiary Sector, City of Guanghan, 1992

a) Share of retail trade in private sector

b) Share of catering trade in private sector

c) Share of services trade in private sector

Source: Authors’ calculations based on data provided by the responsible authorities.

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Figure 5.7

Share of Private Enterprises and Employed Persons of All Xiangzhen Enterprises and Employees in China, 1990–1993

100 90

88.9

88.4

87

80

percent %

70 60 50

45.9

44

41. 6

40 30 20 10 0 1990

1992 Enterprises

1993 Persons

Source: Authors’ calculations based on Zhongguo nongcun tongji nianjian (1994), p. 334.

Share of Private Enterprises and Employed Persons of All Xiangzhen Enterprises and Employees in the Provinces Studied, 1992–1993

percent

Figure 5.8

Source: Authors’ calculations based on data provided by the authority responsible for the administration of rural enterprises.

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The number of employees, the ratio of workers to enterprises, and the production value (according to form of ownership) showed that zhen and village enterprises were considerably larger than private ones. In 1993 private companies employed only slightly more than half the number of workers in rural enterprises. In the regions of our fieldwork, the numbers ranged between extremes: Jiangsu (21.7 percent) and Guizhou (75.1 percent) at the province level and Dongting (3.8 percent) and Xinzhou (68.0 percent) at the zhen level. Here again we found that the stronger the collective economy in a region, the fewer the employees in the private sector and the lower the private share in the value of production. Summary People were engaged in the private sector primarily because there were no real opportunities in the state- or collectively owned sector or in agriculture as far as employment and income were concerned. In the urban small-enterprise sector are individuals who have lost their jobs, pensioners, people with disabilities, and ex-convicts, and in the rural sector, peasants. Just as in almost all developing countries, self-employment is the sector of last resort. In recent years, more and more individuals come from run-down state or collective enterprises that are no longer able to guarantee their employees the minimum standard of wages or social security. A number of such small-business entrepreneurs can become a group of well-off people using their income primarily for consumption. Concerns about political instability keep them away from major reinvestments. The few willing to invest gradually became part of the large-scale enterprise private sector. The rural large-scale enterprise private sector mainly consists of former officials, technicians, professionals, individuals with a relatively high standard of education or experience, as well as individuals having profitable connections within the administration. They are well off and must invest to survive economically. The number of such enterprises is growing, as is their workforce, forming a wealthy stratum of entrepreneurs. Though there are regional and industry-type differences, these businessmen form the nucleus of a future middle class of entrepreneurs.23 The process of privatization started in the countryside and spread from there into the cities, though in urban areas the state sector is still dominant. The growing number of party members among private entrepreneurs and their desire to integrate themselves into party activities will accelerate the ideological and organizational erosion of the party. They must be considered to be a group that will have a decisive influence on the development of future politics, as they are interested not only in economics but also in political participation. In 1994 a paper published by the United Front Department of the Central Committee of the CCP revealed that private entrepreneurs increasingly bought political positions, voters, and officials in rural regions, and that this phenomenon was already spreading to the cities. A report from 2000 confirmed that this phenomenon had increased significantly.24 A growing number of private entrepreneurs have recognized that economics and politics cannot be separated.25 One of the larger private entrepreneurs explained clearly that entrepreneurs have to be politicians. If they cannot manage to act politically, they will fail.26

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Due to weakly instituted laws and the dominance of party organizations, entrepreneurs have to be politically active in order to operate their firms successfully, particularly under conditions of legal insecurity. Politically in that sense means that they must strive for party membership or, alternatively, for positions as deputies of institutions granting them major public protection (people’s congresses or political consultative conferences). Officials or individuals who have close relationships with cadres have an advantage in this regard. Though the number of party members among private entrepreneurs is relatively high (at present about 5 percent of the total population are members of the CCP, while according to a Chinese 1 percent sample survey of 2000, 19.8 percent of the entrepreneurs are members), this percentage was well below that of enterprise managers (96.5 percent) and managers of joint ventures (41.2 percent) in 2001. In our own investigations in southwest China during the years 1999–2002, the share was about 50 percent.27 There are two reasons for the high percentage of party members among entrepreneurs. First, a relatively large number of officials at the local level decide to turn to entrepreneurship, particularly due to the fact that as party members they enjoy good connections to local authorities that can be used for their own benefit. As the Communist Party is the party in power, many entrepreneurs are interested in becoming members in order to gain protection and beneficial social connections. Party membership and political functions help to enforce and protect private interests. They guarantee important political connections and by that also a certain political influence. Local parliaments as well as advisory committees—such as the political consultative conferences—are also regarded by the entrepreneurs as important instruments to express and realize their interests. As a member of a people’s congress, entrepreneurs come into contact with politics as well as with important individuals, which explains why more than 90 percent of the entrepreneurs we interviewed expressed interest in becoming deputies of people’s congresses. At the local level our research revealed that the private large-scale business sector has developed most rapidly in places where state and collective industry were weak and operated inefficiently and where the local cadres supported the development of private entrepreneurs. Private businessmen with large firms were rare where the state- and collective-owned sectors were up to standard and the local party organizations supported the development of township and village enterprises. There the private small-scale business sector was almost entirely confined to the tertiary sector. In Dongting and Jinji in mid-1993 there were only a small number of larger private enterprises, with a low average number of workers and staff. In Jinji, larger private firms were concentrated in villages where there were not enough qualified workers to build up a village-owned industry. In Dongting the collective enterprises were relatively modern and well equipped with technology, making it difficult for the competing private sector to develop. In Zongshizhuang the private sector dominated, as the city of Jinzhou took all income out of the TVEs for its own development. In zhen having no financial support, the private sector became the only economic alternative. Frequently, however, larger private enterprises were officially registered as collective ones.

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Local cadres primarily promoted the development of TVEs, as in this way the zhen and the officials themselves profited much more than by supporting private enterprises. Furthermore, TVEs were directly under the control of the town and township governments, which could transfer profits or “charges” either directly or indirectly to the zhen. Fees levied from these enterprises went directly to the town. Fees paid by the private sector, however, were transferred to the Bureaus for the Administration of Industry and Commerce in the respective county towns, but not to the zhen government, which explains why the zhen tried to get “donations” from private enterprises for local projects. At the same time it explains why towns had an interest in private firms’ being registered as collective enterprises, as that was the only way for them to share in their profits. In spite of all the local differences, the private sector contributes considerably to the development of rural towns and townships, whether in the form of taxes or in the form of fees and “donations.” In areas with a dominant collective economy, the private economy is of vital importance in the tertiary sector and also provides buyers for shops and flats that are built and sold by the local governments to acquire financial means. In the villages the majority of nonagricultural enterprises were privately owned. In well-developed regions (southern Jiangsu) the larger enterprises were formally still under village ownership, although almost all of them were let to private individuals. In less-developed areas in the South, almost all village enterprises were private property. The following factors are important for the development of the local private sector: • level of infrastructure (transportation system, access to markets), proximity to centers of industry and commerce, development of the local economic structure, traditional attitudes toward commerce and handicrafts, and specific trade structures (in Pingle bamboo processing or distilleries, in Zongshizhuang fruit growing and processing as well as textile handicrafts, in Xinzhou processing of pepperoni and textile-shoe production) • traditional mobility of the people, surplus of population, and the ratio of population to arable land • open-mindedness of the regional and local political leadership The following can be stated: The process of privatization at the village and zhen levels is well advanced. On a national scale, more than half of the employees in rural enterprises were employed in the private sector. Privately owned firms dominate the tertiary sector in particular. The small number of employees per enterprise in the private sector reveals that most private firms are small businesses run by one individual. Data from recent years reveal that in rural areas the private sector developed rapidly. If we assess this sector not according to official data but according to its real situation, it is obvious that the private sector dominates in most areas of China, even in well-developed regions such as southern Jiangsu, where TVEs dominated until the end of the 1990s. The private sector still faces major constraints that hamper its development. The most important factors are:

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• Economic problems, for example, access to markets and procurement of production areas and business localities, raw materials, credit and capital, and export licenses; • Administrative problems, for example, being forced to pay arbitrary fees and extra charges to local authorities or high taxation,28 bureaucratic restrictions (in Sichuan in the mid-1990s private enterprises needed as many as thirty-five permits before being registered as independent firms), tax increases of between 123 percent and 300 percent (which were due to the tax reform of 1994), charges the private sector had to pay (which in 1993 were double the sum of the taxes; in Sichuan in 1993 there were up to 112 different charges),29 interference of local authorities—an arbitrary procedure, called “second” state-owned management” (er guoying), that treated private firms as public ones, which included subordination to local enterprise administrations, enforced allocation of workers, levies on profits for administrative purposes (this phenomenon was found mainly in less-developed regions—Jinji and Pingle); • Social problems such as social prejudices, discrimination by local authorities, social envy, and no effective protection against crime; and • Political problems such as unstable central and local policies, the classification of employment in the private sector as “exploitation,” and the classification of private entrepreneurs as “new capitalists.” The claim that private entrepreneurs do not correctly pay their taxes is partly true. Our investigation, however, has revealed that state- and collective-owned enterprises behaved no better. The imposition of extremely high levies on profits in the form of taxes, charges, and fees on private businessmen causes tax evasion and prevents reinvestment. It has not been proved that this unlawful behavior is more widespread among private entrepreneurs than among members of other groups. Those who believe that private businessmen are more ruthless mainly take examples not from the official private sector but from the informal and illegal one (trade in illegal goods, concealment, prostitution, gambling, fortune-telling, and the like). Yet the accusation that private entrepreneurs bribe functionaries to gain profits has a basis in truth. As long as certain branches of industry are under state monopoly and the private sector can participate only by guanxi, corruption might be the only way to realize economic activities. As Kornai pointed out, the shortage economy of the socialist sector had the effect that in many cases private enterprises could access necessary materials only by illegal means.30 Rural Collective and Private Enterprises Development and Regional Structure of Rural Enterprises Before the development, structure, and economic significance of rural collective and private enterprises in the surveyed towns are analyzed in detail, the general development and regional differentiation of the rural trade at the provincial level will be sketched.

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Development of Rural Collective and Private/Individual Enterprises Since 1978 In the following discussion the development of rural enterprises will be analyzed. Regardless of the ownership structure, the importance of this sector for the economy of rural China becomes especially conspicuous in comparison to agriculture, and the various ownership types contain common features of the development process. Whereas in 1978 the gross output value of rural enterprises was 35 percent of the agricultural value of production, in 1999 it was already about 4.4 times higher than that of agriculture, forestry, and fishery.31 In other words, the growth of the rural industrial and commercial sector has been one of the decisive factors for growth during the economic reforms.32 It is important to note that only the former people’s communes and brigade enterprises (sheduiban gongye) were included in the data collected until 1983. In 1984 they were combined with the newly developed private and mainly cooperative enterprises under the heading of township and village enterprises (xiangzhen qiye). Though the term “township and village enterprises” indicates collectively owned enterprise forms, as there is a connection to public property, this category comprises several forms of ownership, private enterprises representing a considerable number among them. In general, the term “TVEs” has been used for collective rural firms. Consequently, despite the present simplified distinction between private or individual and collective enterprises, the following categories of ownership must be distinguished: 1. Collective enterprises a. Enterprises collectively owned by towns (or zhen) (zhenban qiye) and townships (xiangban qiye); b. Village-owned enterprises (cunban qiye); 2. Private enterprises a. Partnership and joint enterprises (lianhu qiye, lianban qiye, lianying hezuo qiye, etc.). As a rule such enterprises are run with the capital of two or more peasant families. b. Rural private enterprises, the smaller of which are called individual enterprises (geti hu, geti qiye) or specialized households (zhuanyehu). The larger enterprises (siying qiye) are privately owned and employ more than seven people. This difference between partnership and joint enterprises and rural private enterprises is, however, irrelevant. Private rural enterprises had already begun to develop in 1984, but they first came under official regulation in 1988. For example, privately run enterprises could obtain a collective license by paying an “administration fee” to the local government. Such firms are called “red hat firms,” signifying that private owners put on a collective “hat” to circumvent the government’s prohibition of private firms. This phenomenon is of secondary importance today.33 Even in light of the argument that the combination of private and collective ownership was the best basis for China’s rural industrialization, we should not forget that even

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today a limited number of private enterprises wear a “red hat” to evade ideological problems and government regulations. However, since the Asian crisis in 1997 private rural enterprises have enjoyed a higher priority, since their competitiveness is stronger than that of collective rural enterprises. As statistics for collective and private enterprises can be found in official records for the first time in 1984, between 1983 and 1984 the statistics show an amazing increase from 1.3 million to 6.0 million enterprises and from 32.3 million to 52.1 million employees. However, private enterprises (siying qiye) were officially included in statistical publications for the first time in 1988. c. So-called joint enterprises (qita xingshi hezuo gongye qiye), which are rural collective firms that cooperate with state enterprises, foreign partners, and others. d. In December 1992 the Ministry of Agriculture officially introduced the shareholding cooperative system. In 1994 for the first time so-called stock companies (gufenzhi qiye) were mentioned in official statistics; so far their percentage of 0.93 (1999) is still minimal. After completing various lengthy procedures, collective as well as private rural enterprises of sufficient size can be registered as stock enterprises.34 As Figure 5.9 documents, the transformation of collective enterprises has played an important role in the private sector’s development in China since the early nineties. The number of employees in private enterprises has grown very fast since the mid-nineties, while the number of employees in collective firms has declined.35 Compared to the urban areas where “nonproductive” tertiary sector activities dominated, about 57 percent of all rural private employees were engaged in manufacturing or processing in 1999.36 The stages of development between 1949 and 1978 as well as those of the two decades since the beginning of the economic reforms by no means proceeded harmoniously; on the contrary, they reflected the various political-economic conditions of the period. Until 1960 the nonagrarian sector in official statistics was called agricultural sideline production (fuye). Between 1952 and 1957 its share was just 4–5 percent of the value of all rural production.37 The people’s commune and brigade enterprises experienced substantial growth in the late 1950s and 1970s, while during the 1960s they suffered setbacks.38 According to a publication by the Ministry of Agriculture, for example, between 1960 and 1964 the number of enterprises decreased from 117,000 to 10,600.39 Since 1970, numerous collective enterprises for the production of agricultural machinery and tools have come into existence because of the efforts by the central government to intensify the mechanization of agriculture.40 After the introduction of the economic reforms, the number of collective enterprises in rural areas decreased from 1.52 million to 1.35 million, while the number of employees slowly increased from 28.3 million to 32.3 million. In the following passage we will concentrate mainly on collective enterprises—implying zhen/township and village-owned firms—but we will also include private enterprises to the extent that they were former collective firms (all types abbreviated as TVEs).

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.9

89

Private and Individual Sector’s Share of the Total Workforce, 1993 and 1998

Source: Authors’ calculation based on Gongshang xingzheng guanli tongji (1994) and Zhongguo tongji nianjian (1994); China Labour Statistical Yearbook (1999).

If these firms were not established after the introduction of the economic reforms, at first glance they are nothing else but the continuation of former people’s commune and brigade enterprises. Their initially slow growth was caused not so much by low profit expectations as by unsettled ownership rights, making a sale by village committees or township administrations to potential private entrepreneurs impossible in the early years.41 This explains why many villages decided to transfer rural small-business enterprises into a “common pool resource.” All village inhabitants had to contribute either financially or by actual labor to the upkeep of the common pool’s value and its further increase.42 Without doubt the “principal-agent relationships” at the village level are different from those on township or town level. While the owners as village inhabitants have closer contacts to their village collective enterprises and are better able to control them, there are only few direct relationships between township- or zhen-owned firms and the local population, as collective enterprises at the township level are controlled by the township government or an economic commission belonging to the township administration.43 A further reason for the temporary stagnation of collective rural enterprises between 1979 and 1984 can be seen in the hesitant official support they received, for during the phase of so-called economic reconstruction these enterprises were not allowed to compete with state-owned enterprises as far as raw materials were concerned. Only since 1984 have they received substantial political support, as at that time they represented the Chinese way of rural industrialization and mechanization.44 Until 1984 taxation that could be held by local authorities as well as bank loans were also subject to restrictions.45 The growth since the middle of the 1980s has led to an increase in the total number of rural enterprises—both collective and private—by three times within four years. This has caused an overheating of the economy, which since 1988 the government has tried to

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counter with austerity policies and increased regulation, impeding further growth. The reduction in the money market for rural enterprises affected them severely because they suffered from a chronic deficiency of capital.46 Therefore, in 1988 the number of enterprises and employees decreased for the first time. The TVEs were especially affected, decreasing in number until 1991 (by almost 10 percent between 1988 and 1990, according to official statistics), while the number of enterprises below the village level (cooperative enterprises of two or more households or individuals and individual and private enterprises) stagnated. In some cases the number of their employees even increased slightly between 1988 and 1990. There is some doubt whether the officially documented decrease of 148,000 TVEs and about 3 million employees during these three years reflects the real state of development. Publications in Hong Kong spoke of the closure of 3 million enterprises and the dismissal of 30 million employees.47 Even if the estimated figures are based on supposition alone, there is no doubt that between 1988 and 1990 many enterprises terminated their production without informing superior offices.48 That private enterprises experienced more favorable development than collective firms since the middle of the 1980s might be explained by the fact that they are less dependent on official bank credit and more flexible because of their smaller size.49 The dramatic decline in the number of employees in collectively owned firms since 1995 has been the result of a sweeping privatization, due to a number of reasons, as mentioned above. The additional number of employees in both types of rural enterprises has declined slightly since 1995 (128.6 million employees in 1995; 123.3 million employees in 2000). Consequently their relative significance for the labor market is no longer increasing. If we look at the two different forms of ownership, we can see that the number of employees in the private sector increased more or less constantly (from 64.5 million in 1995 to 89.9 million in 2000), while the number of employees in collective enterprises declined dramatically (from 58.8 million in 1995 to 38.3 million in 2000). In other words, the share of employees in collective enterprises in relation to all employees in rural enterprises decreased from 47.7 percent in 1995 to 29.9 percent in 2000.50 The private sector in rural regions has grown much more quickly during the past three decades than the collective sector, not only in terms of employment, but also in terms of the net value of production capacity. In 1995, 64.1 percent of the net production value of all rural enterprises outside agriculture originated from collective enterprises, but that value decreased to 34.7 percent in 2000. (See Table 5.5.) The following are possible reasons for this recent change: • The political attitude has changed; the transformation started in 1994, when the socalled Sunan model (dominance of collective enterprises) was to be replaced by the Wenzhou model (dominance of private enterprises). Especially after the so-called Asian financial crisis in 1997, private rural enterprises have proved to be much more competitive. • Since 1997, different forms of privatization can be observed; for example, numerous enterprises that were previously officially classified as collective now showed their real, that is, private, status. Other collective enterprises were left to private

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Table 5.5 Rearrangement of Rural Enterprises’ Ownership Structure, 1995 and 2000 1995

2000

Private

Collective

Private

Collective

Number Percent Number Percent Number Percent Number Percent Enterprises (10,000)

2,041

92.7

162

7.3

2,004

96.1

80

3.9

Employees (10,000)

6,801

52.9

6,060

47.1

8,987

70.1

3,832

29.9

Net value of production (100 million yuan)

5,236

35.88

9,359

64.12

17,731

65.29

9,424

34.7

Turnover (100 million yuan) 25,157

43.9

32,142

56.1

70,951

65.8

36,883

34.2

53.95

1,496

46.05

4,149

70.5

1,733

29.5

Profit (100 million yuan)

1,754

Table 5.6 Shareholders in Rural Enterprises in China, 1999 (in percent)

State 2.2

Collectives, mostly local governments

Managers

Other private individuals

Foreigners

Total

31.6

22.9

37.6

5.7

100.0

Source: Zhongguo xiangzhen qiye nianjian (2000).

owners (zhuanrang), or a cooperation agreement was established between local governments and local private individuals or foreigners, or collective enterprises were sold to private individuals (chushou). • These different forms of privatization were dependent mainly on plant size. Larger enterprises were usually transformed to joint-stock companies, medium-size enterprises were given to one private owner or two partners, while small enterprises were transferred to single individuals. • Successful enterprises were privatized immediately, while firms with a very small profit margin or losses kept their collective status. Other collective enterprises have officially kept their previous status but are leased to former managers or transformed to joint-stock companies in which the manager in many cases is the dominant shareholder. Shareholders can also be workers (private individuals) or the local government. The latter as a rule hold a considerable share; however, they dominate especially in regions where collective enterprises had a strong and successful position, especially in coastal provinces such as southern Jiangsu. The latest development allows even foreigners or state-owned enterprises to buy shares in a trading company. (See Table 5.6.) In general, collective enterprises have lost their dominant position because of reduced profit margins, increased competition, lower local and export demand due to slower

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Table 5.7 Export Turnover of Rural and Total Industry, 1986–1999, Various Years (current prices) China (total) (million yuan) 1986 1987 1988 1989 1990 1991 1992 1993 1994 1999

108,210 147,000 176,670 195,600 298,580 382,710 467,940 528,530 1,042,460 1,615,980

Rural enterprises (million yuan)

Percent of total exports

9,948.70 16,196.00 26,870.70 37,144.33 46,231.81 66,993.77 119,279.41 235,044.45 339,830.80 774,358.27

9.2 11.0 15.2 19.0 15.5 17.5 25.5 44.5 32.6 47.9

Sources: Zhongguo nongcun tongji nianjian (various years); Zhongguo tongji nianjian (2000), p. 588; Zhongguo xiangzhen qiye nianjian (2000), p. 172.

economic growth, lack of credit access, and inefficient performance.51 In contrast, private enterprises are characterized by introduction of new production techniques, reordering of the production structure, and introduction of new market strategies. Therefore, privatization might be just another rent-seeking behavior in China, which means that the transition to the new form of ownership might improve access to government or bank funds. More profitable private firms in particular could and can receive credits from profit-oriented bank managers. This is one of the additional reasons that made privatization a consistent choice for local political leaders. Whatever the respective reasons might have been, the development clearly shows the strong dependency of rural privatized enterprises on economic and political circumstances.52 We can summarize the process of development by saying that even if the different stages of growth and decline of private and collective rural enterprises and the number of their employees are typical indicators for the changing political-economic positive and negative factors, their general increase during the past three decades without any doubt shows the influence of more and more free market elements during this period. In the meantime, rural industry has frequently achieved more than just local or regional importance. Though the absolute number of rural enterprises concentrating on export is still relatively low, their share in the Chinese export volume is quite considerable. Since the 1960s there has been some kind of export behavior, that is, export activities by the former people’s commune and brigade enterprises, organized by the offices for foreign trade. In 1986 the export turnover of rural enterprises was almost 9.2 percent of the entire Chinese export value; in 1993 it had grown to 44.5 percent. In 1994 its share went down again, but this is because of the exceptional growth of the total export turnover, an increase not to be found in the earlier years. However, in 1999 rural enterprises—collective and private—produced nearly half (48 percent) of total exports (see Table 5.7).

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Table 5.8 Export and Import Value for Selected Provinces as a Percentage of the Total for China, 2002 (in million US$) Province Guangdong Jiangsu Zhejiang Fujian Sichuan Shanghai

Export

Import

36.6 12.0 9.7 5.6 0.8 9.5

36.0 12.0 5.0 4.0 0.6 14.0

Source: Zhongguo tongji nianjian (2003).

Export goods comprise simple products for the most part, such as textiles and clothing, products of light industry, and arts and crafts. The recent development of export activities by rural factories shows quite a number of remarkable features in regard to regional differences and industry segment. As might be expected, economic reforms and the policy of opening China to the outside world have led to a growing regional differentiation of export activities. In 1999 a significant proportion of all employees in Guangdong’s rural enterprises (35 percent) worked in firms concentrating mainly on export. The corresponding shares in Shanghai (23 percent), Jiangsu (15 percent), Fujian (18 percent), and Zhejiang (18 percent) were considerably lower, whereas in the interior provinces the respective percentages were much below this level, only 1.1 percent in Sichuan, for example. When we take the provinces’ total export business as an indicator, Guangdong province ranked first (22.1 percent of the total value of production), Shanghai second, Jiangsu third, Zhejiang fourth, and Fujian fifth.53 Even if the export of agricultural products still plays an important role, there can be no doubt that the comparative advantage for the export of products has shifted from agricultural to manufactured products. A similar structure can be observed if we consider the total export and import value in the same provinces: Guangdong clearly leads regarding the total share of China’s exports and imports in 2002. All the other coastal provinces—including Shanghai—show considerably lower values. (See Table 5.8.) Significance of Rural Enterprises for the Economy and the Rural Labor Market The fundamental economic change in rural areas results from economic reforms and decentralization. The relationship between the Chinese gross national product (GNP)54 and the rural social value of production55 between 1980 and 1992 (1980: r = 0.673; 1992: r = 0.938) was growing in the same way as that between the value of production of rural industry and the entire social value of production in rural areas (1980:

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r = 0.7288; 1992: r = 0.9848).56 In other words, the rural economy is more and more dependent on rural industry and commerce; rural areas are becoming ever-more important to the development of the entire economy. Table 5.9 shows the significant decline of state-owned industry, the share of which in the total industrial gross value of production decreased from almost 78 percent in 1978 to about 28 percent in 1999. During the period between 1985 and 1994 the share of the rural collective industrial sector increased from 16 percent to 33 percent, but declined to 28 percent in 1999. One of the reasons for this development is the above-mentioned increase of private enterprises and other types of ownership. (See Figure 5.10.) While in 1985 rural enterprises produced almost half of the gross output of urban and rural collective firms, in 1999 the share of all types of collective and private enterprises had already reached about 82 percent, dominated by rural activities. Private industrial firms and smallscale trade at the household level (individual enterprises)—90 percent of which were to be found in rural areas—in 1985 had a minimal share (1.8 percent) of the total value of production. In 1999, however, their share had increased to 18.2 percent—again nearly exclusively (94 percent) in rural areas. In the next section we will describe how important all nonfarm activities were and still are for the entire labor market in rural areas. The following data illustrate some trends: Between 1978 and 2001 the share of employees in nonagricultural sectors among the entire rural workforce grew from 7.1 percent to 32.7 percent, though the absolute number of the total rural labor force in the same period increased from 306.4 million to 473 million.57 (See Figure 5.11.) A very significant increase in nonagricultural activities occurred between 1978 and 1993; in 1993 their share was already 24.8 percent. Until 2001, the relative growth of this sector, not the absolute figures, decelerated somewhat. The reasons for the slight decrease since the middle of the 1990s might be the enterprises’ small scale, their limited capital, their remote location, or their poor management.58 However, not only is nationwide development of interest, but so is the regional differentiation of employment in the sectors outside agriculture. While in 2001 the national average was 32.7 percent, there is still considerable variation from region to region. In the zhen and villages of the three municipalities directly under the central government there was no significant increase between 1989 and 2001, as the initial share was already very high. However, in coastal provinces such as Zhejiang, Jiangsu, Guangdong, and Fujian, the increase of employment was very significant, though there had already been a considerable share of extraagrarian activities in 1989. Also some interior provinces, for example, Ningxia, were marked by an impressive increase of nonagricultural jobs, though on a lower level.59 Regional differences in the growth of employment in rural enterprises are certainly also due to the proximity of large urban markets, to the level of infrastructure, and to the stage of agricultural development. Even though the number of rural enterprises is significant, there are still exceptions in quite a number of western provinces, where the share of employees in rural enterprises of the total rural workforce decreased, for example, in Sichuan or Guizhou. Opportunities for employment in rural enterprises and other nonagricultural sectors do not only relieve the rural labor market but also determine the level of rural incomes. In

100.0

0.0

0.0 423.7

77.6 22.4 — 0.0

328.9 94.8 — 0.0

%

971.6

11.7

630.2 311.7 157.5 18.0 14.6

Absolute value

1985

100.0

1.2

64.9 32.1 16.2 1.8 1.5

%

2,392.5

104.8

1,306.4 852.3 532.0 129.0 118.3

Absolute value

1990

100.0

4.4

54.6 35.6 22.2 5.4 4.9

%

7,691.0

1,042.1

2,620.1 3,143.4 2,569.7 885.3 798.7

Absolute value

1994

100.0

13.5

34.1 40.9 33.4 11.5 10.4

%

12,611.1

2,300.5

3,557.1 4,460.7 3,494.5 2,292.8 2,158.9

Absolute value

1999

Sources: Zhongguo tongji nianjian (1994), p. 373, (1995), p. 375, and (2000), p. 407; Zhongguo xiangzhen qiye nianjian (2000), p. 118. *Only individually owned enterprises. “—” indicates no date available.

Total

State industry Collective industry Rural collective industry Private/individual industry* Rural private/individual industry Industry with other types of ownership

Absolute value

1978

Industrial Gross Value of Production, by Form of Ownership, 1978–1999 (in billion yuan [current prices])

Table 5.9

100.0

18.2

28.2 35.4 27.7 18.2 17.1

% ECONOMIC STRUCTURES AND ECONOMIC CHANGE 95

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Figure 5.10 Employees in Township and Village Enterprises, by Collective and Private Form of Ownership, 1984–2000

Source: Zhongguo nongcun tongji nianjian, 1985 to 2001. Figure 5.11 Total Rural and Agricultural Labor Force, 1978–2001

Source: Zhongguo tongji nianjian (1995 and 2002).

the provinces, there is a considerable correlation between the share of employees in nonagricultural enterprises in relation to all employed individuals, and the per capita net income of rural households. (See Figure 5.12.) The correlation coefficient is as high as 0.83 (2001). For instance, the counties within the municipal area of Shanghai had the highest share of nonagricultural employees—65 percent—and the highest per capita net income (PCNI)—5,870 yuan—in 2001, while Tibet had the lowest values—9.1 percent and 1,404 yuan.

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Figure 5.12 Nonagricultural Workforce’s Share in Total Rural Workforce, 2001 70

60

Percentage

50

40

30

20

10

Tibet

Xinjiang

Y unnan

Heilongjiang

Inner Mongolia

Jilin

Qinghai

Hainan

Guizhou

Ningxia

Henan

G uangxi

Gansu

Shaanxi

Anhui

Hunan

Sichuan

Jiangxi

Chongqing

Hubei

Liaoning

Shandong

Fujian

Shanxi

Hebei

Jiangsu

Guangdong

Tianjin

Zhejiang

Beijing

Shanghai

0

Source: Zhongguo tongji nianjian (2003).

Among the provinces in which our survey subject areas are located, Hebei (38.2 percent and 2,603.6 yuan PCNI) and Jiangsu (44.5 percent and 3,784.7 yuan PCNI) were well above the average, while Sichuan (28 percent and 1,987 yuan PCNI) was just below the average. Heilongjiang (16.8 percent and 2,280 yuan PCNI) is an old industrialized province with structural problems, while Ningxia (20.5 percent and 1,823.1 yuan PCNI) and Guizhou (17.4 percent and 1,411.7 yuan PCNI) are examples of still less developed provinces. Guizhou had one of the lowest PCNI. In the category of income increase, between 1985 and 2001 the coastal provinces were the clear leaders, with between 700 and 900 percent growth—for example, Jiangsu with 768 percent, Zhejiang with 835 percent, and Guangdong with 761 percent—while the provinces in our survey grew between 491 (Guizhou) and 676 (Hebei) percent. During these years the growth rate in the interior provinces increased mostly because of their very low initial position. Other Structural Characteristics of Rural Enterprises in Temporal and Spatial Differentiation The following passage will describe additional general trends between 1978 and 2001 as well as their regional differentiation. We must note that we were at a disadvantage in that a number of data cannot be traced through this period of time, as official statistics vary in composition and representation and since certain data and yearbooks are for internal use only and were not available for our research purposes.60

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Table 5.10 Employees in Rural Enterprises, by Form of Ownership, in Selected Provinces, 1993 and 1999

TVEs (collective) (%)

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China (total)

All rural enterprises (in 1,000s)

Private and individual (%)

1993

1999

1993

1999

%

1993 Absolute value

37.0 33.0 75.3 42.3 21.2 33.8 46.7

19.5 26.2 40.4 17.5 18.3 7.5 25.3

63.0 67.0 24.7 57.7 78.8 66.2 53.3

80.5 73.8 59.6 82.5 81.7 92.5 74.7

100.0 100.0 100.0 100.0 100.0 100.0 100.0

7,433 2,051 9,474 10,336 1,535 323 123,453

Share of employees in rural enterprises as a percent of the total rural workforce (%)

1999 Absolute value

1993

1999

7,875 1,491 8,214 7,302 1,283 489 127,041

29.6 36.4 34.0 20.0 10.1 21.0 27.9

29.7 16.7 30.3 14.2 7.4 25.5 27.1

Source: Zhongguo nongcun tongji nianjian (1994); Zhongguo xiangzhen qiye nianjian (2000), p. 121; Zhongguo tongji nianjian (2000), p. 371. All data for 1999 for Sichuan province include Chongqing.

Since the mid-1980s the growth in the number of enterprises and number of employees has been achieved mainly by firms below village-level, by private enterprises. The share of employees in private firms and self-employed individuals in relation to the number of all rural employees went up from almost 15 percent (1990) to more than 27 percent (2000). This development however mirrors only one part of the real development, since— as we have seen above—an increasing share of former collective enterprises in reality is now privately owned. In 1984 only 23.5 percent of TVEs were owned by private individuals, companies, and so on, whereas the share in 2000 was 70.1 percent. Watson and Wu came to the conclusion that at the beginning of the economic reforms, collective TVEs grew more quickly in the eastern provinces, as they had better start-up conditions and a more advanced infrastructure. Later, however, private rural enterprises in the central and western provinces were able to match the collective TVEs’ standard because of an acceleration in their growth.61 The share of employees in collectively owned TVEs is still very high in Shanghai (79 percent), Beijing (72 percent), and Tianjin (55 percent) (Tibet may be a specific case [72 percent]) and still above China’s average of 34 percent in provinces such as Jiangsu, Zhejiang, and Guangdong. It is below the average, however, in more centrally located and western provinces such as Sichuan (29 percent), Guizhou (26 percent), Ningxia (14 percent), and Xinjiang (22 percent). (See Table 5.10.) The empirical data support the thesis that where collective enterprises are still strong and rural industrialization is favored by township and village administrations, private

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enterprises are characterized by a slower increase (especially in south Jiangsu, the socalled Sunan model of rural industrialization). On the other hand, in less developed provinces a growing tide of privatization can be observed.62 When, as is the case in Jiangsu, TVEs still have a rather strong position, collective enterprises frequently leave only limited room for individual and private firms, at least in the area of production. Township governments often support this by erecting bureaucratic barriers for private and individual enterprises.63 Table 5.11 demonstrates that Jiangsu still differs from the other provinces in our research area by its comparatively high percentage of rural collective enterprises, even if the share declined from 75 percent in 1993 to 40 percent in 1999. It is not surprising that the less-developed provinces of Guizhou, Sichuan, and Ningxia had the highest percentage of private and individual enterprises. The average number of employees per plant of the collective and private enterprises still varies. For China as a whole, the average number per collective enterprise was 34 individuals in 1993 and 43.5 individuals in 1999, whereas it was only 2.9 individuals in 1993 for a private enterprise and 4.2 in 1999, including self-employed individuals (getihu). In all the provinces where we selected our examples, we noticed a similar concentration of the number of employees per enterprise. Therefore, it can be posited that a certain process of concentration has occurred in both collective and private enterprises during the past decade, explaining the reduction of enterprises in the selected provinces. Private enterprises played only a marginal role, especially in the period 1978 to 1983, acting as a supplement to the collective sector.64 Many collective enterprises had either officially been leased to individuals (siying qiye) or were often still called “collective” though frequently privately owned. Therefore, the figures for private enterprises were in fact underestimated in the early period. The regional differentiation of the average number of employees per enterprise roughly correlates with the aspects mentioned above. Where the infrastructural or institutional conditions are well developed, the average number of employees per collective enterprise is quite high. This is true for Jiangsu, for example (65 employees per collective enterprise in 1999); the number is lower in less-developed provinces, as, for example, in Hebei (54 employees) and Sichuan (43 employees), while the lowest figures can be found in Heilongjiang (34), Guizhou (35), and Ningxia (37). Regarding the average number of employees per private enterprises, there are numbers significantly above average only in Hebei (6.3), Jiangsu (5.3), and Heilongjiang (4.5). All the other provinces had only 3 to 3.4 employees per private enterprise in 1999. The comparison between the figures in 1993 and those in 1999 verifies a certain process of business concentration. The growing average size of collective enterprises in particular is accompanied by technical and organizational modernization. In general, the larger the collective rural enterprises with regard to their number of employees, the higher are their gross output, taxes, and fixed assets per employee.65 In general, collective rural enterprises may still have easier access to the capital market and in that way can produce in larger-scale enterprise units. As they in general predominate in eastern provinces, it can be deduced that they have better access to the urban markets than the private enterprises and furthermore are better integrated in the diversified

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Table 5.11 Gross Value of Production of Rural Enterprises in the Provinces Analyzed, 1999 (in million yuan) Collective

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China

Private

Individual

Total

Absolute value

%

Absolute value

%

Absolute value

%

Absolute value

%

17.97 4.38 62.80 9.45 2.05 0.25 427.89

25.7 41.5 59.8 24.2 36.3 18.8 39.5

15.47 3.39 22.86 7.33 0.83 0.48 261.02

22.1 32.2 21.8 19.8 14.7 35.8 24.1

36.41 2.78 19.40 21.84 27.77 0.61 395.35

52.1 26.3 18.5 56.0 49.0 45.4 36.5

69.85 10.55 105.06 39.02 5.65 1.34 1084.26

100 100 100 100 100 100 100

Source: Zhongguo xiangzhen qiye tongji nianjian (2000).

economy of the coastal regions. Private enterprises, however, and to a certain extent collective firms as well, in the central and western provinces are still forced to manage in a less-developed economic region under relatively insecure and risky conditions.66 In the provinces where our analyzed towns are located, the regional distribution of plant sizes in the 1990s was similar to the share of gross output of rural industry according to form of ownership. As stated above, there is a clear correlation between the scales regarding the ownership structure of the rural enterprises and the gross value of production. While in Jiangsu nearly 60 percent of the production value was generated by the collective enterprises, this share was only 19 percent in Ningxia. In other words, the increasing economic importance of nonagricultural activities was mainly caused by private and individual enterprises in the sectors of industry and commerce, especially in the provinces of Hebei, Sichuan, Guizhou, and Ningxia (see Table 5.11). Sources of Financing, Capital, and Branch Structure The upswing in rural trade was dependent, not in a minor way, on new sources for investment and financing. Until 1978 the main investments by the central government had been concentrated on big projects and urban enterprises. Rural regions had almost completely been neglected. Along with decentralization, new sources of financing were available, improving the conditions for the growth of rural industry. All published data show, however, that the raising of capital and the possibilities for financing were easier for collective than for private enterprises. Furthermore, township firms seemed to have a better chance on the capital market than village enterprises. In 1992 the fixed assets of township enterprises on average were almost four times higher than those of private firms, and about one and a half times higher than those of village enterprises. It is remarkable that the township enterprises in the provinces near the coast—in the

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early 1990s mainly the province of Guangdong was even ahead of Shanghai, Beijing, and Tianjin—possessed capital resources per employee that were about three times higher than in the interior provinces of Yunnan, Sichuan, Hunan, Qinghai, Anhui, and Jiangxi. From the regional point of view, the capital resources of village enterprises correlated with those of township firms. Regional relationships as well as differences between township and village enterprises are understandable, when the sources of enterprise capital are analyzed in more detail. A Chinese study and the yearbooks for TVEs describe very exactly the sources of capital, at least for collective firms. In 1992 their fixed asset investments of 55.23 billion yuan primarily came from bank credit (38 percent) and equity capital (28 percent), while investments of the central government were negligible at 1.8 percent. As far as we know, capital for other regions also included mainly bank credit. At about 4 percent, the bank deposits of the local population and of the employees were on a level similar to that of foreign investment. If we compare these data with those from 1999, we can see the share of bank credit lost its importance and fell back to 17 percent, while owner’s equity (48 percent) became the most important supply of capital. Foreign investment doubled, whereas the investment from the central government was totally insignificant, at only 0.5 percent. The more-than-halved share of bank credit mirrored the difficulty of TVEs to gain access to this kind of capital, especially during periods of macroeconomic problems.67 Despite the impressive growth of the rural enterprises, the sectoral structure, measured by the number of workers and other employees, is rather constant. The traditional branches are textile and clothing firms, producers of building material, and mechanical engineering enterprises. In the previous decade high-quality firms in the fields of electronics, telecommunications, and chemical plants were also funded. On the other hand, the so-called Fifteen Small Enterprises, which created intensive environmental pollution, had to be closed down, especially in the eastern part of China, because conservation regulations were much more strictly controlled in eastern China than in the western part of the country. These enterprises are those that produced or still produce paper, glass, sugar, or cement, as well as, tanneries, breweries, dyeing works, small coal mines, cooking plants, small oil refineries, and metallurgical enterprises. We still found some of these enterprises, such as cement factories or small paper mills, in some zhen of our analysis. Regarding all types of rural enterprises, different types of financial institutions today still grant bank credit. The largest is the Agricultural Bank of China (ABC), one of the four special banks in the country,68 which was founded in the middle of the 1980s to separate the central bank (People’s Bank of China) from the commercial banks.69 The ABC is to be found at all administrative levels, and it has its own branch offices in almost 50 percent of the townships. It is still an important source of capital for rural enterprises: it granted about 14 percent of all loans in 1996. At the end of the 1980s it had lent almost half of all official credit. The Agricultural Development Bank of China (ADBC), established in 1994, takes second place. Today, nearly all banks, for example, the China Construction Bank or the Bank for Industry and Trade, finance credit for agricultural activities. Besides, for decades the so-called rural credit cooperatives (RCCs), found in almost all

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Table 5.12 Borrowed and Equity Capital of Township and Village Enterprises (1992) and Collective Enterprises (1999) (in percent) Origin of investments

1992

1999

Central government Responsible superior offices Bank credit Financial means from other regions Foreign capital Equity capital Collected money (residents) Others Total Absolute value in billion yuan

1.8 3.5 38.2 12.0 4.4 27.9 4.1 8.1 100.0 55.23

0.5 1.2 16.9 12.4 9.7 47.9 4.0 7.4 100.0 257.49

Source: Study Group, Research Department under the State Council, Xiao chengzhen de fazhan zhengce yu shijian; Zhongguo xiangzhen qiye tongji nianjin (2000), p. 181.

townships and villages, have played an important role. How much rural industry is dependent on agriculture, or even forms a symbiosis with it, can be seen in the fact that in 1993 rural enterprises held only 8 percent of all deposits of the rural credit cooperatives—89 percent came from agriculture—but received 64 percent of all credit.70 Though the share of bank credits declined by more than 21 percentage points between 1992 and 1999, the absolute amount still increased, since the sum of all investments more than quintupled in the same period (see Table 5.12). As far as credits are concerned, it is due to the strong influence of local governments that collective enterprises on average had the best capital resources per employee, particularly in 1992. Even if the People’s Bank of China and the Ministry of Finance, in charge of the cash resources of the Agricultural Bank, follow certain macro policies, for example, in the distribution of annual credits to provinces and counties, local governments again and again try to realize their own interests and neglect central targets by guaranteeing credit, though they know that township firms will often not be able to repay it.71 In other words, friendly relationships with the responsible offices are still an important factor in receiving credits—even for enterprises chronically in default.72 For village, individual, and private enterprises informal sources of finance and credits are mainly bonds, shares, or deposits by local residents and most of all by employees. Sometimes enterprises do not pay other firms for goods, raw materials, or energy, or they postpone paying their employees for months. The latter in particular seemed to be the rule in order to force employees and workers into some kind of obligatory credit relationship. The equity capital consisted mainly of investments by township and town governments, in 1992 amounting to 28 percent of all township investment expenditures.73 Many township enterprises (today officially collective enterprises) in our research

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areas of 1993 were in one form or another supported by their township governments. As a rule, however, township governments concentrated on township enterprises, while individual or private firms had to find other sources of financial support. Zhang and Ronnås proved by their fieldwork in Zhejiang and in Sichuan that village enterprises were even more dependent on investments by village committees than were township firms on township governments.74 For all collective enterprises that are mentioned in the report, at the time of their foundation 50 percent of the capital in Zhejiang and 65 percent in Sichuan stemmed from township and village governments.75 This situation has presumably changed significantly, because most local governments suffer from shortage of capital. However, even in 1999 the origin of equity capital was not always clear. Naturally there are regional differences; for example, in the province of Jiangsu in 1992 one-third of the necessary means for renewal and extension came from the Agricultural Bank (nongye yinhang), one-third was equity capital of the enterprises, and onethird was invested by foreign partners. The significant increase of equity capital until 1999 may have been due to the TVEs’ better capital resources, and furthermore there is an increasing number of different local capital generation modes, especially since many former collective enterprises now are privately owned. One of the consequences of the high percentage of the share base might be that the proportion of credit loads was slightly reduced (see Table 5.13). In general, however, borrowing is easier in the economically developed provinces on the east coast than in the interior provinces. Especially because of the permanent problems of liquidity of the still collective rural enterprises, support from townships or other local resources is still of vital importance. The comparably high need for capital and at the same time the low productivity of labor of many township collective enterprises can be explained by two factors. As this type of enterprise is not so much orientated toward improvement of profit but rather toward the maximization of benefits for its township, the qualifications and productivity of the workforce are of minor importance. The creation of jobs for local employees has priority. Since local protectionism, however, is so great that workers from outside the township often were not employed, an extension of the production is mainly reached by growing capital intensity.76 Credit Load and Operating Results The collective township and village enterprises in the province of Jiangsu reached a gross output (156 percent of the national average in 1992) and a turnover (152 percent of the national average in 1993) per employee far above the average; their profits, however, were below the mean value in comparison to the other provinces. These low profits most likely are only partly the consequence of debt overload or of the high taxes enterprises have to pay. The credit load of enterprises in Jiangsu in 1993 and in 1999 was only slightly above the average. The reasons might be “underreporting,” as was very often the case in the early 1990s. In general, the credit load of township enterprises seemed to be higher than that of village firms in 1992.77 This situation is easy to explain, since—as described above—township governments are especially interested in credit for their own

2.6 3.7 11.0 9.7 5.7 7.3 7.5

1992

0.9 0.3 4.5 1.0 1.6 0.3 1.6

Village enterprises 1.4 1.4 6.6 3.8 4.2 3.9 3.2

Total

1999

7.2 0.9 11.0 8.4 63.2 4.7 6.8

Collective enterprises 4.1 0.1 20.1 2.1 16.0 1.1 10.2

Total 35.4 32.7 25.3 33.2 22.1 16.4 31.6

Township enterprises

Source: Zhongguo xiangzhen qiye tongji nianjian (1993) and (2000). *Credits in percent of the net fixed assets at the end of 1992 and the current capital in 1999.

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China

Township enterprises

Share of enterprises with losses (%) 1992

25.9 13.6 16.2 19.9 10.4 12.3 20.9

Village enterprises

30.9 27.1 22.1 30.4 21.0 15.8 27.6

Total

Credit load*

Percentage of Rural Enterprises with Losses and Credit Loads in Selected Provinces, 1992 and 1999

Table 5.13

1999

20.6 17.8 19.2 20.7 11.0 24.0 18.8

Collective enterprises

17.0 13.6 16.6 19.0 14.7 19.9 15.6

Total

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enterprises. It is remarkable that the share of enterprises with losses is lower in villageowned enterprises than in township-owned enterprises—at least in the early 1990s.78 The explanation for that is not yet consistent. However, it might support the thesis that township governments do not only help their own enterprises to obtain credit, but also, for different reasons, keep enterprises with losses alive, not least because of their importance for the local labor market. In principle, such arguments also apply to village enterprises. Village committees, however, are not dominant institutions, and in any case they depend on the township governments that control them. It is most likely that township governments would rather close down an unprofitable village enterprise than a township firm operating in the red. The relatively unfavorable situation in the province of Jiangsu—in 1992 and in 1999 it had the highest percentage of collective rural enterprises with losses, at 6.6 percent and 20.1 percent, respectively—apparently contradicts the above statement. It is very likely, though, that the officially relatively disadvantageous state of profits of township and village enterprises in more wealthy provinces, such as Jiangsu, is at least partly the result of profit hiding by the enterprises.79 Such practices in the 1990s were often performed with the agreement and support of township governments. Data on the number of enterprises with losses are difficult to evaluate. In economically weak provinces one can expect a palliation of losses, as enterprises frequently want to obtain new credit to be able to survive. An internal valuation of the efficiency of township enterprises in Sichuan by the Office for Industry in that province came to the conclusion that between January and May 1994, 29.8 percent of the township-owned enterprises and 39 percent of all collective enterprises were firms with losses.80 In general, the situation of collective enterprises was in many cases better than that of state firms—in Sichuan 60 percent of all state enterprises had losses, in Heilongjiang 41 percent, in Ningxia 25 percent, and in Jiangsu 15 percent.81 Nevertheless, the situation for rural collective enterprises is in no way only positive. In the provinces of Guizhou, Sichuan, and Ningxia, with a low average turnover, gross output, and profits, the percentage of enterprises with losses among the collective firms was, with 4 percent in 1992, also slightly above average. Here, too, the township-owned enterprises ranged behind the village-owned firms. A comparison of the data for 1992 and 1999 show the nationwide average situation in 1999 to be less favorable, since the share of loss-making collective enterprises increased from 3.2 percent to 10.2 percent. Especially significant was the change in one of the most developed provinces, namely Jiangsu, where the percentage of deficit enterprises increased from 6.6 to 20.1 percent. The economic situation of collective enterprises in Guizhou, one of the poorest provinces in China, seemed to be disastrous, since the share of loss-making enterprises increased from 4.2 to 16 percent within the same period—especially fatal was the development for collective enterprises. The situation in Heilongjiang, Sichuan, and Ningxia, in contrast, had improved considerably within the same period. The burden of credit showed a significant reduction between 1992 and 1999 for each of the six provinces as well as for the whole country. However, there are two different reference variables: namely, net fixed assets at the end of 1992 and current capital in 1999.

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Township and Village Enterprises The Transformation of Zhen/Township- and Village-Owned Enterprises Though today only one-third of all rural enterprises are still collective, the relationship between the local government and the Communist Party seems to be nearly unchanged. The local leadership—branches of the Communist Party and governments at the county, township, and village levels—usually supports the development of collective and, if necessary, of private and individual enterprises, especially industrial plants, to maximize local economic growth.82 From the point of view of township governments, collective enterprises should be supported first, since—with regard to finances—the townships as well as the functionaries themselves hope to profit from them. Furthermore, the position, social standing, and wages of the local cadres often depend on the economic success of the collective enterprises. Especially in developed regions, as a rule, rural collective enterprises are, for example, still subordinate to so-called commissions for economic development, which themselves are dependent on the township or zhen governments but in fact function as independent economic corporations. The better developed the private and individual enterprises are, the more limited the influence of the commission. However, the relationships between township governments and their collective enterprises often are described as very positive, as the local governments function as “economic actors, not just administrative-service providers,” as in other countries. There is no doubt that the interventions of local governments in favor of their enterprises are an essential condition for their economic success or even for their survival. However, there are quite a number of differentiations and restrictions connected to this. The “local state corporatism,” represented by the economic commissions, often leads to economic activities, directed and supported by local governments, as far as superior offices, banks, and state institutions are concerned.83 The interventions of township governments, as a rule, consist of helping to get loans approved or renewed, finding out about possibilities for investment, procuring raw materials or auxiliary materials, finding land, supporting negotiations with superior offices, or trying to convince tax offices to reduce taxes.84 For instance, in the middle of the 1990s the profitable rural collective enterprises of a sample in Zhejiang and Sichuan on average paid less than 60 percent of the technically required taxes.85 Today only so-called hightechnology enterprises or enterprises in so-called development areas can receive a reduction of local or provincial taxes, while they have to pay full taxes to the central government. Where the local bureaucracy is interested in private economic activities only to a limited extent, collective rural enterprises are indirectly supported, since, for example, neither rent nor compensation is paid to the township governments for the collectively owned land. For instance, private and individual enterprises often have to pay rent or compensation—even sometimes reduced—for the sites they need for their production plants. Some decades ago, responsible cadres (party secretary, vice party secretary, head of the economic commission) had considerable room for their own initiatives and could actively direct the development of an enterprise; for example, they could use the profits

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of one enterprise to support other firms or to initiate new businesses. This situation has changed significantly, since control by superior authorities is now very strict. Financial transfers from the collective enterprises to the township governments are officially no longer legal; however, it is not unusual that some “local taxes” are still paid. About ten years ago one of the rights of local governments was the distribution of profits within the scope of the so-called responsibility contracts, or the levying of fees and charges of various kinds. All over China rural collective enterprises had to transfer between 30 and 40 percent of their profits after taxes to their township governments.86 That was one of the reasons why offices in charge in order to raise illegal profits often encouraged “their” enterprises to evade taxes. Between 1985 and around 1995, township governments were allowed to levy special tax-like fees that were declared as “social costs” in the annual accounts of an enterprise and could amount to 10 percent of the before-tax profits. According to our investigations in 1993–1994, almost all enterprises paid the full rate of 10 percent. Despite the profit regulations, all township-owned and sometimes even village-owned enterprises transferred an administration fee of 1 percent of their turnover or of their sales income to the township or the corporation for industry.87 Fees and charges, though, were matters for negotiation. For instance, the administration fee could be reduced to 0.5 or even to 0.25 percent, or it could be avoided altogether. The administration fees of private enterprises had to be transferred directly to the administration office for industry and commerce as well to the office for rural enterprises. In other words, the private firms had to pay these fees twice. Additionally, township governments tried to get “donations” from private and individual enterprises for local projects, and that explains at the same time why townships were interested in having private enterprises registered as collective firms, at least in name. (For details and changes until 2001–2002, see Chapter 5, pp. 115–138.) In addition to these transfer payments, the taxes of the collective and private rural enterprises played an important role in the local township. The township revenues in the so-called regular budget, as a rule, were the most important source of income for townships or towns. In the townships we surveyed, they made up between 72 and almost 100 percent of the total revenues. The regular budget mainly consisted of industrial and commercial taxes (between 65 and 99 percent) and agricultural taxes (between 1 and 35 percent). The industrial and commercial taxes in the surveyed places mainly comprised the product tax, VAT, and turnover tax of the rural and especially the collective enterprises, their percentage amounting to between 80 and 95 percent of the entire industrial and commercial tax.88 After the tax reforms in 1994, taxes first of all had to be transferred to superior offices, and—within the tax responsibility system—they flow only to a small extent back to the townships. The Former Contract Responsibility System (Chengbao) The chengbao system was limited to the collective enterprises. It may, however, be of interest to also consider the situation around 1993–1994. For the local government it was

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of great importance to maintain control over township-owned enterprises and to be sure of the loyalty of the responsible managers.89 Though the majority of the collective enterprises have now been transferred to private ownership, the completion of a contract may still be an instrument to maintain a committed relationship between local government and management. General aims were higher productivity, a quicker adjustment to market demands, or an efficient use of means, and at the same time a guarantee of jobs and an adequate transfer of profits and charges. Township governments wanted management contracts that allowed them sufficient control; on the other hand, managers needed enough freedom to lead the enterprise successfully. As a rule, a so-called responsibility contract existed between the local economic commission under the township government or the village administration and the manager of a collective enterprise (gongye gongsi, gongye zonggongsi, xiangzhen qiye gongsi, etc.). As a matter of fact, this was a kind of lease of collective property, and because of that the first step toward privatization. Township and zhen governments or village committees formally remained the owner of an enterprise; de facto, however, the managers behaved as owners as far as the management was concerned. The contracts, running between three and five years, usually consisted of three parts: 1. Economic targets and index numbers for production figures, quality, profit, and so forth; 2. Rewards or punishment fees when these targets and ratios were fulfilled, overfulfilled, or not realized; and 3. Further regulations regarding how to reach these economic targets most efficiently; definitions of rights and duties of the contract partners; regulations concerning product quality, management, and improvement of equipment and fixed assets, further vocational training of employees, perhaps safety regulations, and so on. It could happen that certain ratios of the contract responsibility system for rural collective enterprises were settled hierarchically; for example, the economic commission for rural enterprises in the city of Harbin required from the counties or cities under its administration certain targets for taxes and profits. They again passed the latter on to the townships that had to fix concrete contracts with township- and village-owned enterprises. As a rule every year such ratios and targets were newly defined. These so-called economic indicators referred to the gross output, turnover, amount and quality of products, profits, set taxes, increase of fixed assets or improvement of the equipment, or interest and amortization of credits.90 In addition to so-called responsibility contracts, comprising ratios of production and economic efficiency of an enterprise, some townships also realized so-called risk-management contracts, which did not precisely settle the desired amount of profits, but only an amount of charges. A security deposit had to meet the risk of losses.91 In economically weaker townships the township government or the corporation sometimes allowed their percentage of profits to be divided between the enterprises and the

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Table 5.14 Stockholders, by Capital Share, 1999

Million yuan Percentage

State

Collectives

Factory owners

0.49 2.2

7.12 31.6

5.17 22.9

Private individuals Foreigners 8.49 37.6

1.28 5.7

Total 22.56 100.0

Source: Zhongguo xiangzhen qiye nianjian (2000).

workforce.92 In Jinji, however, all township-owned enterprises had to transfer 28 percent of their post-tax-profits to the corporation for industry, though de facto the majority of enterprises incurred losses.93 In other words, in these cases the transfers by enterprises with losses to the zhen government were de facto financed with the help of bank credit. Throughout China in 1992, 31 percent of the net profits of the TVEs were transferred to the zhen and township governments and village committees, mainly to advance the development of agriculture and the collective nonagrarian sector. In the case of a risk-responsibility contract, the manager usually had to transfer an annual fixed amount to the zhen or township government, independent of whether the enterprise made profits or losses. Economically successful collective enterprises sometimes had to transfer between three and four different charges to the corporation for industry and to the township government, that is, in addition to an administration charge for the sales income and the so-called social contributions of the before-tax profit, another set percentage of the post-tax-profit, and perhaps even a percentage of the profits exceeding the set amount in the plan.94 The regulations concerning the distribution of profits were not applied when a rural enterprise was transferred into a “stock corporation.” This type of firm was not freely traded in the middle of the 1990s.95 These conversions happened only in very few cases during our first investigation. In 1994 it involved less than 1 percent of all rural enterprises.96 In 1999 shares were mainly transferred to the township governments, that is, the collective units, the managers or the factory owners, and other private individuals, mainly the labor force. The share of the state and foreign investors is still very limited (see Table 5.14). The shareholding cooperative system was propagated primarily because the contractresponsibility system, formally separated from production responsibility, has caused many difficulties, as, for instance, the ever-returning tendency to make decisions in favor of quick profits and to neglect the upkeep and improvement of the fixed assets, or not to properly reinvest profits, but to distribute them as bonuses among managers and workers according to the “poor temple, rich monk” motto.97 The autonomy of the management was restricted by contract, though in fact it was quite far-reaching, at least as far as everyday work was concerned. The former corporation for industry decided on longer-term management strategies and on the engagement of managers, and it controlled the accounting; on the other hand, however, it had to pass on information, and it had to guarantee cooperation and financial means. Controls had to

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prevent corruption; for instance, these controls had to ensure that a manager, because of his short-term contract, was not tempted to withdraw capital from the enterprise or even to plunder it.98 The managers as contract partners had the right to engage and dismiss employees as well as to settle the payments and bonus system. Usually, within a certain time, they were obliged to undertake improvements or extensions of the enterprise; they had to handle the plant and the equipment with care, and they were responsible for labor security and sometimes for the education and further education of the workforce, as well as for sufficient product quality. To get more credit or to realize extensive alterations in the plants was dependent on the permission of the former corporation for industry, the township government, or the local party committee. With the introduction of the contract-responsibility system in the 1990s, labor contracts running between three and five years were frequently made with workers who originally had been engaged for life. At the same time, fixed wages were turned into piecework wages. The introduction of an hourly wage was the decisive change, for in general terminable labor contracts, which ten years earlier had been renewed automatically. However, in general there existed great differences as far as enterprises and areas were concerned. In some developed regions the township government and even more often the county government helped with the recruitment of the workforce by trying to establish connections to less-developed counties in order to support the engagement of workers from other regions. This assistance, however, was only necessary if there was an acute lack of workers. Otherwise, the tendency to keep the labor market closed to the outside dominated. Origin of Collective and Private Enterprises’ Managers As the main idea of the contracts between collective enterprises and township governments or village committees was to settle the interests between entrepreneurial or personal profits and public welfare, it was quite natural that the group of potential managers was mainly restricted to individuals who have or had a close connection to local government or party organs (see Table 5.15). At the beginning of this development in the early 1980s, in general those individuals became managers who were educated and had experience, in other words, peasant functionaries who had led former production brigades, party secretaries of village committees or people’s communes, but also farmers who had been good workers. Another group for recruitment were cadres and specialists who had been transferred into the county during the sending-down campaign of the Cultural Revolution in the late 1960s, and who had proved themselves in these new surroundings by special knowledge and abilities. Cadres who came from the responsible offices at the county or city levels (for example, heads of the offices for township enterprises or directors of state institutions in the rural areas, such as the cooperatives for marketing and supply, stations for grain, etc.) were often sent to the lowest level of administration. Local governments were asked by superior offices to appoint these specialists as managers of enterprises.

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Table 5.15 Origin of the Managers in the Surveyed Collective Enterprises, 1993–1994 (in percent) Cadres at the zhen or county level Village/brigade cadres Buyers and salesmen of enterprises Peasants Individual/private entrepreneurs Soldiers Former “class enemies” Factory managers Workers in state enterprises Others Total

22.6 15.1 13.2 11.3 11.3 7.5 5.7 5.7 5.7 1.9 100.0

Source: Authors’ field survey, 1993–1994.

A survey of the former activities of the managers in fifty-three county- or zhen-owned enterprises we investigated in 1993–1994 shows the above described features.99 Almost 38 percent of them were former administrative cadres, factory managers not included. While managers of zhen- or village-owned firms often simultaneously had party or administrative functions in the local bureaucracy, in the private sector the percentage of individuals with dual functions was relatively small. Such dual functions were more common with cadres in village enterprises than with those in zhen firms, and more frequent with individuals in the private small trade than with those in the wholesale trade.100 The origin of enterprise directors, though, was different according to the level of development of the surveyed locality. While in less-developed regions former village cadres represented the greatest number of managers in rural enterprises (30 to 40 percent) (Zongshizhuang, Pingle), in the better-developed zhen (Dongting, Xiangyang) they were to a great extent individuals with technical knowledge and experience in management. Not a small number of these managers possessed experience with regard to life and work in urban regions, and they had built up market contacts there, a factor very useful for the rural entrepreneur. Party schools as well offered management courses at all levels, to which the directors were sent. Frequent changes of personnel in the management of rural enterprises were quite common. For instance, managers became party secretaries; a vice party secretary became director of the society for industry; or mayors were appointed as vice heads of the society for industry. In this connection it is of interest that able employees in township administrations often preferred to work in collective enterprises because that was the only way to get the job title of “economist” or “engineer” and because there they earned much more than they did in an administrative job. Even if it was impossible to collect the same data for the years 2000–2001 as we did for 1993–1994, a similar analysis may demonstrate the latest development. The following data are the result of a random sample of private enterprises, which was carried out

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Table 5.16 Private—Including Urban—Entrepreneurs and Enterprises, 1999 (in percent) Former Professional Activities of Private Entrepreneurs Qualified employees Cadres Employees in production and service Peasants Private small businessmen Others Total Type of Ownership of Former Enterprises State-owned Collectively owned Individually and privately owned Peasant-owned Others Total

10.5 43.4 14.0 9.6 17.4 5.1 100.0 22.9 24.5 41.2 7.4 4.0 100.0

Source: Data from research group on “Private Enterprises in China,” the Research Society for the Private Economy and for Industry and Trade, 2000.

by the Research Society for the Private Economy at the end of 1999 and included 0.24 percent of all private firms (1.5 million) in thirty-one provinces. The results from around 3,100 questionnaires are the basis for Table 5.16. Even if the source material for Table 5.16 differs, the fields of activity of the managers and owners are quite similar. In the last decade there was no sweeping change regarding the former activities of the present private entrepreneurs. Most of them were cadres (43 percent) or individual entrepreneurs. Forty-seven percent worked in state-owned or collective enterprises, 41 percent in private or individual firms. However, the former functions are different. Aside from cadres in state-owned or collective enterprises, obviously a large number of the present private entrepreneurs did not have a specific title or function within the former system. Often managers were engaged who were experienced in buying or marketing, and who had good knowledge of the market and very good connections (guanxi). Additionally, technicians and administrative cadres from urban enterprises were often won over by rural enterprises on the strength of good salaries and a number of benefits. Cooperatives of Rural Enterprises with Urban/State Enterprises and State Institutions or Joint Ventures In the provinces of our research area there were all kinds of cooperatives between urban and state enterprises or institutions and rural collective enterprises. Their work consisted of:

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• Technical advice, often by retired specialists who were sent by urban enterprises or state institutions. For instance, the brewery in Yuquan (Acheng) was advised by a former employee of the Research Institute for Light Industry in the city of Harbin. • Short-term work by specialists from urban enterprises. Often so-called Sundayengineers or technicians worked on weekends in rural enterprises. • Procurement or purchase of secondhand or relatively outdated machinery. Such machines were often used to produce semifinished or final products for urban partner-enterprises. This cooperation could be taken as a special variety of so-called subcontracting, the dominant form of cooperation in the middle of the 1990s, but presently without importance. While technical advice or the procurement of machinery was called indirect cooperation by Chinese authors such as X.M. Pang,101 the supply of semifinished or final products to urban partners can be looked upon as a form of direct cooperation. About 40 percent of the rural industrial production value in the province of Jiangsu is said to consist of semifinished products for urban contract partners.102 About 50 percent of the rural collective enterprises inside the administrative area of the city of Harbin worked together with large-scale urban enterprises. As a rule, they delivered semifinished or spare products for the machinery industry.103 In the meantime, rural enterprises also produce final products (e.g., shoes) for urban enterprises, and for partners outside or inside China, especially in Hong Kong. Rural enterprises are even allowed to sell such products under the brand name of the urban partner when a certain standard of quality is guaranteed and the licenses are paid.104 Regarding joint ventures between urban and rural enterprises, rural enterprises supplied land, buildings, and the workforce, while the urban enterprises were responsible for the equipment and machinery, raw materials, and marketing. In the county of Acheng (Harbin), for instance, of the total of 277 TVEs, between 70 to 80 were joint-venture enterprises or suppliers.105 Among the sample in our field study, there were joint ventures between zhen and a city or county, between zhen and an import-export corporation belonging to the province, and among zhen, a state enterprise, and private individuals. A survey among 500 enterprises in seven counties in south Jiangsu showed that two-thirds, in one way or another, cooperated with enterprises or institutions in Shanghai.106 An analysis of 630 rural enterprises in the provinces of Sichuan and Zhejiang in 1991 revealed that enterprises depended on local inputs that mostly came from the state sector (52 percent for collective enterprises and 46 percent for individual and private enterprises).107 That applied to almost all branches of industry, even to the production of food, and especially to the apparel and textile industry. Products were sold mainly to the state sector, though less in the interior province of Sichuan, with weaker developed state industries (40 percent of all products), than in the coastal province of Zhejiang (67 percent).108 As a rule, a large part of cooperation was informal or worked out without any contract. Cooperation or subcontracting in general were profitable for both sides. Urban state enterprises could outsource production lines that were either outdated or damaging to

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Table 5.17 Cooperating Rural Enterprises, 1992 and 1999 Rural enterprises 1992 Partners

Absolute value

State enterprises 14,080 Urban collective enterprises 4,005 Other rural enterprises 4,653 Enterprises in Hong Kong 11,465 Others 9,465 Total 43,668

Employees (in millions)

1999 %

Absolute value

32.1 9.2 10.7 26.3 21.7 100.0

3,334 3,235 — 15,923 11,697 33,189

1992 %

Absolute value

10.0 9.7 — 48.0 32.3 100.0

1.84 0.32 0.22 1.36 0.45 4.19

1999 %

Absolute value

%

43.9 7.6 5.3 32.5 10.7 100.0

0.38 0.20 — 2.14 1.45 4.16

9.1 4.8 — 51.5 34.6 100.0

Source: Xiangzhen qiye tongji ziliao (1993); Zhongguo xiangzhen qiye nianjian (2000), pp. 196–207. Note: “—” indicates no information available.

the environment, while rural enterprises could gain new jobs or access to urban markets. In particular, technical-scientific cooperation transferred know-how to rural enterprises that was absolutely necessary to extend the sales market in competition with state enterprises. In the beginning of the 1990s, urban state enterprises played a significant role for the modernization of technology and for the production of rural firms. However, between 1992 and 1999 the share of rural enterprises that had state enterprises as partners declined from 32 percent to 9 percent. It is obvious that the options and decisions of the rural enterprises now have a wider scope, as the shrinking cooperation with state enterprises and the increasing cooperation with Hong Kong firms shows. Quite often it is difficult to generalize the various pieces of information on the extent of cooperation, as they have a broad range, moving between detailed contracts and a casual supply chain. According to internal data from 1992, only 11 percent of the township enterprises had a formal cooperation agreement with other partners, mostly state or foreign enterprises.109 In 1999 the share was significantly lower, since the number of those rural firms decreased from 43,668 to 33,189, even if the number of employees remained unchanged (see Table 5.17). The decisive factor for cooperation is proximity to state, urban, or foreign partners. Twenty-nine percent of all rural enterprises in China that had contracts with state enterprises were located either in the administrative area of Shanghai or the province of Jiangsu. Seventy-eight percent of the enterprises that worked together with foreign firms, mostly in Hong Kong, were located in the province of Guangdong.110 In general, the cooperation of rural enterprises with state-owned enterprises declined. Among rural enterprises now, feeder plants dominate. They mainly manufacture local raw materials, especially agricultural products.

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Development and Situation of Zhen-Owned, Village-Owned, and Private Enterprises in the Analyzed Zhen We are of the opinion that the development of the TVEs in the analyzed zhen we studied in 1993–1994 and in 2000–2001 shows the trend for China and its provinces in general. At the same time, we were aware of numerous variations and limitations that convinced us to look at official data with some skepticism. We could analyze in detail around forty enterprises in 1993–1994 and around the same number in 2000–2001. Furthermore, we had extended talks with the responsible offices at the provincial and county levels as well as with the local authorities. This small number of samples, though, does not achieve a statistical significance. That is why the results are to be described in a more qualitative form and are to be supplemented by internal data of local statistical offices or departments, and by using internal documents of the local governments. Unfortunately, it was also not possible to establish for all seven zhen the same data-pattern concerning the development of all zhen- and village-owned private enterprises. A general comparison thus became only partly possible; in addition, for different reasons, it was not feasible to repeat the analysis for the former zhen of Dongting.111 Today Dongting is the administrative center of Xishan district and a part of Wuxi city. The development of the different TVEs was discontinuous and full of setbacks. That can be seen by the fact that a large number of the enterprises had to at least change their production line to survive on the market. Some enterprises had to interrupt their production for some time or had to declare bankruptcy, as there were not enough purchase orders, or a substantial part of the surveyed enterprises reported permanent losses.112 Before the introduction of the economic reforms in all towns and townships, mainly people’s communes and brigade enterprises existed. They can be seen as a predecessor of the present collective—now in many cases private—enterprises, though only in a few cases was there an unbroken continuation of these firms after 1979. Since the beginning of the economic reforms in about 1979, the development can be divided into two stages. In a first step between 1979 and 1984 the production-responsibility system was introduced in agriculture, with the main intention being to develop agriculture itself and to create jobs outside agriculture. Since 1984 the state has withdrawn more and more from organizing the marketing of agricultural products. Free-market elements have become increasingly important, and a growing number of collective as well as private enterprises have been established in rural areas.113 The frequently expressed opinion that the present collective rural enterprises are the descendants of former people’s commune and brigade enterprises is more or less wrong, because the majority of the TVEs were established only after the introduction of the economic reforms. Our survey data also confirm these circumstances, as more than half of all surveyed enterprises were established in 1985 and later. In some provinces, as, for example, in Jiangsu, collective rural enterprises dominated the economic development of rural regions; in others noncollective enterprises were of greater importance.114 Other studies reaffirm our results with regard to the relatively short existence of rural enterprises.

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Table 5.18 Statistical Data of Analyzed Zhen, 1992–1993 and 1999–2000 Jinji

Zongshizhuang Xinzhou

Yuquan

Pingle

Xiangyang

Total population, 1992–1993

21,830

30,540

64,771

39,036

21,808

15,002

Total population, 1999–2000

23,293

31,025

70,823

39,419

22,963

15,677

Share of nonagrarian population, 1992–1993 (%)

29.6

2.8

3.9

68.9

8.6

13.4

Share of nonagrarian population, 1999–2000 (%)

20.3

0.7

5.7

—

11.2

12.5

Net income per farmer (yuan) 1992–1993

886

812

780

1,231

987

1,130

Net income per farmer (yuan) 1999–2000

3,356

3,679

1,735

3,154

2,896

2,940

Source: Data provided by local administrations.

A survey among 630 rural enterprises in Zhejiang and Sichuan from 1991 yielded the result that only 10 percent of the collective and 2 percent of the noncollective enterprises had already existed before 1978, whereas 66 percent and 88 percent, respectively, were established in 1985 and later.115 As can be expected, the main reason for the establishment of new enterprises was the intention to develop income and employment. Table 5.18 includes information on the zhen we analyzed in the years 1993–1994 and 1999–2000. Structural changes cannot be observed. The number of inhabitants remained nearly unaltered; the share of nonagricultural inhabitants decreased significantly only in the zhen of Jinji and Ningxia. The striking improvement, however, came with regard to income, even taking into account the strong influence of inflation. The differences in average rural income among the single zhen deepened significantly. While the average income of peasants in Zongshizhuang (Hebei) or Jinji (Ningxia) increased fourfold, the income of the other zhen only doubled within these seven years. The details of our study until the year 2000 show that the development of the zhen in our research area was dependent on regional-economic conditions as well as on local and regional-political circumstances. For example, in the region of Harbin, enterprises originally fabricated simple agricultural machinery, produced building material, or processed agricultural products.116 Just as in the townships of the city of Guanghan (Sichuan), the Five Small Industries from the period of the people’s communes were frequently found: iron and steel industry, mechanical engineering, building materials, production of fertilizers, and textile production.117 In the city of Guanghan, which administers Xiangyang zhen, until 1984 the development of collective plants and their products was characterized by a relatively low technical standard, high energy consumption, and considerable transport costs. Only beginning in the mid-1980s did there begin technical modernization, better marketing, and

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an increasing product value. In other places as well, similar stages of development were found, though they occurred somewhat later. Our analysis of the economic situation of township-owned enterprises in seven zhen in 1993–1994 and six zhen in 1999–2000 resulted in a broad spectrum of economic growth, pseudo-growth, and stagnation. That trend is illustrated in the following discussion with the help of selected examples. For a better understanding of the samples, we introduce data not only for the surveyed towns, but also for the counties and the cities at the county level where these analyzed zhen are located (see Table 5.19). In the places surveyed, the degree of industrialization varied considerably in 1993– 1994. Six to seven years later (1999–2000) there had developed a certain balance in the cities and counties where the analyzed zhen are located regarding the share of the industrial sector. In most cases it was on a level of 40 to 50 percent of the total GDP. However, the correlation between the share of the nonagrarian population and the GDP per head was not very significant. While most of the cities and counties showed only a very limited proportion of agrarian inhabitants because of the dominance of the number of employed individuals in the city proper or in the county seat, the analyzed zhen had a nonagrarian population of only 0.7 (Zongshizhuang) to 20.3 percent (Xinzhou). However, we suppose that many of the individuals officially classified as “farmers” had a second job as workers. The economic situation of the analyzed zhen seemed to have improved markedly in 1999–2000 compared with the situation in 1993–1994 (see Table 5.20). The development of the economic structure and enterprises in the first case study, namely the zhen of Jinji, located in the Ningxia Autonomous Region, might be taken as a sample for the situation of small towns in the economically weaker provinces of China. Compared to the other zhen, Jinji’s industrial structure seems to be rather weak when we take into account turnover and rates of increase as indicators. Only in Xiangyang (Sichuan) is the economic situation still considerably weaker. In Jinji, a certain expansion has taken place since the mid-1980s, that is, at the time that most of the collective enterprises came into existence. In 1970 there were just two collective enterprises (repairing agricultural machinery and producing building materials). The idea of establishing an enterprise came mostly from outside. The vice mayor of the city of Wuzhong got the concept from Zhejiang for founding a chemical enterprise; the idea of establishing a paper mill came from the party secretary who, by personal connections, had got the idea in a neighboring city. The establishment of the factory for wood chipboards in 1970 was recommended by the Research Institute for Building Materials in Liaoning during a conference in Yinchuan, the capital of Ningxia. Between 1985 and 1993, the number of zhen-owned enterprises (eleven) remained the same, though during these years four firms had to close down because of a lack of orders, while another four were newly established. Out of the eleven existing enterprises in 1993, ten belonged to the manufacturing sector (mainly food industry, wood processing industry, paper production, chemical enterprises), and one to the trade sector. The number of employees in all collective enterprises increased from about 460 in

134.33 89.9 3,800 38.5 30.9 31.6 1,558.0 138.84 244.58

Total population (10,000)

Share of nonagrarian population (%) GDP per head Agriculture (%) Industry (%) Service (%) Industrial gross production value (millions of yuan) Local revenue (millions of yuan) Local expenditure (millions of yuan)

Source: Information provided by the respective administrations.

1,954

Net income per farmer (yuan)

Zunyi County (Xinzhou)

87.7 8,151 18.4 42.5 39.1 1,067.4 183.30 172.87

64.1

2,571

78.6 7,563 20.7 46.7 32.5 2,156.5 205.00 No data available

58

2,745

93.1 9,973 22.7 42.5 34.8 2,515.1 123.52 152.81

50.6

3,449

Qionglai City Guanghan City Jinzhou City (Pingle) (Xiangyang) (Zongshizhuang)

Statistical Data for the Cities and Counties Inside Which the Analyzed Zhen Are Located (1999–2000)

Table 5.19

79.2 8,933 17.3 49.4 33.3 3,845.5 213.12 346.90

66.7

2,628

Acheng City (Yuquan)

68.0 5,706 21.7 44.1 34.2 1,073.0 60.31 114.70

30.3

2,674

Wuzhong City/Urban District Litong (Jinji)

118 CHAPTER 5

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Table 5.20 Basic Indicators of Zhen Township Enterprises, 1999–2000 Xiangyang Yuquan Turnover (millions of yuan)

Zongshizhuang Xinzhou

892.2

756.6

290.8

225.9

Increase in turnover compared with the previous year (%)

–1.8

56.0

34.0

—

Profit (millions of yuan)

58.12

36.01

19.70

24.68

Profit’s increase compared with that of the previous year (%)

–3.1

4.0

0.7

Taxes (millions of yuan)

17.45

35.57

Rate of increase compared with that of the previous year (%)

–24.5

14.0

4.23 18.5

— 2.30 —

Jinji

Pingle

249.5

235.2

8.3

14.3

31.00

6.37

deficit*

–13.5

7.74

5.16

0.3

50.8

*9.48 million yuan in 1998; no deficit in 1999. — = not available.

1985 to about 870 in 1992, finally accounting for roughly 60 percent of the nonagricultural workers and 14 percent of the total rural workforce. The number of employees varied during these years due to the mentioned new foundings and closings of enterprises, as well as because of the yearly changing situation of employment in the township-owned construction firms. While village-owned firms were of no relevance, very small private and individual enterprises were important for the local economy. As Jinji was and is one of the so-called model zhen in Ningxia, and as it had great plans to develop its location and its enterprises, a more detailed analysis of the economic development of the former collective enterprises is of interest to find out about this zhen’s chances of development. For the party and the local government these enterprises were the economic basis for the development of the locality. According to official propaganda and articles published by the regional press, collective enterprises were flourishing and expanding. In reality, however, their situation before and since 1994 was and has been rather precarious. The net profits of most enterprises are very low, whereas the losses of a few firms are still considerable. According to internal documents of the industrial society for 1992 there was for instance a loss of 231,000 yuan altogether by the collective enterprises. The data for 1992 are by no means an exception, for the accounting for industry during the period from 1985 to 1992 showed a cumulative total loss of 773,000 yuan.118 Since obviously some enterprises with so-called profits actually operated in the red, the real losses might be much higher than the industry corporation’s data show.119 We use the development of the larger enterprises of Jinji between 1994 and 2000 as samples to analyze the situation in detail (see Table 5.21). The divergences between the real situation and that presented to the outside world are obvious. In reality, the most important firms in Jinji incurred a total deficit of 36.6 million yuan between 1994 and 2000. Of twelve collective firms in 1994, only four were left

1995

–10

–251

Cement producer

Total

Source: Authors’ investigations, 1999–2000.

–38

–6,875

0

–36

39 250 –196 –70 –97 55

Paper mill 25 Furfural (Chemical enterprise) –37 Flour mill –149 Chopsticks 40 Cardboard 0 Chemical factory 28

Vinegar factory

–1,280

–920 –970

–3,650

–43

0 0

Dairy Steelworks

Wood processing

–67

Chipboard

1994

–7,740

Bankrupt

–20

Merging with chipboard enterprise 52 153 Bankrupt Bankrupt –115 40

–1,840 –4,130

–1,880

1996

Profits and Losses of the Larger Enterprises, Jinji, 1994–2000 (1,000 yuan)

Table 5.21

1997

–5,790

3,830

10

40 100

920 20 0

380 190

2,510 Stopped production

600

1998

–2,750 –540

2,600 –920

–5,120

1999

–19,860

Stopped production

–70 –30

–5,000 –300

700

–15,160

2000

80

220 Stopped production

–3,300 –400

Stopped production 3,560

120 CHAPTER 5

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in 2000, and of these four firms, two enterprises still suffer losses. To explain the background of the rural enterprises’ situation in one of the interior small towns, some detailed descriptions will be given. Especially in connection with the situation of the collective enterprises the roles and mainly the relationships became obvious among the township government, the party committee, the enterprise management, and the deciding organs or individuals at the city or even the provincial level. Evaluation of economic criteria shows that the majority of the former collective enterprises in Jinji had already entered into bankruptcy in the beginning of the 1990s. Nevertheless, the political leaders of the zhen and the heads of the enterprises repeatedly succeeded in getting new credit for keeping the enterprises alive and at the time for following a course of expansion “on credit.” However, in the last few years some changes took place, since privatization increased effectiveness and since the new factory owners tried to rationalize the production process. Examples from some firms will serve to prove these policies. The wood-processing enterprise, founded in 1970 with almost 180 employees, was the largest in Jinji, and it had already incurred losses producing wood chipboard in the early 1990s. In 1992 it operated in the red by 347,000 yuan. Nevertheless, according to the ambitious plans of the zhen government, this enterprise was to become one of the three future leading enterprises in Jinji. With a credit volume that already amounted to almost 40 million yuan in 1993 (double the credit amount of 1992), two imported new production lines were installed (for the production of furniture elements and table-plates furnished with polyvinyl chloride [PVC]) without keeping to the established schedule and without knowing much about the future opportunities for these products on the market.120 The economic result was a total deficit of 25.3 million yuan between 1994 and 2000 that led to the closing down of this model factory at the end of 2000. A company consisting of several food-processing plants was selected as a second leading manufacturing branch. In 1993 only a flour mill with 65 employees existed; in 1992 it produced a net profit of 12,000 yuan. It had to declare bankruptcy, however, because of a deficit of 345,000 yuan in 1994 and 1995. In 1992 a dairy was set up to produce 40–50 tons of ultraheated and pasteurized milk and other milk products daily. The intention was to supply the coastal regions with these products. In the neighboring county town there were already three smaller dairies, whose milk supply at that time was insufficient. There was no concrete plan as far as the organization of the sales volume and the sales market were concerned. Nevertheless, in 1993 the dairy’s loan amount had run up to 16 million yuan.121 Against all expectations the enterprise (Ningxia Xiajin Dairy and Beverage Co.) started production in 1995 and at present produces a wide range of milk products (pure milk, sweetened milk, milk with almond added, yogurt, etc.). The China Foods Association now classifies the products of this enterprise as recommended, well-known Chinese foods. Since its establishment, the company has introduced a series of advanced equipment from the United States, the Netherlands, and Germany. Now the company has an annual production capacity of 30,000 tons and supplies a market of more than 130 cities and counties. In 2000 it made the largest profit of all enterprises in Jinji.

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At present, Ningxia Xiajin Dairy and Beverage Co. is facing difficulties involving manpower shortages as far as well-trained individuals are concerned. This deficiency has become the main obstacle to the company’s further development. Insufficient capital is another major problem that the firm must face. The company is now pursuing restructuring and hopes it can be listed on the stock market so that it can raise enough money to be ready for further development. A paper mill with 140 employees that started production in 1988 made an official net (post-tax) profit of about 6,900 yuan in 1992. In this profit calculation, so-called sales costs were only to be found for the portion of the mill’s products that were sold. However, as the paper the mill manufactured in 1992 could only partly be sold, there were costs of about 230,000 yuan not mentioned in the official balance sheet. In fact, this enterprise incurred a loss of almost 230,000 yuan in 1992. Furthermore, it was chronically in debt overload; in 1992 the interest load alone amounted to 400,000 yuan.122 What we heard from the manager was quite typical: “If the banks want their investments back, they have to grant new credit”; in other words, new credit is almost completely used for paying interest and for repaying credit due. To save this enterprise it was privatized in 2000. The new owner has the obligation to pay off the debts. He was able to improve the quality of the paper by introducing new raw material and was also able to expand the market. Also, environmental protection equipment was installed, especially to dispose of production sewage. However, losses in 2000 still amounted to 3.3 million yuan. Since 1987 a chemical enterprise (Furfural) has produced supplies out of corn remains for the production of acetates, nitrocellulose, pharmaceutical products, and pesticides.123 In 1992 only 26 percent of the material produced (260 tons) was sold.124 Since the products are all exported, this enterprise has specific problems. Though the amount of production has been constant for about ten years, the prices on the world market vary significantly. Therefore, the factory’s economic situation is continuously changing between profits and losses. If we try to generalize the economic and sales market situation of these few examples, we can make the following remarks: Many former managers of collective firms did not have the necessary economic experience since they had been appointed mostly due to political reasons. Additionally, their political connections were often the basis for unsecured credit. Because of the very heavy loan burden, many collective enterprises were constantly operating at a loss. In addition, many rural TVEs (including the paper and flour mills) were under financial strains because of increasing raw material prices. Often, too, there was no rational or thought-out way of selecting specific industries. For instance, raw material required by the small steelworks had to be transported a long way, and the factory produced steel with quality defects. In addition, steelworks and cement plants are part of the so-called Fifteen Small Industries, which should be closed down because of their serious environmental pollution. Enterprises that are producing in a modern plant and with new equipment and are able to tap new markets expand rather fast, however. The above-mentioned Ningxia Xiajin Dairy and Beverage Co. is one of the best examples of this type of enterprise.

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Table 5.22 Development of All Types of Enterprises, Jinji Zhen, 1994–2000

Total number of enterprises Collective Private and individual Total number of employees Collective Private and individual Total output value (millions of yuan) Collective Private and individual

1994

1996

1997

1998

1999

2000

365 16 349 2,340 1,763 577

958 11 947 4,519 1,978 2,541

1,117 12 1,105 5,319 2,143 3,176

1,371 7 1,364 4,812 1,380 3,432

1,523 7 1,516 5,609 1,273 4,336

1,654 4 1,650 5,902 1,044 4,858

100.70 57.20 43.50

205.82 136.70 69.12

242.95 127.13 115.82

265.95 108.07 157.88

269.19 58.00 211.19

342.26 88.66 253.60

Source: Documents provided by the Jinji government.

In Jinji the zhen government decided to privatize most collective enterprises around 2000 to improve their competitiveness. But before this change in ownership structure, the enterprises had been pressed for some restructuring to improve the production process. Table 5.22 can partly demonstrate the privatization of all collective firms; the second row in Table 5.22 refers only to the above-mentioned collective industrial enterprises. This privatization started in the mid-1990s. Between 1995 and 2000 twelve of sixteen larger collective factories were privatized. Only the four largest collective enterprises survived hitherto, since their economic situation improved between 1995 and 2000. One indicator is the increasing number of employees per enterprise (1995: 110; 2000: 261). The above-mentioned dairy—temporarily still collective—is a good example, because its number of employees tripled between the years 1994 and 2000 (from 206 in 1994 to 632 in 2000). If we consider the average number of employees per collective and private industrial plant for the whole period in detail, we can observe a varying number of employees per enterprise per year. These shifting figures partly seem to be indicators of several phases of privatization—for example, the years 1995 and 1998—partly due to wavering market conditions. But over the course of a longer period of time, there seem to be two different trends. The average number of employees within the sector of private and individual enterprises seems to shrink, on the one hand, because of the rapid establishment of new family businesses and, on the other hand, because of a process of concentration concerning the largest industrial plants, independently of their still-collective or already-private status. This tendency appears to be valid for rural enterprises throughout China (see Table 5.23). The rapid growth of the total number of private enterprises between 1994 and 2000— from 349 firms in 1994 to 1,650 firms in 2000—was also mainly due to the increase of small businesses not only in the field of production but also in trade, transportation, and so on. Since most were small family-run operations, the growth in the number of

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Table 5.23 Average Number of Employees per Collective and Private Industrial Plants, China, 1994–2000

Average-size plant Collective Private

1994

1995

1996

1997

1998

1999

2000

13.2 111.4 2.16

108.4 123.8 8.50

21.4 189.9 3.16

12.6 191.2 3.38

33.9 193.0 17.18

5.7 175.8 4.02

5.0 267.3 3.69

Source: Zhongguo tongji nianjian.

employees per business was small compared to the total number of new businesses, growing from only 1.65 to 2.9 employees per business during this period. Now the collective enterprises are no longer the main body of Jinji’s economy, though their output value increased from 57.2 million yuan in 1994 to 88.6 million yuan in 2000. In the same period the total output value of private and individual enterprises in all industries grew by nearly six times (from 43.5 million yuan in 1994 to 253.6 million yuan in 2000; see Table 5.22). Therefore, the private output value in 2000 was 74 percent of the total output value, whereas it was only 43 percent in 1994. This change is even more distinct regarding the number of employees. The share of employees in the collective sector as a percentage of all employees fell from 75 percent to 18 percent within the same period. In spite of this privatization process and the diversification of the range of products among private and individual enterprises, the economic structure is still dominated by the industrial production and building industry, regardless of whether the enterprises are collective or private. However, the businesses in all other sectors are exclusively dominated by private owners. In Jinji the last larger collective retail store could be found in 1992; some years later it was closed because of the very low turnover and its burden of debts. (See Table 5.24.) The industrial enterprises’ privatization creates a number of problems for the zhen government. When we combine and simplify the data for the twelve originally collective firms in Table 5.21, we are able to summarize their development and especially their contribution to the township’s economy (see Table 5.25). Though the development of average wages seemed to be quite positive—they doubled between 1994 and 2000—there are nevertheless problems. The peasant laborers still feel that they have an uncertain job because so many enterprises have gone bankrupt, for example, the flour mill and the chopsticks factory, or were shut down, such as the steelworks, vinegar factory, or cement factory. In all these cases the peasant laborers were simply forced to leave the factories and no longer received their wages. Even in the enterprises that survived or were developing favorably, there is no stable increase in wages; instead, the income is dependent on market conditions. The average wages were, for example, higher in 1998 than they were in 1999. As we can see from Table 5.25, there mainly have been losses in all larger enterprises since the beginning of the 1990s.

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Table 5.24 Number of Enterprises and Employees, by Form of Ownership and Industry Type, Jinji, 1999 All enterprises

Collective enterprises

Private enterprises

Enterprises Employees Enterprises Employees Enterprises Employees Production Building Traffic, transport Trade Catering industry Total

602 141 269 381 130 1,523

3,453 823 445 592 296 5,609

6 1 — — — 7

1,055 218 — — — 1,273

596 140 269 381 130 1,516

2,398 605 445 592 296 4,336

Note: “—” indicates no information available. Table 5.25 Economic Development of the Twelve Analyzed Enterprises, Jinji, 1994–2000 1994

1995

1996

1997

1998

1999

2000

Average cost (yuan) 2,542 Total tax (1,000 yuan) 940 Total profit (1,000 yuan) –250 Total turnover (1,000 yuan) 23,780 Percentage of taxes in turnover 3.95

3,218 1,870 –6,880

3,711 3,410 –7,740

4,384 6,030 –5,770

5,399 3,840 –24,200

4,378 4,100 –19,860

5,388 5,300 80

53,420

75,070

102,400

71,370

53,120

101,340

3.50

4.54

5.89

5.38

7.72

5.23

The relatively low performance level accompanied by the high burden of credits, taxes, and social contributions in many cases prevents the introduction of technical innovations to improve product quality or restructure the production program. Therefore, many rural enterprises in the interior parts of China gradually lose their competitiveness. One of privatization’s side effects is the reduction of the rural enterprises’ transfer of profits to the local government. While at the beginning of the 1990s the at-that-time collective enterprises paid about 30 percent of their profits to the zhen government, the privatized firms now pay much less. Therefore, the structure of the local budget has changed significantly. Since 1994 the share of the local enterprises’ revenues in the budget receipts has declined, while that of the taxes has increased. However, the fiscal revenues have decreased since 1997 and caused a burden for the local budget or even a budget deficit. The town of Jinji may serve as an example for this type of development, which can be generalized for many small towns in the less-developed regions of northwest China. In 1993–1994 Dongting served as an example of a town whose collective enterprises seemed to be economically successful. With an output of about 85,000 yuan per rural employee, Dongting reached a volume that was almost three times as high as the economic per-head result of the zhen of Xiangyang (Sichuan), being second among our case

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studies in these years. In Dongting, which was representative of the situation in south Jiangsu, collective enterprises were of much greater importance than in Jinji and the other towns in Ningxia. Of the 39,700 inhabitants of Dongting in 1992—almost double the number of those in Jinji (21,830)—6,375 individuals were employed in township-owned and 9,936 in village-owned enterprises, that is, almost twenty times more than in Jinji. On the one hand, the dominant position of village-owned enterprises was noteworthy with regard to employment (being of no importance in Jinji), and on the other hand the low significance of private enterprises, employing only about 4 percent (marginal compared to Jinji), was noteworthy. Dongting represented the so-called Sunan rural economy model, characterized by a predominance of rural collective enterprises. The comparison among collective rural enterprises in 1993–1994 in the two surveyed zhen of Jinji and Dongting showed that the range of the trade structure depended on the local and mainly regional economic and political conditions. In spite of a certain predominance of more traditional sectors, such as textile or food production, Dongting was able to establish a broad and partly already modern and technically advanced spectrum of industrial firms. Of decisive advantage were not only the proximity of urban markets and access to the know-how of urban factories or research institutes, but also the massive political support and help of strong political groups at the zhen and county levels. In spite of the strong position of the township enterprises, apparently in some regions the village firms were the decisive basis for employment on the rural labor market (as was seen, for instance, in Dongting). Though the number of employees per enterprise (49 individuals in Dongting) was just one-third that of the zhen-owned enterprises, nevertheless, because of the numerous new company foundings during the last decades, the village enterprises (cunban qiye) alone employed almost double the number of individuals compared to the township enterprises. The village enterprises concentrated more on the processing of agricultural raw materials—about 43 percent of all employees compared to 34 percent in Dongting’s township enterprises—although they already showed a broad product diversification. About 39 percent of the employees produced consumer goods, 22 percent worked in the electronics and mechanical engineering sector, 13 percent worked in the production of chemical products, and 11 percent worked in the textile industry. Since we did not have the chance to contrast Dongting’s 1993–1994 development and structure with the situation around 2000, we only presented a short description of the former situation of this zhen. To compare Jinji’s development and problems between the years 1993 and 2000 with those of other small towns, we concentrate on the development of the other zhen, which we were able to analyze both in 1993–1994 and in 2000–2001. The analysis of collective enterprises in the other townships during our fieldwork in 1993–1994 seemed to be based on correct data. Among the other zhen, only Xiangyang possessed a collective enterprise structure similar to that of Dongting, though the percentage of employees in rural industry, compared to all employees, was conspicuously

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lower than that in Dongting in 1992. Due to the proximity of Xiangyang to Chengdu and its position on the Chengdu–Deyang development axis, the town offered attractive location advantages for rural enterprises—there were thirty-two zhen-owned enterprises. Only four enterprises had survived from the people’s communes period; five had been established between 1978 and 1980; the rest after 1980. In the late 1980s and early 1990s Xiangyang zhen was selected as a so-called model case. One would therefore expect very positive development in this zhen. However, the zhen’s industrial sectors showed more or less the traditional patterns (such as paper producing, textile fabrication, processing of iron and metal, production of cement and building materials), and not a concentration in just a few sectors, as in other towns. To improve the economic situation, the zhen government developed a new strategy for a so-called rural modernization, namely to speed up the development of the nonagrarian sectors. This strategy in reality has a long tradition. In the case of Xiangyang, the local government’s concept was to diversify the industrial sectors—this was and is a concept similar to that used in Jinji. Recently the following industries have played an essential role in the zhen: • fodder production: two important enterprises (Zhengda from Thailand and Xiwang) have located production in Xiangyang • medical industry: an enterprise—transferred to Xiangyang from Tibet—produces drugs based on traditional Tibetan culture • engineering works, especially producing electrical installations • food industry, dominated by the so-called South China food enterprises In Xiangyang, just as in Jinji, collective enterprises at the village level played a marginal role in 1993. While in 1993 in Jinji, 38 percent of the employees not working in agriculture did business as independent or dependent employees in individual or private enterprises, in Xiangyang 39 percent of all employees outside agriculture were found in the private sector. These three examples represented different models of development; Dongting represented the collective-orientated Sunan model at its best. In all three zhen, collective enterprises in 1993–1994 were mainly found in the manufacturing sector, whereas the private sector was and is more engaged in transportation, trade, catering, and services. To characterize the development—although in a restricted way—we can compare the economic structure of Xiangyang in 1993 and the structure of the city of Guanghan in 1999 (Xiangyang is located inside Guanghan’s administrative area). While, for example, in 1993 only 22 percent of all industrial workers in Xiangyang were employed in private enterprises, the figure was 88 percent for the year 1999 in Guanghan. In most of the other sectors, such as traffic, transport, trade, and catering, private and individual enterprises dominated in Xiangyang and Guanghan in both 1993 and 1999. In 1993 the income situation of the collective enterprises in Xiangyang was almost as favorable as that in Dongting. The average before-tax profits of the enterprises in Xiangyang were about 1.15 million yuan per enterprise in 1993, just above the comparable results in

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Table 5.26 Rural Industrial Enterprises, Xiangyang Zhen, 1999 Number of enterprises Enterprises with net profits Net profit per enterprise (yuan) Enterprises with losses Loss per enterprise (yuan) Total number of employees Per capita wages Turnover per enterprise (million yuan) Tax per enterprise (yuan) Bank loans per enterprise (yuan) Social contributions per enterprise (yuan)

611 588 99,950 3 280,000 5,868 5,682 1.46 28,560 268,576 171,000

Source: Local information, 2000.

Dongting; the net profits for disposition, however, were, at 0.97 million yuan, much higher than those in Dongting.125 The average number of employees in the plants of Xiangyang was slightly below that of Dongting (136 compared to 148). As mentioned above, we can only analyze the development of industrial enterprises in Xiangyang between 1993 and 1999, since we could not get any later data on Dongting. It is remarkable that the number of enterprises tripled within six years. However, the average number of employees per enterprise declined strongly—to 9.6. The main reason seems to be the rapid establishment of private industrial firms since 1993. A sketch of the present situation in Xiangyang reveals significant changes (see Table 5.26). The economic situation of the industrial enterprises seems to be satisfactory, though the financial burden (taxes, bank loans, social contributions) per enterprise was around 468,100 yuan on average. Compared with the other analyzed zhen, the rural enterprises seem to be more productive. Additionally, they dominate the rural economy. Though the share of nonagrarian population was only 13 percent of the total number of inhabitants, the share of the rural enterprises’ gross output value ran up to 96 percent. However, there are a number of other problems. Many of the firms that were established around 1980 have economic problems that prevent them from introducing technical innovations. Therefore, their competitiveness declined. Their surrender of taxes to superior authorities and the economic support of local rural enterprises curtail local administrative tasks and further economic development. In 1998 Xiangyang collected around 25 million yuan in taxes from industry and trade. Of this amount, the local government had to transfer 75 percent to the central government. The remaining 25 percent had to be divided among Deyang City, Guanghan City, and Xiangyang Zhen. The consequence of this allocation system is that there is no opportunity to invest financial means for the modernization of rural enterprises. Since private individuals who take over collective enterprises are not willing to cover the bank debts, they remain the obligation of the local

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Table 5.27 Budget of Xiangyang, 1999 (in million yuan)

Revenue (million yuan) Value–added tax Turnover tax Income tax Individual income tax Urban construction tax Real estate tax Stamp tax Vehicle tax Slaughter tax Agricultural tax Special product tax Other Total Expenditure (million yuan) Innovation of enterprises Promotion of agriculture Culture, broadcasting Education Public health Administrative costs Urban construction Total

1999 (plan)

1999 (actual)

Difference (actual–plan)

380.0 200.0 680.0 3.5 20.0 7.0 3.5 1.5 5.0 70.0 0.4 22.0 1,392.9

198.02 188.12 221.40 5.49 23.33 6.30 10.75 1.27 5.06 55.91 0.38 25.90 741.9

–181.98 –11.88 –458.60 1.99 3.33 –0.70 7.25 –0.23 0.06 –14.09 –0.02 3.90 –650.99

600.00 500.00 7.50 85.00 0.80 30.00 200.00 1,423.30

624.24 543.80 7.51 94.26 0.66 22.16 0 1,292.63

24.24 43.80 0.01 9.26 –0.14 –7.84 –200.00 –130.67

Source: Information provided by the administration of Xiangyang zhen.

government. However, because of the transfer of local tax revenues to higher administrative levels, as required by law, the Xiangyang administration is not willing to repay bank loans on time. Therefore, the banks responsible for this area have judged this zhen since 1998 to be a high-risk administrative unit for new bank loans. Because of this financial situation, it seems impossible to develop a reasonable modernization program for this former model zhen. Another feature is the recently introduced strict control of enterprises damaging the environment. Many of the still-collective firms are affected by this new requirement and will be shut down. This economic structural development clearly has a strong impact on the budget of Xiangyang (see Table 5.27). The main sources of the local budget are—as in most other small towns—the three taxes that are generated by local enterprises, namely the value-added tax, turnover tax, and income tax. Their share of the total budget revenue ran to 82 percent of the total tax income in 1999. That means that the economic situation of most zhen is still nearly totally dependent on the rural enterprises’ development. The performance of the local gov-

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ernment is judged in the same way by the superior authorities. However, in most cases the zhen government is not able to fulfill the fixed goal, since the development of the rural enterprises has decelerated. While many enterprises could reach an annual rate of growth of about 20 to 30 percent in the 1980s and early 1990s, this growth rate has decreased since the mid-1990s. Therefore, the local budget revenues have declined in a worrying way. For example, the budget deficit—in this case the difference between the planned and actual budget receipts—amounted to 651 million yuan. Because of this situation, the local government of Xiangyang is still investing the main share of the budget in the modernization of enterprises (48 percent) and agriculture (42 percent). Only 10 percent of the budget is left for all other public tasks; urban construction (public institutions, etc.) in particular is totally neglected. Despite the small amount of financial means available for urban development, the transformation of arable land into industrial or other nonagrarian areas is a serious problem not only for Xiangyang but also for most small towns. While Xiangyang some decades ago was dominated by agricultural land use, in 1999 54 percent of the total administrative area was transformed into industrial areas. In the other four zhen (Zongshizhuang, Yuquan, Pingle, and Xinzhou), we can analyze a similar development, which will be presented briefly. In most cases the rural collective enterprises, and among them especially the manufacturing plants, were and are characterized by a privatization process. In Zongshizhuang, for instance, in 1992, most enterprises were collective. Regarding profits, just one enterprise out of all zhen-owned, village-owned, and cooperative enterprises made about 50 percent of all profits (in themselves rather modest), though from an economic point of view Zongshizhuang belonged to the ten leading townships and towns out of the 291 total in the prefecture of Shijiazhuang. The leading enterprise in 1992, producing paints for dyeing and chemistry, was, at the initiative of the zhen-government, transformed from a village-owned firm into a branch of the state-owned enterprise in Tianjin (Tianjin Paint Works No. 4), and in that way received investments and considerable technical support; in other words, the state enterprise was responsible for the equipment as well as for marketing and export. Apparently it then became a stock cooperative, as 50 percent of the shares belonged to the Tianjin Paint Works and 50 percent to local inhabitants and the zhen. For collective township and town enterprises, such shareholders’ companies had generally been permitted since the beginning of the 1980s. Since 1992 the ownership pattern of this enterprise has become rather complicated, because four departments, belonging to the stock portfolio of the local inhabitants and the zhen government, decided on a joint venture with a Hong Kong partner; the state enterprise in Tianjin was not included in the joint venture, though it possessed 50 percent of all shares. Another enterprise, having attained the second-best profits among all collective rural enterprises in Zongshizhuang, produced paints mainly for export. Founded in 1979 as a village-owned enterprise, at first it incurred only losses. After technicians from Shanghai and Tianjin were invited to advise the enterprise, the production of traditional products was changed in 1985. Since then paints and chemicals have been produced. Due to growing export possibilities, a joint venture was established with the province’s import/

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Table 5.28 Number of Enterprises and Employees, by Form of Ownership and Industry Type, Zongshizhuang, 2000 All enterprises

Production Traffic, transport Trade Catering industry Total

Collective enterprises

Enterprises

Employees

Enterprises

173 46 61 18 298

2,057 316 382 191 2,946

13 — — — 13

Employees 472 — — — 472

Private enterprises Enterprises 160 46 61 18 285

Employees 1,585 316 382 191 2,474

Source: Information provided by the local government. Note: “—” indicates no information available.

export corporation and with a Hong Kong entrepreneur. Each partner held one-third of the shares. Obviously this enterprise also functioned as a kind of stock corporation, though in fact it was a collective enterprise belonging to the zhen. The success in production of these two larger enterprises in Zongshizhuang made other firms imitate them. In Zongshizhuang in 1993 most of the township, village, and cooperative enterprises produced various textile dyes. Six of these enterprises were founded between 1990 and 1993, the year of our first field study. More recently established enterprises had difficulty surviving on the market, which became more limited. This situation began in the late 1990s; since then the still existing collective industrial enterprises have lost their competitiveness. Another reason was the problem of environmental pollution, because of which twenty-three small chemical factories were closed down in 1995. Today the main production is manufacturing of car accessories, furniture, weaving, dyeing, and so forth. While private individuals or families conducted all service (catering) functions in 2000 (see Table 5.28), there still existed thirteen larger collective enterprises—nearly the same number as in 1993. Many manufactured the same type of product groups as seven years earlier. The number of workers per collective enterprise in 2000 was quite similar to the number in 1992, namely thirty-six employees. The 160 private industrial enterprises employed only ten individuals per enterprise. However, while the share of employees in collective industrial enterprises amounted to 23 percent of all employees, their industrial gross output only covered 13 percent of the total amount. This was a sweeping change during the late 1990s. One of the reasons was the insufficient investment in collective enterprises. Since the local budget was and is very limited, the zhen government is incapable of modernizing collective enterprises. Of the total amount of local investment in plants, 31 percent originated from banks, 9 percent originated from foreign countries, and 60 percent consisted of contributions to funds collected by the inhabitants themselves. A kind of vicious circle

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Table 5.29 Collective Enterprises as a Percentage of All Rural Enterprises, Zongshizhuang, 2000

Total Collective Percent of total

Number of enterprises

Number of employees

Turnover (1,000 yuan)

Profit (1,000 yuan)

Tax (1,000 yuan)

298 13 4

2,946 472 16

29,078 4,000 14

1,970 298 15

423 116 27

Source: Information provided by the local government.

is at work here. Because of the poor local government, both the collective and private enterprises’ credit financing is reliant on banks and privately collected funds. Since the collective enterprises in particular are not productive, the amount of investment they receive is very limited; the majority of private funds is invested in private firms. The collective enterprises are the main tax base for the local government, though. This disadvantageous situation is, among other reasons, one of the consequences of privatization, since private enterprises try to reduce their taxes in any way possible. This new structure is very typical for many rural regions, especially in China’s interior. Table 5.29, which includes all types of industry, illustrates this situation. Though the turnover and profit of the collective enterprises come to only 14 percent and 15 percent, respectively, of all types of enterprises, they have to contribute 27 percent to the local taxes. While the reduction of the agricultural acreage due to other functions is a problem within the administrative areas of all small towns we have analyzed in our project, in some cases agricultural specialization is able to offset this drain on agricultural land resources and even to increase the rural income in a significant way. For example, in Zongshizhuang great efforts were made in the second half of the 1990s to restructure the town’s agriculture by enlarging the arable land for fruit, such as pears, grapes, and plums. During the same time, some 250 greenhouses were built and vegetables were produced, which are exported mainly to Japan, Singapore, and Hong Kong. In the town of Pingle—located southwest of Chengdu—the degree of industrialization was and is limited, if we include agriculture. In 1993 about 7 percent of all employees worked in the manufacturing sector. As in some other cases, industrialization was connected with a high percentage of employees in the private sector, where about 66 percent of all those not working in agriculture were employed. In contrast to all other places, the percentage of private production in Pingle was very high. That might be due to the long tradition of wood processing (bamboo products) and distilleries. The fourteen zhen-owned enterprises, too, were mainly engaged in traditional sectors, that is, in timber and paper production, distilleries, and food. However, the further transformation of enterprises from collective to private between 1993 and 1999 was significant. The number of collective enterprises decreased from 92 to 7, that of employees from 2,078 to 590, while the corresponding figures for private enterprises increased from 1,209 to 1,479 companies and from 3,518 to 5,133 employees within the same period (see Table 5.30). On the other hand, the economic

968 25 192 50 65 1,300

736 111 177 278 201 1,486

1999 4,176 851 242 200 125 5,594

3,806 1,031 177 408 301 5,723

1999

Employees 1993

Source: Documents provided by the zhen government in Pingle. Note: “—” indicates no enterprises.

Industry Construction Traffic Trade Catering industry Total

1993

Enterprises

All enterprises

89 1 1 1 — 92

1993 6 1 — — — 7

1999

Enterprises

1,806 267 3 2 — 2,078

1993

332 258 — — — 590

1999

Employees

Collective enterprises

Enterprises and Employees, by Form of Ownership, Pingle, 1993 and 1999

Table 5.30

879 24 191 50 65 1,209

1993

730 110 160 278 201 1,479

1999

Enterprises

2,370 584 239 200 125 3,518

1993

3,474 773 177 408 301 5,133

1999

Employees

Private enterprises ECONOMIC STRUCTURES AND ECONOMIC CHANGE 133

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and employment structure did not undergo sweeping change. Industry and construction are still dominant, while the share of the tertiary sector only increased from 10.1 to 15.5 percent. The growth rate of the number of construction workers—although limited—is due to the acceleration of construction work in the western part of China. One of the main reasons for the rapid increase in private enterprises is a startup phase of private firms that occurred in the late 1990s; a second factor is the conversion of collective into private enterprises. The structure of the collective enterprises is rather differentiated and covers distillation factories, food industry, wood processing, cabling, builders, and brick works. The private enterprises mainly produce alcohol. One of the consequences of this rapidly increasing production and Pingle’s and Qionglai’s remote locations is increasing transportation charges. Therefore, these enterprises often are relocated to a nearby through road and into the urban area of Qionglai, the county seat. One of the solutions preferred by the local government seems to be the construction of an industrial park close to the through road in order to keep the enterprises within its administrative area. One of the other development projects seems to be the expansion of tourism, since Pingle has a history of more than one thousand years. Before 1949 it had been a famous freshwater dock and a distribution center for agricultural products. Though these traditional functions are lost, there are still a number of impressive historical buildings. Even after the renovation of some of these buildings, the conception of how to develop the tourism industry and how to attract a considerable number of tourists is still missing. Yuquan, located in the southeastern part of Heilongjiang, was and still is another example demonstrating the strong dependency of local finances on a few flourishing town enterprises.126 In 1993, 84 percent of the entire profits of all collective enterprises were made by the brewery. The other eight enterprises made modest profits or none at all. Compared to other examples in our field study, the collective plants in this town were relatively old. The local government had repeatedly tried to incorporate ideas from outside and introduce new ways of production, though on the whole with little success. In many cases, the responsible cadres, often without being properly advised by experienced state agencies, tried by trial and error to develop new ideas that could lead to prosperous collective enterprises. The main enterprise of the township, the brewery, was founded in 1979 as a maltery; it did not also begin to brew beer until the beginning of the 1980s. In 1993 the before-tax and disposable income of the brewery came to 3.4 million yuan. It was remarkable that only the so-called social expenses of 10 percent of the before-tax profits, normally used for township development, exceeded the profits of all other collective enterprises. For some years now, the profit of the brewery, the zhen’s last collective enterprise and still the largest firm in the town, has declined. Its competitiveness has developed too slowly compared with larger enterprises in Harbin City. With the exception of the brewery, all other firms in Yuquan zhen are privately owned. One reason for this transformed ownership structure was the local strategy to stop investment in collective enterprises. However, the economic situation of the now private enterprises is by no means robust, since it is still very difficult to receive bank loans. Because

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Table 5.31 Economy of Rural Enterprises, Yuquan Zhen, 1994–2000 Turnover

Year

Absolute value (10,000 yuan)

1994 1995 1996 1997 1998 1999 2000

3,557 9,463 80,093 89,868 48,340 75,664 85,916

Profit

Rate of increase (%)

Absolute value (10,000 yuan)

166 746 12 –46 56 13

279 1,013 4,670 3,934 2,499 3,601 4,509

Tax Rate of increase (%)

Absolute value (10,000 yuan)

Rate of increase (%)

263 361 –15 –36 4 25

285 1,064 4,725 4,237 3,096 3,557 2,748

273 344 –10 –26 14 –22

Source: Information provided by the local government.

of this, many private firms tried to borrow funds from private individuals. This situation forces the enterprises to incur losses, since the interest rate for that credit in most cases comes to 20 percent per year. It is understandable that even those firms that would make a profit under normal circumstances record losses. So far mostly quarries—usually privately owned—are profitable enterprises. Despite severe environmental pollution, this industrial sector is still supported by the local government. While the private owners are locals, most workers come from other provinces. However, they do not want to stay permanently, as they do not want to move because of the bad working conditions or because they do not see any opportunity to move. The situation for all rural enterprises in Yuquan may be characterized by the data in Table 5.31. Characteristics of temporal problems are distinct variations in turnover, profit, and tax. One of the main reasons was the market situation, especially for the building and raw materials produced by the local quarries. This varying economic development had a direct impact upon the town’s financial situation. Even if the VAT was always the main source of the zhen’s income, the local government had to significantly vary the urban maintenance and construction tax in order to obtain sufficient income. These two forms of taxes came to 65 percent and 58 percent of the total income in the years 1999 and 2000, respectively. The highest share of the public expenditure went into the costs for education, administration, and urban construction. These measures are presumably because of the intention to build up tourism, since one side of Yuquan has convenient road and rail connections with the capital of Heilongjiang. The other side of the town offers well-known hunting grounds and preferred ski runs. Though the employment structure in Yuquan is mainly characterized by nonagricultural activities such as industrial, administrative, and service work, the number of inhabitants is decreasing, since more and more inhabitants are moving into the nearby cities or the capital.

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Finally, Xinzhou zhen, located 54 kilometers northeast of the city of Zunyi in the northern part of Guizhou, one of China’s poorest provinces, differed from all other surveyed towns insofar as it had a small number of industrial workers. Since the mid1980s the number of employees in the collective enterprises had been decreasing slightly (from 1,296 employees in 1986 to 1,054 employees in 1993). In Xinzhou, collective rural enterprises obviously had only a small chance of being successful. While in 1993 the profits of five enterprises came to about 350,000 yuan, the losses of three firms ran to 800,000 yuan. In 1993 among the eight collective enterprises the highest profits were reached by a factory, founded in 1984, which produced medicaments for animals and fodder admixtures. As is to be expected, this enterprise did not entirely belong to the local government, but was and is a cooperative enterprise between the county of Zunyi (office for rearing domestic animals) and the zhen government; in other words, the chances of development of this so-called collective enterprise at the county level are determined not so much by local decisions but almost entirely by the county. The enterprise with the highest losses (405,000 yuan) in 1993 was a zhen-owned paper mill that, according to its own information, reached average profits of 280,000 yuan per year. The losses were apparently disguised, as this enterprise is supposed to be a national model town enterprise. In 1999 the economic situation seemed to be the same as before, as far as the collective enterprises were concerned. The paper mill showed a deficit of 774,000 yuan, while the factory that produced medicaments for animals achieved a profit of 885,000 yuan. The other collective enterprises mainly showed small deficits, except a cement producer that incurred a loss of 523,000 yuan. As is to be expected, due to the relatively low significance of collective enterprises in Xinzhou by 1993, the private sector provided most of the nonfarm jobs; however, it grew only slightly in the 1990s. In 1993, 68 percent of all nonagricultural employees worked in the private sector, mostly as traders, in transport, or in catering, as Xinzhou was an important marketplace. This structure of employment did not change significantly until 1999, when the share of private workers came to 77.7 percent. Table 5.32 illustrates the new structure. While in 1999 only 0.8 percent of all enterprises were still collectively owned, the share of their employees was 22.3 percent. This figure demonstrates, as described above, that the size of collective—mainly industrial—enterprises is still much larger (79 workers per firm) than that of private firms (2.2 individuals per enterprise). The most significant reason for this different employment structure is the absolute dominance of private enterprises in the traffic, trade, and catering sectors, where the state has totally withdrawn its own firms. The still significant share of the collective industrial sector is due to the above-mentioned production of clothing, paper, and medical and pharmaceutical, nonmetal mineral, and metal products. The private manufacturing enterprises dominated in the fields of food processing, furniture manufacturing, and working in leather and fur. Because of the annually shifting turnover and profit, especially of most larger collective enterprises, Xinzhou’s fiscal revenue fluctuated from year to year. Since 1999 there have been only losses,

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Table 5.32 Rural Enterprises, by Type of Ownership, Xinzhou Zhen, 1999 All enterprises

Agriculture Industry Construction Traffic Trade Catering industry Total

Collective enterprises

Private enterprises

Enterprises

Employees

Enterprises

Employees

Enterprises

Employees

2 440 16 351 430 160 1,399

25 1,957 723 394 562 236 3,897

2 8 1 — — — 11

25 580 265 — — — 870

— 432 15 351 430 160 1,388

— 1,377 458 394 562 236 3,027

Source: Documents provided by the zhen government in Xinzhou. Note: “—” indicates no information available.

caused by the rising deficits of most of the collective enterprises. On the other hand, the wage expenses for the employees in the local administration have increased significantly. Since 1999 there has been an average annual budget deficit of around 2 million yuan. Even though the collective enterprises are in the most critical situation, many of the local firms have similar problems, independent of their ownership structure: • Due to insufficiently specialized products, a prevailing small scale, and low technology, most of the local enterprises do not have sufficient competitiveness in a market economy. Additionally, most of the larger enterprises founded before 1990 cause serious environmental pollution, nowadays contravening official environmental policy. Therefore, most of the enterprises are threatened by shutdowns. The more or less permanent deficits of most of the local enterprises intensify this problem. • A second problem is the disadvantageous location, which reduces the sales territory. Xinzhou is located far from larger cities, and the road network and quality as well as the traffic development are very low. Correspondingly, the transportation charges are relatively high, while the local consumption capacity is rather limited. • The restrictive natural conditions and isolated location have resulted in a backwardoriented ideology. The local government officials are conservative and are lacking a spirit of enterprise. In most parts of China enterprise transformation has more or less been completed, while this process is still ongoing in Xinzhou. • Now the local government is looking for new economic growth opportunities. One is the attempt to develop enterprises that will process local agricultural products and resources. Tourism is another prospect under discussion. The local market, even though the trading conditions are limited, is able to convey an impression of traditional rural China.

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Summary The collective and private enterprises in the described towns offer quite a typical spectrum of Chinese rural firms. Altogether, the economic problems of the still collective enterprises especially are in many cases more serious than is documented in official statistics. During our field studies we became quite aware of the great extent of environmental problems, the result of rural industrialization entirely concentrated on economic success. Though this is not a topic of our survey, nevertheless, some remarks are in order. Numerous rural enterprises we visited polluted water, soil, and air to a high degree. Especially bad for the environment are plants that produce paper or food, printing houses and dye works, chemical enterprises, and firms processing building materials. Plants producing concrete or lime work without any filters and send masses of particles into the air. The cement works alone are responsible for almost 80 percent of all dust emissions.127 Chemical enterprises are especially bad in causing pollution. In Zongshizhuang, where a greater number of enterprises were chemical plants, we could observe in 1993 that highly toxic untreated sewage was allowed to flow into rivers or just seeped away into the soil. The many breweries and paper mills, too, used the rivers for their untreated sewage. According to recent data in China, the paper mills alone are responsible for 44 percent of the sewage of all township-owned enterprises.128 The rural paper mills are said to produce 2.6 to 3.5 times more sewage per processed unit than the urban firms manufacturing paper. According to estimations, the ejection of the “three sewages” (fluid, solid, and gaseous) is about 45 percent higher than that of urban and/or state industry.129 Due to the very disperse and often haphazard choice of location, and due to the frequently unreasonably large reserves of space, between 1978 and 1984 alone about nine times more fields were transferred into industrial usage than necessary.130 Since the government has realized that the absolutely necessary solution to the environmental problems had become nearly too late in a medium- and long-term perspective, it has tried to stop this situation. Our samples, however, document that environmental awareness is still underdeveloped due to the often low degree of technology in the enterprises as well as to the poor educational level of the workforce. All in all, however, the development of the zhen has to be seen in close connection with the growth and modernization of rural industry. On the one hand, nonfarm jobs were created; on the other collective enterprises to a great extent financed township projects. The processes of the collective enterprises’ privatization and the tax reforms have caused the main drop in the income of the townships. Our studies have revealed remarkable successes as well as many deficiencies. In less-developed regions in China, the Northwest, for example, we could observe that a great number of both collective and private enterprises suffered from indebtedness. New credit often served only to repay old debt. Furthermore, the collective enterprises in particular were sometimes indebted to one another, because they were unable to pay, for instance, for their raw

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materials or fuel. Frequently, for quite a long while workers were not paid, or peasant suppliers did not receive their money. In fact, bank credit was often obtained as hidden subsidies. We think that rural enterprises in less-developed places often need better instructions and support when trying to develop new products. We found that imitation is often the reason for establishing new enterprises. If one enterprise is successful, within a very short time several firms belonging to the same branch and sector of production are established, though the market situation speaks against it. Especially in less-developed regions, profits of enterprises in general are low. Frequently townships are dependent on one or two profitable enterprises, whereas the majority of the collective firms are struggling for survival. All private enterprises should pay taxes correctly in order to support the local government and through this the development of the local infrastructure. However, though in many cases they make a reasonable profit, they try to evade taxes. On the other hand, often collective enterprises are supported that, from an economic point of view, should long since have been closed down. The reason is that despite their dwindling importance for the local governments, collective enterprises are not just economic firms but also have social and political functions for the township. They guarantee a certain employment, and they stand for the abilities and activities of rural cadres. In general, collective rural enterprises in the immediate vicinity of big urban markets still dominate the economic life in some rural areas, while the private and individual economy is better developed in peripheral and economically weaker regions. There is no doubt that the rapid development of private rural enterprises in economically poorer regions also depends on the readiness of the government to allow differentiated markets for laborers, raw materials, capital, and industrial products. Such enterprises can only be of sufficient influence if they are able to tap new markets with products that do not fear comparison with products manufactured, for example, by rural enterprises located in eastern China. The Regional Labor Market in Relation to Rural Collective and Private Enterprises: Results from Our Case Studies, 1993–1994 and 2000–2001 The Rural Labor Market: Transition from Agriculture to Nonagrarian Sectors Since the beginning of the 1980s the economic reforms in rural regions, especially the introduction of the so-called production-responsibility system at the household level, have mitigated migration restrictions. Furthermore, the possibility of offering one’s services and buying consumer goods on the private market has had an influence on those looking for a job outside agriculture, and on migration in general. Rural industry not only accelerated sectoral change in rural areas, but was in many cases the new workplace for numerous surplus employees from agriculture. The diversification of the rural economy and through it new occupational opportunities have created

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numerous forms and phases of transition from agricultural to nonagrarian activities. Such transitions were and are frequently connected with migration. At present it is still difficult to call the various forms of transition from agriculture to nonagrarian activities a straight process of transformation. As the economic situation especially in less-developed regions is rather unstable, the rural workforce is fluctuating among various forms of earnings, or it combines different sources of income. Often households gain their living from agriculture as well as from industry. For instance, frequently a wife works on the land, either in the evening or during the harvesting season, supported by her husband, who works in a rural enterprise; in other words, the income of the household often depends on a sectoral diversification that at the same time to a certain extent grants some economic security in life. If, for instance, a rural enterprise has to close down its production, even a very modest agricultural income remains a source of survival.131 Between 1978 and 2001 the number of jobs in nonagricultural sectors grew from 31.5 million to 166.3 million,132 which represents an increase of more than five times. Nevertheless, this increase of about 136 million nonagrarian jobs in rural regions does not at all meet the potential demand. There are different estimations as far as the so-called surplus workforce in agriculture is concerned. However, the supposition does not seem exaggerated that at least one-third of the agricultural workforce is under- or even unemployed; that is, at least about 110 million can be called the “surplus agricultural labor force.”133 The chances of finding a job in rural areas outside agriculture vary from region to region. While in Guizhou or Ningxia in 2001 not more than 24 percent of all rural workers were employed in different kinds of rural enterprises, in Shanghai or Beijing it was more than two-thirds, and in the developed provinces on the east coast it was about half of the rural working population. There are various access barriers for an activity outside agriculture, not only spatially but also social-structurally. Before we describe in detail the socioeconomic aspects with the help of our own investigations, we trace in general some connections between rural enterprises and the labor market (see also “Process of Privatization” in Chapter 5). Since the introduction of the economic reforms, a labor market has been developed that—though to a certain extent “free”—is segmented.134 So-called individual entrepreneurs soon received permission to employ up to seven individuals; legal private enterprises from the very beginning had no restrictions as far as the number of their personnel was concerned. In the private sector the entrepreneurs have always been free to employ or dismiss. The rural collective enterprises still have to accept certain restrictions with regard to their personnel policies, though, according to our observations, less and less frequently. For instance, peasants whose farmland is used for industrial purposes have to be employed; this is an obligation to which state enterprises also have to submit. Whenever possible, township- and village-owned enterprises hire local inhabitants. This is quite understandable because of the difficult situation of the local labor market in many regions and because of collective ownership. In some cases, the concentration of job searches on the local labor market is seen in connection with the lack of mobility of the rural population.135 We ourselves have tried to find out how important for employment are the frequently

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cited informal relationships of management with potential employees, that is, the preference shown for relatives, friends, and neighbors. The often-supposed practice of preferably engaging workers from poorer households could not be tested.136 Only once in 1994 did we meet with the remark of a manager that employees from poorer families work “harder” than others.137 According to Odgaard, members of poorer families are often employed as unskilled workers; they have to do the harder jobs and they are paid below average.138 Finally it has been pointed out quite often that employees have to “buy” their jobs with a capital contribution. This topic was also included in our questionnaire, but it seemed to be significant only in the mid-1990s. Development of Employment: Origin and Engagement of the Workforce Although it seems quite simple to trace the annual increase in new jobs outside agriculture with the help of official statistics, during our case studies we were confronted with serious difficulties in finding data and statistics for former years. As we could ourselves find out by very intensive research in the departments or offices of the respective towns, this was not so much due to the unwillingness of the local offices to hand out such data, but more often to the fact that such statistics do not exist. That is the reason why all figures published in statistical handbooks and yearbooks should be taken with a grain of salt. Sometimes we supposed that in the documents of the office for industry the figures for employees were artificially raised to heighten the annually transferred flat sum of wages. A higher sum of earnings, divided by a smaller number of actually working employees, naturally leads to higher wages for each employee. Besides, the data referring to employees varied from source to source (internal statistics, information by the management, etc.). While some recently published studies that describe the situation of rural enterprises and their employees rely on interviews with the management,139 the empirical basis of our analysis, concerning the situation and structure of employees in rural collective and private enterprises, is based on valid interviews of altogether 2,140 and 1,708 employees in 1993–1994 and 2000–2001, respectively. The interviews took place in collective and private rural factories in seven zhen during the summers of 1993 and 1994 and six zhen during the summers of 2000 and 2001. In these selected enterprises we tried to reach all employees with the help of a written questionnaire.140 On average, about 300 employees were interviewed per zhen. Table 5.33 shows the distribution of the interviewed individuals in the various zhen, and at the same time the administrative area of their origin. First of all, two deviations were remarkable in 1993–1994. In the economically developed Dongting, the percentage of in-migrated workers, mainly from other counties in the province of Jiangsu and from other provinces, was, at 48 percent, significantly higher than in all other zhen we included in our investigation. In other cases the percentage of employees from other counties within the province or from other provinces lay between 7 and 8 percent or below. In Zongshizhuang the share of employees from other regions was only 18.4 percent; they had mainly come from other towns and villages (65.6 percent) within the same administrative area (city of Jinzhou). In Jinji the situation was

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similar: 23.5 percent of the employees originated from outside the zhen, but primarily from other townships within the administrative area of the county seat (66.6 percent)— the city of Wuzhong—or from other counties within the Ningxia Autonomous Region (29.0 percent). In the other four zhen of our research area only between 5 and 13 percent of the interviewed employees had come from other regions in 1993–1994. When we compare these catchment areas of 1993–1994 with those of 2000–2001, there were only a very few significant changes. The zhen of Jinji, Yuquan, and Pingle had somewhat expanded the catchment area of their nonlocal employees, since the share of those workers living in other villages and towns within the same county, in other counties within the same province, and in other provinces had increased only slightly. However, the catchment areas of the other zhen remained the same or even shrank. This changed structure is very characteristic of the years 2000–2001. These very limited catchment areas are partly due to the fact that many peasants from the nearest vicinity first move into the zhen and then look for a job. Only where a more or less rapid economic development had caused manpower requirements that could not be satisfied by the local labor market were employees from other regions engaged. In towns with an average or lower degree of development, mainly local employees were taken on. In our analysis in both periods of time, 70 to 90 percent of all workers originated more or less from the administrative area of the towns themselves and mainly from villages subordinate to the zhen government. As Table 5.33 demonstrates, this is especially the case in Zongshizhuang and Xinzhou. In contrast, the zhen of Yuquan and Pingle were able to speed up their economic development during the last years and could therefore expand their area of labor supply to some degree. That means that the rural enterprises indeed recruit the majority of their workforce from village agricultural regions and in that way maintain their—still limited—collecting function for a part of the surplus peasant employees. The local nonagrarian jobs on offer are usually not sufficient to meet the demand. Only the dynamic rural economic regions in east and south China are at the same time the centers of attraction for migrant workers from the interior provinces. As far as these examples can be generalized, there exists a close connection between the development of rural industry and the radius of the recruiting area for workers. The more traditional towns in the southern provinces of Hebei, Sichuan, and Guizhou remain examples of this issue. A study by the Rural Development Institute (RDI) of the Chinese Academy of Social Sciences in connection with the Stockholm School of Economics (SSE), carried out in Zhejiang and Sichuan in spring 1991 among 630 rural enterprises (262 of them rural collective enterprises), came to similar results.141 According to this survey, 78 percent and 82 percent, respectively, of the employees in rural collective enterprises in Zhejiang and Sichuan were locals of the towns, and 21 percent and 17 percent, respectively, had come from other townships in the county.142 Another study from 1991 should be mentioned, this one carried out by the Rural Development Research Institute (RDRI) of the Chinese Academy of Social Sciences and the Chinese Economy Research Unit (CERU) of the University of Adelaide/Australia, mainly in the rural textile and garment industry in one country each in Zhejiang, Hebei,

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Table 5.33 Origin of Interviewed Employees, 1993–1994 and 2000–2001 (in percent)

Jinji 1993–1994 2000–2001 Dongting 1993–1994 Zongshizhuang 1993–1994 2000–2001 Yuquan 1993–1994 2000–2001 Xiangyang 1993–1994 2000–2001 Pingle 1993–1994 2000–2001 Xinzhou 1993–1994 2000–2001 Total 1993–1994 2000–2001

Zhen proper

Villages under the zhen

Other villages and towns in the same county

30.1 25.7

46.4 38.1

15.7 22.1

6.8 11.1

1.0 2.9

100.0 100.0

394 307

25.9

26.2

10.9

11.3

25.7

100.0

338

19.4 61.2

62.2 23.9

12.4 12.0

4.5 2.9

1.5 0.0

100.0 100.0

331 253

73.1 67.6

18.6 3.3

3.8 6.6

2.1 11.1

2.4 11.4

100.0 100.0

293 289

22.5 24.2

65.0 52.7

5.8 6.0

6.7 17.1

0.0 0.0

100.0 100.0

224 296

27.2 25.1

59.9 44.9

11.3 19.0

1.6 9.9

0.0 1.2

100.0 100.0

257 269

38.2 57.3

56.2 33.2

2.5 6.5

2.0 2.7

1.0 0.3

100.0 100.0

303 294

33.7 43.2

46.7 32.9

9.4 12.0

5.2 9.3

5.0 2.6

100.0 100.0

2,140 1,708

Other counties in the same province

Other provinces

Total

Number of interviewees (valid cases)

Source: Authors’ interviews, 1993–1994 and 2000–2001.

and Shaanxi.143 Their results were similar as far as the origin of employees was concerned: 79.4 percent of the workforce had come from the same village or township, and 18 percent from other townships in the county; only 2.6 percent had come from other counties of the province and 0.4 percent from other provinces. Only managers and technicians showed a greater spatial mobility: 3.8 percent originated from other counties and 1.4 percent from other provinces.144 The RDI-SSE study could not confirm this result. There were no significant differences between managers and the rest of the employees with regard to their origin. Because of the limited number of interviewees we have not included a more detailed comparison of these results. In addition to their origin, the possession of a rural household registration (nongye hukou) in the enterprises is also important for the rural labor market; in general, people looking for a job and holding an urban household registration (feinongye hukou) can find permanent employment in rural areas, whereas individuals registered in rural areas as a rule can find only temporary employment in the cities, for instance, as construction workers. The

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RDRI-CERU survey showed that the percentage of workers with a rural hukou was very high (96.5 percent) within the mentioned group and that there were only inconspicuous differences with regard to the position of the employees.145 According to our survey, the percentage of employees with a rural hukou fluctuated much more than in the above-cited RDRI-CERU survey. For example, the astonishingly high share of workers with an urban hukou in Yuquan can only be explained by the zhen’s special situation in the province of Heilongjiang. Many of the interviewed individuals and their parents, for instance, had a job in state farms and could therefore keep their urban hukou. Others were employed as young people and sent into rural areas during the Cultural Revolution and therefore had permission to keep their nonrural household status. In other towns, the share of employees with a nongye hukou reached 80 percent or even more. In particular, Zongshizhuang, Pingle, and Xinzhou, where agriculture still dominated, showed figures similar to those in the RDRI-CERU study that we have chosen for comparison. Without regarding regional differences, the share of employees with a nongye hukou especially among the temporary workforce and among contract workers was quite high, with about 83 and 88 percent, respectively, while of the permanent workers in 1993–1994, only up to 67 percent were registered as rural inhabitants (see Table 5.34). In 2000–2001 permanent positions for workers usually no longer existed. Therefore, it was and still is easier to dismiss rural workers. On the other hand, there was a very significant increase of workers and employees with an urban hukou in all analyzed zhen. One of the explanations for this development seems to be the fact that many inhabitants of a county seat moved into the zhen in order to find work, since it became more and more difficult to find employment opportunities in the county seat itself. The other reason was the rural enterprises’ demand for specialists, since they wanted to improve the quality and design of their products. The modalities of employment and the criteria for the selection of employees in rural enterprises were a frequently discussed topic, as was the role of the local and regional administration in controlling the labor market. One of the preconditions for the changes in the vocational training was the new recruitment practice. While in the early 1990s, according to ARTEP’s 1993 paper “Re-absorption of Surplus Agricultural Labour into the Non-agricultural Sector,” a workplace for about 60 to 70 percent of all new employees was arranged by the local or provincial government, now new employees were in many cases selected by the enterprises themselves, which means that the applicants were chosen by the firms or by arrangements initiated by friends or relatives. In our own analysis, the differences between 1993–1994 and 2000–2001 were much smaller than we had supposed (see Table 5.35). The official arrangement of jobs by authorities played a minor role, even though there was a small increase within the six years between our two field studies, especially regarding local people. According to our field surveys, mainly the number of self-applicants decreased within the six years of our two analyses among those who changed their hukou, while in the same group mediation by relatives and friends grew from 29 to 55 percent. But there was a similar trend among the two other groups. The increasing share of “other reasons” (2.4 percent in 1993–1994; 26.9 percent in 2000–

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Table 5.34 Type of Household Registration Among the Interviewed Employees, 1993–1994 and 2000–2001 Household registration

Jinji 1993–1994 2000–2001 Dongting 1993–1994 Zongshizhuang 1993–1994 2000–2001 Yuquan 1993–1994 2000–2001 Xiangyang 1993–1994 2000–2001 Pingle 1993–1994 2000–2001 Xinshou 1993–1994 2000–2001 Total 1993–1994 2000–2001

Interviewees (valid cases)

Rural

Urban

Unknown

Total %

79.3 59.8

20.7 38.9

0.0 1.3

100.0 100.0

400 319

82.4

16.7

0.9

100.0

352

95.8 80.9

4.2 19.1

0.0 0.0

100.0 100.0

335 253

25.9 11.4

73.1 88.3

1.0 0.3

100.0 100.0

301 290

82.7 72.0

17.3 27.7

0.0 0.3

100.0 100.0

226 296

93.3 85.3

6.3 13.6

0.4 1.1

100.0 100.0

268 269

90.9 76.3

9.1 23.1

0.0 0.6

100.0 100.0

307 321

78.7 63.9

21.0 35.5

0.3 0.6

100.0 100.0

2,189 1,748

Source: Authors’ interviews, 1993–1994 and 2000–2001.

2001) can be explained by the recruitment of specialists or employment of dismissed members of the army. The main conclusion is that the constant dominance of family relationships in the opportunity to find a job was revealed in our interviews during both periods of our field studies. Composition of the Workforce: Age, Gender, and Qualifications Youth is a striking feature of employees in rural enterprises, compared to the whole population and also to the employees in the state sector. Empirical comparisons, though, are hampered by insufficient data. Nevertheless, because of the former rapid expansion of rural enterprises and numerous new firms, it was to be expected that the age structure of the workforce would show a high percentage of young people. Of the examined studies on the same topic, only the RDRI-CERU survey investigated

10.0 15.0 41.5 29.0 4.0 100.0 200

Workplace arrangement

Change of workplace (without precise information) Arrangement by authorities One’s own application Arrangement by relatives/friends Other reasons Total Number of interviewees (valid cases) 9.1 0.0 9.1 54.5 27.3 100.0 11

2000– 2001

Source: Authors’ interviews, 1993–1994 and 2000–2001.

1993– 1994

Move with change of hukou

4.2 8.8 27.7 57.2 0.7 100.0 285

1993– 1994 3.5 10.5 7.9 50.0 28.1 100.0 114

2000– 2001

Move without change of hukou

Job Changes in the Surveyed Zhen, 1993–1994 and 2000–2001 (in percent)

Table 5.35

5.1 4.5 47.2 41.1 2.1 100.0 1,666

6.5 10.4 15.3 41.9 25.9 100.0 1,031

2000– 2001

Local applicants 1993– 1994

5.4 6.0 44.1 42.1 2.4 100.0 2,151

1993– 1994

Total

5.4 10.3 14.6 42.8 26.9 100.0 1,156

2000– 2001

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the age structure. Although this age structure cannot really be compared with that of our groups, the results tend to be similar. Almost 86 percent of all employees and 90 percent of the female workers were under forty years of age. The much higher percentage of female employees under thirty years was remarkable, as it was 10 percent above that of men. As was to be expected, managers and administration staff normally were older than the average member of the workforce. Production departments had an especially high percentage of young people (67.2 percent younger than thirty years). The results were less detailed in a study that worked on the basis of a sample survey of 509 households in five counties in the provinces of Sichuan and Zhejiang and examined nonagrarian activities, occupation, and income.146 According to this survey, in rural production enterprises 87 percent of the male and 78 percent of the female workers were younger than thirty-five years. On the whole, our results in 1993–1994 were very similar to those of the other two studies. (See Table 5.36.) Almost 70 percent of the total workforce was thirty years old or younger in 1993–1994. Noteworthy was the young age of all female employees, of whom 80.1 percent were thirty years or younger—about 20 percent more than in the male group. Results were similar for the female in-migrants without a change of their hukou. It is also remarkable that the in-migrants with a hukou change were significantly older than the other groups. They were mainly qualified employees who had been engaged by townships and zhen for the development of rural factories. Significant changes in the age structure took place in 2000–2001. The share of the total workforce below thirty years lapsed to 51 percent. The same change was true for males and females and the local workforce. The share of male workers below thirty years went down from 60 to 43 percent, of females from 80 to 63 percent, and of local workers from 68 to 50 percent. It was not possible to compare this age structure with that of in-migrants with a change of hukou because of the negligibly small amount of data for 2000–2001. It is quite difficult to explain the general increase in the average age of all groups. One reason might be the general age trend in China; another reason is presumably the elevated educational standard the enterprises request from the job seekers. A third reason is very likely the increasing share of permanent jobs, at least in the analyzed zhen. Township and village enterprises were two of the most important places for the creation of nonagrarian jobs in rural areas. That is why two questions are of great interest: What was the period of employment and the security of their job and what kind of education and occupation did the interviewed individuals have before they took their present job? In this context also the length of their occupation is of interest. A very short period of employment is to be expected because of their young age: In 1993–1994 23 percent of all employees had been employed for less than one year, 24 percent for between one and two years, and 1.3 percent for between two and three years; 40 percent had already worked in an enterprise for three or more years. There was a clearly marked differentiation between migrant workers and in-migrants who had transferred their hukou. (See Table 5.37.). A correlation might be expected between the age of the employees and their length of employment, but we do not have the data to support such a finding.

17.6 22.3 20.2 12.3 10.1 8.2 9.1 100.0 1,128

20 21–25 26–30 31–35 36–40 41–45 46 Total Number

7.3 15.3 20.7 16.7 15.4 8.9 15.7 100.0 970

2000– 2001 34.3 28.6 17.2 7.7 6.8 3.7 1.7 100.0 1,060

1993– 1994 15.4 19.6 27.6 17.8 11.0 4.6 4.0 100.0 652

2000– 2001

Female

Source: Authors’ interviews, 1993–1994 and 2000–2001. Note: Absolute value = number of valid cases.

1993– 1994

Age

Male

14.1 27.8 19.5 11.7 11.7 9.3 5.9 100.0 205

1993– 1994 38.5 7.7 23.1 0.0 7.7 7.7 15.3 100.0 13

2000– 2001

In-migrants with change of hukou

32.6 39.3 11.6 6.7 3.2 1.8 4.9 100.0 285

1993– 1994 12.8 24.8 30.3 9.2 9.2 1.8 11.9 100.0 109

2000– 2001

In-migrants without change of hukou

Age of Employees, by Gender and Origin, 1993–1994 and 2000–2001 (in percent)

Table 5.36

25.9 22.7 19.8 10.5 9.0 6.3 5.6 100.0 1,704

1993– 1994

8.4 17.2 24.6 17.7 14.5 6.6 11.0 100.0 1,099

2000– 2001

Locals

25.7 25.3 18.7 10.1 8.5 6.0 5.6 100.0 2,194

1993– 1994

Total

9.9 18.0 23.3 17.2 13.2 7.1 11.3 100.0 1,741

2000– 2001

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Table 5.37 Period of Employment of All Interviewed Individuals, 1999–2000 (in percent) Period of employment 13 or more years 8–12 years 5–7 years 3–4 years 2–3 years 1–2 years Less than 1 year Total

Without change of hukou

With change of hukou

Locals

8.9 8.9 21.0 10.5 12.9 10.5 27.4 100.0

33.3 5.1 5.1 10.3 7.7 10.3 28.2 100.0

23.2 15.8 22.1 11.0 8.7 6.9 12.3 100.0

Source: Authors’ interviews, 1993–1994 and 2000–2001.

Compared with the situation in 1993–1994, the instability in terms of the length of employment had declined in 2000–2001: 49 percent of those without a change of their hukou, 54 percent of those with a hukou change, and even 72 percent of the local workers had worked more than three years. Regarding only short-term employment: In 1993–1994 about 42 percent of the local employees, 50 percent of the in-migrants with a hukou transfer, and 76 percent of those without a hukou transfer worked less than two years in rural enterprises. This showed the uncertain conditions of employment of the third group as well as their high rate of fluctuation. When production was extended, they were employed as extra workers; when it was reduced, they were the first to be dismissed. One has to consider, though, that migrant workers themselves like to change their job, because they often prefer better working conditions or better payment. Furthermore, the situation of short-term jobs had changed in 2000–2001, since among people both with and without a hukou change only 38 percent had an employee-employer relationship of less than two years; among the locals it was only 19 percent. In a similar way, we can observe a differentiation among employees as far as their educational level is concerned, depending on their origin and status of registration. The group of migrant workers includes the highest number of individuals with very little schooling, whereas the percentage of academy and university graduates among the inmigrated workforce is higher than among the local employees; this applies especially to the in-migrants with a transfer of their hukou. A comparison of the educational level of the interviewed employees in rural enterprises with that of the whole population in the surveyed zhen supports the often expressed opinion of managers during our interviews in 1993–1994—that finishing at least lower middle school is necessary for employment. Although the data, because of their unequal origin and various sample years, can only be viewed with caution, in spite of regional differences it is quite obvious that the employees in the township and village enterprises in the five zhen for which we could obtain comparable data possess a significantly higher level of

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Table 5.38 Education of Interviewed Employees, 1993–1994 and 2000–2001 (in percent) In-migrants with In-migrants without change of hukou change of hukou Educational level

1993– 1994

Illiterates, semi-illiterates, primary school 14.1

2000– 2001

1993– 1994

2000– 2001

Locals 1993– 1994

Total

2000– 2001

1993– 1994

2000– 2001

9.1

20.8

8.7

14.8

6.3

15.5

7.5

Lower secondary school

53.7

54.5

60.6

24.6

63.7

49.5

62.4

50.9

Upper secondary school

25.9

18.2

16.3

38.6

21.0

37.4

20.9

36.1

Technical college, university Total Number of interviewees (valid cases)

6.3

18.2

2.4

28.1

0.4

6.8

1.2

5.5

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

205

11

289

114

1,701

1,103

2,196

1,726

Source: Authors’ interviews, 1993–1994 and 2000–2001.

education than the respective total population.147 This trend had obviously increased by 2000–2001, because the educational level of all types of employees had clearly risen. The high level of training of those in-migrants without a change of their hukou especially confirms the fact that rural enterprises need qualified employees in order to improve the quality of their products. Another interesting reason for the higher level of training of the locals might be the fact that local authorities are beginning to prefer applicants with a better educational level in case they advertise jobs within the administration. (See Table 5.38.) The above-analyzed structure is partly reaffirmed when the former occupations of the employees are compared for both periods (see Table 5.39). There is indeed a slight increase in the number of former cadres and technicians, while the total share of former employees in state-owned or collective enterprises remained nearly stable in the two periods. Among the in-migrants with a hukou transfer, the share of former cadres and technicians is significantly higher than among the migrant workers without a hukou change and among locals. That again supports the supposition that this group includes a higher percentage of specialists who were transferred or recruited in the course of the improvement of rural industry. However, the low absolute figure in 2000–2001 may restrict this statement. Former peasants are still the main group among all interviewed employees. The decreased share of the interviewed employees who before their employment were school or university dropouts and unemployed is presumably caused by a smaller number of young people looking for a job in the years 2000 and 2001. In 1993–1994 the activities of the interviewed individuals in rural enterprises once more illustrated the differences between the locals and the two other groups of in-migrants. Those without a hukou transfer could rightly be called migrant workers, for about 80 percent of them worked in production as skilled or unskilled workers, whereas this term applied to only 58 percent of the group of in-migrants with a transfer of their hukou. About 37

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Table 5.39 Former Jobs of Interviewed Employees, 1993–1994 and 2000–2001 In-migrants with In-migrants without change of hukou change of hukou

Cadres, technicians

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

5.9

18.2

2.8

6.3

1.3

2.9

1.9

3.7

Employees in state-owned or collective enterprises

15.2

27.3

11.2

8.9

8.8

8.8

9.7

7.8

Peasants

36.8

36.4

46.0

29.5

46.2

43.2

45.3

46.7

5.4

18.1

6.7

17.9

5.0

12.3

5.3

13.0

30.4

0.0

30.2

12.5

35.4

19.3

34.2

16.1

Employees in the private sector School, university, and unemployed Others Total Number of interviewees (valid cases)

6.3

0.0

3.1

24.9

3.3

13.5

3.6

12.7

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

204

11

285

112

1,668

1,037

2,157

1,650

Source: Authors’ interviews, 1993–1994 and 2000–2001.

percent of them were technicians who worked in the administration or in the purchase/sale business, whereas it was just 16 percent of the group of in-migrants without a hukou change. The kind of occupation in rural enterprises again supported the expert thesis concerning such in-migrants who had transferred their household registration to their new place of residence. Local employees found themselves between these two groups of in-migrants. This employment structure has changed since 1993–1994. Among all groups, the share of workers in production has declined, especially among employees without a change of hukou. Within the same group, the share of technicians, specialists, and employees in the fields of administration, market logistics, and so on has increased significantly. A similar change can be observed within the group of local employees. These structural changes might be the result of an improvement of both organization and production sequence of mainly privatized rural enterprises in our analyzed zhen. (See Table 5.40.) Situation of Employment, Social Security, and Living Conditions As already mentioned, managers of rural enterprises, private or collective, are quite free in recruiting employees. Besides, permanent occupation has been transformed into a socalled contract employment. In 1993–1994 4 percent of all interviewed individuals had paid for the mediation of their job (mostly less than 200 yuan), while about 31 percent had “to bring in capital”; in other words, they had to pay the enterprise a capital contribution that, as a rule, yielded interest. In most cases (39 percent), the amount was less than 500 yuan; one-fifth of the people, however, had to bring in more than 2,000 yuan. While 75 percent of the

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Table 5.40 Present Jobs of Interviewed Employees, 1993–1994 and 2000–2001 (in percent) In-migrants with In-migrants without change of hukou change of hukou

Workers in production Technicians, specialists Administration, market logistics Purchase, sale Transportation Others Total Number of interviewees (valid cases)

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

58.0 11.8

45.5 9.1

79.6 5.9

43.4 18.6

67.4 8.1

51.8 10.4

68.1 8.2

52.1 10.4

21.9 3.4 0.5 4.4 100.0

36.4 0.0 0.0 9.0 100.0

8.9 1.4 0.7 3.5 100.0

27.4 5.3 1.8 3.5 100.0

18.7 2.7 1.2 1.9 100.0

25.0 7.0 2.3 3.5 100.0

17.7 2.6 1.1 2.3 100.0

24.1 6.7 2.4 4.3 100.0

205

11

289

113

1,688

1,078

2,182

1,681

Source: Authors’ interviews, 1993–1994 and 2000–2001.

migrant workers—in cases in which they had to pay a contribution—obviously, due to their limited private capital, paid less than 500 yuan, one-third of the in-migrants with a hukou transfer had to invest more than 2,000 yuan of capital. The small number of locals who paid 5,000 and more yuan to the enterprise consisted mainly of leading employees and managers. In addition, almost 20 percent of the interviewed individuals had to pay a deposit of a considerable amount—78 percent paid 500 yuan and more. Usually such guarantees were lost when temporary or contract workers left their job before a certain period of time had passed. For example, rural enterprises arranged employment contracts with inmigrated workers in which a security deposit of between 200 and 500 yuan was fixed.148 If the employees left the enterprise before the contract had expired, up to 500 yuan had to be retained by the enterprise for so-called training costs and up to 200 yuan for “labor protection costs.” In other cases, 20 yuan per month was deducted from the wages of newly employed workers until the guarantee sum of 500 yuan was reached. After three years of employment in the enterprise, this money was paid back with the interest rate customary in banking. If an employee gave notice to quit before a certain amount of time had passed, normally the guarantee was kept by the enterprise.149 In most cases, however, no guarantee had to be paid, but the employees often had to pay for damages caused by carelessly handling machinery or equipment.150 This situation no longer exists. As a rule, nobody has to pay for his or her job arrangement or similar agreements. The kind and duration of the employer-employee relationship in 1993–1994 included about one-third of the employees with a labor contract unrestricted in time, a further third with temporary or seasonal employment, and finally a third of employees with

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Table 5.41 Employees, by Employee–Employer Relationship, 1993–1994 and 2000–2001 In-migrants with In-migrants without change of hukou change of hukou

Permanent employees Temporary workers Contractual workers Others Total Number of interviewees (valid cases)

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

43.1 25.2 29.2 2.5 100.0

27.3 54.5 18.2 0.0 100.0

18.9 43.9 35.8 1.4 100.0

25.9 22.3 49.1 2.7 100.0

37.4 26.4 31.2 5.1 100.0

28.4 26.4 43.3 1.9 100.0

35.4 28.6 31.7 4.3 100.0

28.4 27.0 42.9 1.7 100.0

202

11

285

112

1,677

1,054

2,164

1,649

Source: Authors’ interviews, 1993–1994 and 2000–2001.

contracts renewable for several years (see Table 5.41). In our 1993–1994 study, the 28.6 percent share of temporary employees was higher than that in the previously mentioned comparable surveys. The RDRI-CERU study for 1991 came to the result that in the surveyed enterprises of all forms of ownership, the share of temporary or seasonal workers was 33 percent, but only 15 percent in the collective firms.151 Our analysis so far has shown that the highest number of employees with temporary or seasonal labor contracts or with no contract at all was to be found among the migrant workers. About 44 percent of them were employed only temporarily; often they had no regular labor contract with management. The workers frequently had to sign a contract that regulated their duties and tasks but gave no hint as to the length of employment, wages, and social security. These contracts with a list of duties, for instance, stated that every kind of work had to be accepted, that punctuality and cleanliness, careful handling of the firm property, and so on had to be observed.152 Often there existed no formal contract between enterprise and employee. According to our 1993–1994 survey, sometimes the contracts were like guarantee contracts, regulating the loss or repayment of deposit sums.153 Even if a labor agreement existed, it was often of no value when a collective enterprise had sales problems. Several times we discovered that employees were not paid because the enterprise was in the process of reorganization or because sales problems had turned up. Sometimes newly engaged workers had to work without wages for up to six months. If they stayed on, their wages for the first three months were paid at the end of the year; if they quit their job, the wages for the three months were lost as a kind of deposit.154 The payment of wages at the end of three months seemed to be quite normal. If the wages could not be paid after three months because of the lack of cash, the enterprises at least tried to pay their workers at the end of the year. In principle, no radical changes occurred until 2000–2001; however, the job guarantee had certainly decreased. An increasing number of local workers in particular had to

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Table 5.42 Former and Current Monthly Salary (in yuan) of Interviewed Employees, by Income Group, 1993–1994 and 2000–2001 (in percent) In-migrants without hukou change

Locals

Income groups

Former income

Present income

Former income

Below 100 100 to 149 150 to 199 200 to 249 250 to 299 300 to 399 400 to 499 500 and above Total Valid cases*

5.7 7.1 7.1 12.9 7.1 22.9 5.8 31.4 100.0 70

0.0 0.9 0.0 2.8 3.7 13.1 27.1 54.4 100.0 107

10.5 13.4 9.6 16.2 4.0 23.3 11.0 12.0 100.0 626

Present income 0.1 1.0 0.5 3.7 1.9 21.9 29.6 41.3 100.0 1,036

Source: Authors’ interviews, 1993–1994 and 2000–2001. *Excluding school dropouts.

accept temporary employment contracts. Only for in-migrants—in many cases qualified workers—without a change of their hukou did the share of permanent jobs increase. In all other groups and cases, the share of permanent jobs had decreased by about seven to ten percentage points within these six years. In spite of the unstable working conditions, the income situation had improved for the majority of the interviewed individuals since the beginning of their employment in rural enterprises both in 1993–1994 and in 2000–2001. In 1993–1994 the percentage of workers who before their employment in a collective or private firm had belonged in the lowest wage bracket with an income of less than 100 yuan per month had been reduced from almost 25 percent to 5 percent, while the share of employees with a monthly income of between 300 and 400 yuan had increased from about 8 percent to almost 21 percent. In 2000–2001 the development of income clearly showed a drastic change. If we exclude the in-migrants with a change of hukou because of the small absolute number (18 individuals), we can observe a significant change of income (see Table 5.42). It has also to be taken into consideration that a number of school graduates could find a job in collective and private enterprises (for reasons of comparison they have not been included). The income at two different points in time can only be compared with a certain reservation, since there are two different absolute figures. As Table 5.42 shows, in-migrants without a hukou change enjoyed the highest relative increase of income. While only 37 percent had an income above 400 yuan per month in 1993–1994, this share increased to 81 percent in 2000–2001. However, the income level of local workers took a similar turn. While only 13 percent received a monthly income of above 400 yuan in 1993–1994, 71 percent had a monthly income of over 400 yuan in

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Table 5.43 Arable Land per Household, 1993–1994 and 2000–2001 (in percent) Arable land (mu ) <1 1–1.9 2–2.9 3–3.9 4–4.9 5–5.9 6–6.9 7–7.9 8–8.9 9–10.9 11–14.9 15 and above

1993–1994

2000–2001

1.8 15.9 19.1 16.1 10.6 10.6 7.9 5.6 4.5 5.5 1.7 0.7

6.1 27.1 21.7 16.2 12.5 7.0 3.1 1.1 2.1 2.4 0.5 0.2

Source: Authors’ interviews, 1993–1994 and 2000–2001. Note: 15 mu = 1 hectare; or 1 mu = 667 square meters.

2000–2001. Even including inflation, the increase in wages seemed to be more favorable in 2000–2001 than about six years earlier. The information we received about the pattern of expenditures was heterogeneous in many cases. Nearly all savings were used for home construction, while other features of the standard of living remained nearly unchanged. Since employment was still rather unstable, this situation might have prevented most of the workers in the surveyed zhen to give up agriculture completely in favor of a nonagrarian job. The families of almost all respondents with a nongye hukou still possessed contract land that was farmed either by themselves or by themselves and their family members. The situation we were confronted with in both periods was quite different from that in more-developed regions, as for instance in rural townships near the coast, where the processes of transformation were further advanced. In the zhen we studied, the majority of the households farmed an area of between 1 and 4 mu. However, there were substantial changes between 1993–1994 (about 53 percent) and 2000– 2001 (71 percent of all farmers); possibly—as mentioned below—some changes regarding the willingness of other family members to farm for the family had occurred. (See Table 5.43.) In 1993–1994 only a small number of our respondents farmed their contract land entirely by themselves (15.4 percent). Mostly, the parents, spouses, or other household members together were in charge of agricultural activities. In 11 percent of the cases the respondents shared the work with their parents, and 8.3 percent farmed together with their spouses. Our study could only partly confirm that with increasing nonagricultural activities farming is more or less left to women (as has been pointed out by

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Table 5.44 Farming of Arable Land, by Group, 1993–1994 and 2000–2001 (in percent) Farming by Interviewees themselves after daily work Interviewees themselves during holidays Partners (mostly spouses) Parents Other members of the family Two different members of the family Three or more different members of the family Lease, other Total Valid cases

1993–1994

2000–2001

13.9 1.5 9.5 22.5 4.0 28.2 18.0 2.4 100.0 1,705

21.5 0.0 20.6 19.7 1.6 15.3 4.2 17.1 100.0 1,154

Source: Authors’ interviews, 1993–1994 and 2000–2001.

other authors). In his sample survey, Mallee has come to a more differentiated result. Agricultural activities are mainly reserved for women, elderly people, and less well educated individuals.155 In 2000–2001 some significant changes had taken place in our study areas since 1993–1994. The share of farmers who worked on their land during their leisure time had clearly increased. The same is true for assistance by spouses, mostly wives; in all the other cases a certain decrease could be observed. One of the main reasons for these changes is probably the unattractiveness of agricultural work. (See Table 5.44.) The RDRI-CERU study confirmed our results for 1993–1994.156 Seasonal employment indicated not only a varying production intensity but also the combination of agricultural and trade activities. Of course, the continuation of farming granted a household the possibility of combining agrarian and nonagrarian incomes and in that way attaining more economic security. The wish for a stable life could be seen in the fact that the workers’ own contract land was kept as long as possible, or it was preferably transferred to close relatives. The land was unofficially given to relatives, other clan members, or other peasants in the village. Farmland was almost never passed on to peasants from other regions. There was also no significant differentiation between locals and in-migrants. The search for economic security by keeping one’s own land was quite understandable, for if the nonagrarian job was lost in the case a rural enterprise collapsed, there was still the opportunity to return to agriculture. 157 The most sweeping change between 1993–1994 and 2000–2001 could be observed in the leasing of one’s own land to other families or individuals. This change indicated that in many cases the close tie to farmland had lost significance partly because there was a high level of job security outside agriculture, and partly because the place of work was too far away from the hometown. Besides the safeguarding of jobs, fringe benefits played a certain role. We exclude a

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comparison of in-migrants with a change of their hukou because the number of those in-migrants was too small in 2000–2001. Regarding the other groups, quite important changes can be noted between 1993–1994 and 2000–2001. The share of those farmers whose place of employment was nearby or who returned home during the holidays increased between the two periods of our analysis by around 7 percent. A similar development could be observed for the share of the family members—especially the farmers’ spouses—whose proportion rose from 9.5 to 20.6 percent. All in all, there was a clear tendency, which can be described as a diametric development. Not only was the development of the inhabitants’ attitude toward their own farmland an important observation, but so were the social benefits rural enterprises were willing or able to offer their labor force. The employees in 1993–1994 can be divided into two groups. About one-third of all workers did not receive any social security benefits from their firms. The low percentage of benefits for migrant workers, who went without social security, was misleading, as one-fifth of them enjoyed free lodging in a dormitory belonging to the enterprise. Putting this advantage aside, almost half of all in-migrants without a hukou transfer did not receive any social security benefits from their employer. About one-third of all employees obtained two or more benefits. Cadres and technicians were given the greatest number of benefits, though that should not to be overvalued. The benefit might amount to an allowance of just a few yuan per month for medical treatment, or some yuan as a so-called washing allowance. As is generally known, pension insurance by enterprises was still absolutely underdeveloped in rural areas. Only about 2 percent of all employees enjoyed some kind of pension insurance. In 2000–2001 the share of workers who did not receive any kind of fringe benefits had increased by eight percentage points (2000–2001: 39 percent). The most significant change seemed to be the total loss of subsidies for visiting a doctor, regardless of whether the workers were locals or in-migrants. In addition to the loss of free medical care, subsidies for birth control were considerably reduced. Increases in subsidies were instead limited to so-called “other support,” which included new and different items such as subsidies for transportation, education of children, insurance, unemployment, or rising costs of food. (See Table 5.45.) As far as social security benefits are concerned, in a sample survey of 252 townshipowned rural enterprises the ARTEP study has found results very similar to our own.158 The ARTEP study, however, did not interview the employees, only the management, about social security benefits in their enterprises. That explains why a quantitative comparison is impossible; one of the results though was that almost all enterprises refunded at least partly, if not completely, the costs for medical treatment, or they paid a monthly fixed sum of 1 to 4 yuan.159 It was not certain, however, whether all employees enjoyed these benefits. According to our interview results in 1993–1994, this was most unlikely. Almost 8 percent of all firms informed us that they had introduced pension insurance for their workforce. According to our interviews, however, less than 2 percent of the employees could expect a pension. All in all, it seems that the procedure used by the ARTEP study led to overly positive results.

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Table 5.45 Fringe Benefits of Rural Enterprises, 1993–1994 and 2000–2001 (in percent) In-migrants with In-migrants without change of hukou change of hukou

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

37.2

20.0

28.3

33.0

30.3

38.5

30.7

38.9

Rent-free flat

4.0

40.0

21.0

12.6

2.6

5.4

5.1

7.0

Free medical treatment

8.0

0.0

12.7

12.6

15.9

12.6

14.7

11.4

Subsidy for doctors’ fees, hygiene

8.5

0.0

2.9

0.0

11.1

0.0

9.7

0.0

Old-age insurance

1.5

0.0

0.7

0.0

2.2

1.7

1.9

1.3

Support for birth control

4.0

0.0

0.0

0.0

0.9

1.9

1.0

1.4

Other support

2.0

0.0

2.9

13.6

3.3

18.0

3.2

17.8

Two different fringe benefits

11.6

20.0

18.5

13.6

17.3

11.5

17.1

11.8

Three or more fringe benefits

23.2

20.0

13.0

14.6

16.4

10.4

16.6

10.4

100.0

100.0

100.0

100.0

199

10

276

103

1,637

905

2,112

1,467

None

Total Number of valid cases

Source: Authors’ interviews, 1993–1994 and 2000–2001.

Summary The data both for 1993–1994 and 2000–2001 show that the chances for the rural workforce to obtain a job in private and collective enterprises varied to a great extent. The main criteria for success seemed to be age, educational level, help by friends and acquaintances, the local net of relationships (guanxi), and—at least in 1993– 1994—being able “to invest capital.” Besides these factors, which we regard as essential, Islam has pointed out that the lack of farmland and the pressure to increase the family income by employment outside agriculture were even more important reasons for taking up nonagrarian activities.160 Of course, in almost all peasant households there is the pressure to increase the family income; its actual realization, however, depends on the above-mentioned criteria, and whether a local job can be found outside agriculture. It is obvious that among all employees, migrant workers with a low level of education, of young age, and being female normally have the weakest position on the labor market. Mostly they can only find a job as seasonal, temporary, or contract workers. The collective rural enterprises definitely prefer applicants from their own township. Only when the local labor market is exhausted are employees from outside the township

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also engaged. The only exception is a rather small group of specialists, often coming from neighboring cities. Though their number is usually limited, they play an important role in developing rural industry and therefore they enjoy more benefits than the majority of the personnel. Most workers had been peasants, and as a family they usually continue some kind of agricultural activity. According to our two surveys, the rural employees had given up farming to a small extent in 1993–1994, but much more considerably in 2000–2001. Sticking to agricultural activities granted them the security to return to farming in case they lost their trade jobs; even though this combination has gone down during the last years it is still of a certain significance.

6

Finance System and Development of Rural Towns (Zhen)

Introduction China’s financial and taxation system in the past few decades has lagged behind the country’s comprehensive economic reforms and therefore created serious problems at both the macro- and microeconomic levels. One indicator for this structural weakness was the decreasing share of the central state’s tax revenue in the GNP. The main reason for the erosion of the central state’s tax base was the fiscal contract system between the central and local governments, which in many cases was the result of a long process of bargaining.1 The main aim of the tax reform, introduced at the beginning of 1994, was to simplify the tax system and administration of the twenty-eight different taxes and to raise the central government’s share of the total tax revenue by dividing taxes into: “local taxes” at the zhen and township level, “higher taxes” at the central, provincial, city, or prefecture level, and county-level taxes. According to other information we received, the taxation system was simplified by reducing the number of tax categories from thirty-seven to twenty-three. Information on the tax-revenue sharing arrangements between the “local” governments themselves, that is, between the provincial or county/city governments and the town/township governments was and still is very limited. The rural town and township governments are in the weakest position when it comes to negotiating tax-revenue arrangements with higher-level authorities such as counties, cities, and provinces. Since the tax reform of 1994 aimed to increase the central-local (provincial) tax revenue from “about 40:60 in 1993 to 60:40,” the tax revenue of the lowest-level governments was not increased.2 While in 1991 70.2 percent of tax revenue—which included revenue actually collected by the central and local governments— belonged to the local government, that percentage decreased to 45.0 percent in 2002. In other words, the financial system did not allow sufficient funds for the use of town and township governments. Despite rapid economic growth of rural nonfarm activities since the beginning of the 1980s, many town and township budgets were very modest and offered only a limited capacity for administrative action. The main source of the local government’s budget was the collectively owned town and township enterprises; in other words, the township and town governments were highly dependent on the economic 161

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success of their enterprises.3 As an alternative solution, some town and township governments tried to provide collective enterprises in particular with preferential and even illegal policies in order to retain a bigger share of their profits. In other cases, especially in less-developed regions where the share of agricultural revenues was more important, local governments tried to extort high or even illegal rates from peasants. In the following discussion, the structure and composition of the local budget and the role of taxes will be illustrated by development in general and by our case studies. Revenue-sharing arrangements between town and township governments and higherlevel offices as well as the relation between revenues and expenditures will be described. Local taxes and fees to a great extent are transferred upward to county- or city-level governments. Finally, the burdens of peasant households will—at least partly—be analyzed, as will the opportunities town and township governments have to generate additional revenues. The first surveys were carried out in 1993–1994, that is, immediately before and after the introduction of the tax reform. In 1994, however, it was still too early to note in detail the consequences of the tax reform on the lowest administrative level. In 2000–2001, the changes wrought by the tax reform—to the extent that we could get illustrative data— were investigated, so that we were in the position to observe some of the transformations that had taken place within these six years. Local Budget and Taxes: An Overview In general, the towns included in this analysis were rather strictly controlled by their county governments as far as economic, financial, and taxation policies were concerned. On the other hand, the towns and townships themselves rigidly controlled the village committees within their administrative area. The largest degree of freedom was to be found in economic development. The county government issued the general development plans, yet it was the task of township and town governments to promote the community-owned enterprises. In the economically developed areas, it was not so much the taxes of the collective enterprises belonging to the townships or towns (xiangban qiye, zhenban qiye) that were the most important source for local development, but the transfer of profits to the township or town governments or “industry corporations” (gongye gongsi) under the local government. If the profits were transferred to the industry corporations, they were, as a rule, not included in the official budget. In cases in which the enterprises made no profits, other forms of fees and levies were introduced or development was promoted by credits. An explanation of the role of taxes as a source of local revenue requires an introductory description of some general rules of the tax system and the township-level budget. Taxes as a rule could be used only to a very limited extent for local development. According to the official fiscal system, the town and township governments themselves could utilize only a few kinds of taxes—even after the 1994 tax reform. However, differentiations among local, central, and shared taxes is of minor importance, not least because the town and township governments must first pass on all taxes to county tax

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offices, which, in turn, transfer most of the taxes to the provincial and central tax offices. Once this process has been completed, a small part of the tax revenue flows back to the town and township levels. At the time of our first surveys, in 1993 and 1994, the township and town government budgets included three types of revenues, for which the various taxes were of quite different significance:4 Budgetary Revenue: The main revenue within the regular budget consisted of industrial and commercial taxes and taxes on agriculture. Of these taxes, the following remained in the townships and towns: Income tax (corporation income tax) of the local collective enterprises, slaughter tax, urban maintenance and construction tax, free market transaction tax, animal transaction tax, contract tax, and vehicle and vessel transaction tax. As the analyzed town- and township-level budgets demonstrated, the share of these taxes in the so-called industrial and commercial taxes was very limited. Most of these taxes continued to exist after the 1994 tax reform as so-called property and transaction taxes. Officially, the urban maintenance and construction tax was of special importance for the development of a town’s infrastructure because the town- or township-level government could keep the revenue this tax generated. This tax made up 5 percent of the three most important industrial and commercial taxes—product tax (chanpin shui), valueadded tax (VAT—zhengzhi shui), and business tax (yingye shui), which is a turnover tax that applied to certain types of services.5 • Product tax, VAT, and business tax—as a rule the most important at the town and township levels—were the so-called shared taxes that had to be divided between the provincial and central administrative levels.6 Three of the four agricultural taxes were regarded as local taxes; however, they had to be transferred to the county-level tax offices.7 The revenues generated by industrial and commercial taxes made up the largest part of the budgetary revenue. In the seven case studies of 1993–1994, their share was between 65 and 99 percent; the agricultural tax was of greater importance only in less-developed areas. The 1994 tax reform replaced the product tax with the VAT and kept the business tax, while a new consumption tax (xiao fei shui), based on the former product tax, was applied to certain luxury items.8 According to the new tax-assignment system, the consumption tax was regarded as a central tax, the business tax, as a local tax and the VAT as a shared tax (central government 75 percent, local government 25 percent). These alterations will certainly not improve the tax base of the town and township governments’ budgets. • Extra-budgetary revenue comprised taxes such as the agricultural surtax, the rural education fund surtax, surcharges for public services, for example, libraries, cinemas, and the like, and fees that were levied by communal administration offices or public institutions acting as enterprises (shiye danwei). • Self-generating funds (contributory funds) included various administrative fees, levied on the construction of houses, for instance, some agricultural charges (tongchoufei), profit transfers of collective township and village enterprises or cooperative households, renovation funds for town and township enterprises, and so forth.

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In general, the kind and number of levies, charges, and taxes varied considerably by region, as did their allocation to the various budget types. However, the tax reform of 1994 favored only higher-level administrations: the budgetary revenue of the provinces increased annually by about 2 percent and their share of China’s total tax revenues went up from 16.8 percent in 1994 to 28.8 percent in 2000. Though the local tax yields of the towns and townships had reached a surplus of 13 billion yuan in 2000, their indebtedness increased in the same year. Probably because of this situation, a second tax and fee reform in rural areas has been introduced gradually since 1997, but it is not completely in force at this time. In reality, only smaller changes in taxes and public charges have been carried out at the township and zhen levels. Township- and Town-Level Revenues and Expenditures: Empirical Data of the Analyzed Zhen To judge the potential scope of the towns’ economic and infrastructural development, it is important to know, first, the volume of the three above-mentioned sources of revenue (regular budget, extra-budget, and self-generating funds managed by the towns and townships) as well as their relationships to one other; second, the most important taxes; and, third, the relation between revenue and expenditures and—if possible—the amount of taxes that must be passed on to superior administrations. Because of the administrations’ different methods of handling the data, and due to the great difficulty in obtaining the data, we will limit our comparisons among these six towns to the most important key data. Additionally, it is essential that we analyze some of the most problematic basic conditions. Since the regular budget in 1993–1994 consisted mainly of the above-mentioned taxes—industrial and commercial taxes being of primary importance—it became clear that these tax revenues were the most important financial source for current town expenditures. The share of tax revenue at the town level (without agricultural taxes) fluctuated between 50 percent and almost 100 percent of the total government budget income. Of the industrial and commercial taxes, the product tax, VAT, and business tax predominated, normally making up between 80 to 90 percent of the total. In other words, rural enterprises and industrial plants in particular were the main source of the towns’ tax revenues.9 Although taxes at the town level in 1993–1994 were basically taxes from rural collective enterprises, there were towns or townships where taxes originated mainly from large collective or state-owned enterprises at the county or city level, because some of these enterprises were located in the towns. Jinji and Yuquan were examples of this type of situation. In Jinji and Yuquan, the industrial and commercial taxes of those collective enterprises made up roughly 14 and 22 percent, respectively, of the total tax revenue. However, the taxes of such county- and city-level enterprises were irrelevant for their townships or towns, as they had to be transferred in their entirety by the local tax bureaus to superior offices. They were not factored into the later redistribution of taxes. As a rule, the extra-budgetary revenue was of minor importance. In four towns, the

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share was between 0 and 2 percent of the total revenue, and in three between 7 and 10 percent. In general, this income originated from surcharges on education, from an agricultural surtax, or from fines levied on people who ignored birth control. The self-generating funds were dependent on the transferred corporate profits of the collective enterprises—if these transfers were at all visible in the government budget— and on the fees that villagers had to pay to the town administration (zhen tongchou).10 With the exception of Yuquan, self-generating funds in the community revenue fluctuated between 11 and almost 24 percent. In the economically well-developed town of Dongting, the profits paid by the rural collective enterprises reached almost 63 percent of the self-generating funds.11 A comparison of the revenues and expenditures of the investigated towns and townships revealed two typical features in the years 1993–1994. In general, township expenditures were lower than township revenues, which shows that part of the township’s income was transferred to higher-level finance and tax bureaus. There was, however, quite a considerable range in the percentage of retained revenues, reflecting the strength or weakness of township governments toward higher-level offices as well as their negotiating skills. In towns that had to transfer a high percentage of their revenue to higher-level offices, self-generating funds played an ever-increasing role, so that the shares of the three budget types in the total expenditures varied considerably. In Zongshizhuang, the 1993–1994 percentage of self-generating funds was as high as 65 percent and in Pingle, 39 percent. The reforms of the tax and fee systems in rural areas pursued the goal to ease the tax burden of farmers and rural enterprises. Before these reforms were introduced in 1994 and modified in 1998, town and township governments had burdened rural households and enterprises with excessive fees. The new policy, however, aggravated the financial situation of the town and township governments. In cases in which the revenue shortfall was too severe, local governments again forced farmers to hand over fees. These illegal collections were called “extra-budgetary taxes” and “funds raised by the townships and towns.” Both kinds of taxes and fees were called “off-budget revenue.” It is very difficult for the county, provincial, and central governments to control illegal taxes and fees at the township and town levels. According to recent investigations, “offbudget revenues” as a share of the total township and town revenues increased from 11.8 percent in 1986 to 35.4 percent in 1996.12 On average, these “off-budget revenues” account for 30 percent of the total local revenues in less-developed rural areas, since the town and township governments demanded these fees directly from rural households. In developed rural areas, the “off-budget revenue” may amount to 60 percent of the local budget, since many farms have to hand over a large part of their profits or even a part of their rents. This increase in illegal costs debits not only the farmers but rural enterprises as well. In the analyzed zhen, we observed a very similar development. In some cases the share of the “off-budget revenue” had nearly doubled; especially extreme was the case of Yuquan, which did not have any share in the “off-budget revenue” in 1993–1994 but had nearly one-fifth in 2000–2001 (see Table 6.1).

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Table 6.1 Budget Revenue of Analyzed Zhen, 1992–1993 and 1999–2000 Total Million yuan

Jinji Pingle Xiangyang Xinzhou Yuquan Zongshizhuang

Regular budget Percent

Off-budget revenue

Percent

Percent

1992– 1993

1999– 2000

1992/1993 1999/2000

1992– 1993

1999– 2000

1992– 1993

1999– 2000

1.32 2.19 13.72 3.19 8.01 3.44

5.24 3.48 7.91 4.60 5.85 5.94

100.0 100.0 100.0 100.0 100.0 100.0

79.1 74.2 78.2 74.0 99.9 85.4

63.5 59.5 76.2 67.3 81.2 75.7

20.9 25.8 21.8 26.0 0.01 14.6

36.5 40.5 23.8 32.7 18.8 24.3

Source: Author interviews, tax offices of the respective zhen, 1993–1994 and 2000–2001. Table 6.2 Revenue and Expenditure per Head in Analyzed Zhen, 1999–2000 (in yuan)

Jinji Pingle Xiangyang Xinzhou Yuquan Zongshizhuang

Revenue

Expenditure

2,360 1,515 5,273 3,224 1,484 1,915

1,932 884 10,627 3,679 1,629 722

Source: Information provided by the respective local governments.

However, revenues belonging to the regular budget decreased accordingly but were still of vital importance with respect to the total income of the townships and towns (Table 6.1). In 1993–1994 the regular budget’s share amounted to between 72 and almost 100 percent of the total budget, while in 2000–2001 the regular budget in the analyzed zhen had decreased to a share of between 63 and 81 percent. When we try to calculate the revenues and expenditures per head in the analyzed towns, we are able to evaluate the financial burden more precisely. In these cases the revenues include both taxes and fees. In Jinji, Zongshizhuang, and Pingle the revenues were higher than the expenditures, but one might gain the impression that zhen governments like those in Zongshizhuang or Pingle do not use the scope of funds they actually possess. Xiangyang, at the other end of the spectrum, is severely in debt. Although the results of our budget analysis are not homogeneous, one can assume that the economic situation of most of the rural towns and townships in China’s interior is in many cases problematic. (See Table 6.2.) In the regular budget in 1993–1994, agricultural taxes were of varying importance

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Table 6.3 Agricultural Tax and Rural Fees as a Percentage of the Zhen Budget Revenue, 1992–1993 and 1999–2000 Budget revenue Million yuan

Agricultural tax Million yuan

Rural fees

Percent

Million yuan

Percent

1992– 1999– 1992– 1999– 1992– 1999– 1992– 1999– 1992– 1999– 1993 2000 1993 2000 1993 2000 1993 2000 1993 2000 Jinji Pingle Xiangyang Xinzhou Yuquan Zongshizhuang

1.32 2.19 13.72 3.19 8.01 3.44

5.24 3.48 7.91 4.6 5.85 5.94

0.37 0.23 0.28 0.75 0.07 0.92

0.51 0.73 0.61 1.90 0.21 1.16

28.0 10.9 2.1 23.4 0.8 26.7

9.7 21.0 7.8 41.2 3.6 19.5

0.15 0.47 — 0.31 0.0 0.33

0.00 0.05 0.26 0.14 0.10 0.00

11.4 22.2 — 9.6 0.1 9.6

0.0 1.4 3.3 2.9 1.7 0.0

Source: Authors’ investigations, 1993–1994 and 1999–2000.

depending on the towns’ or townships’ level of industrialization.13 Their percentage of the total revenue fluctuated between 1 percent (Yuquan) and 22 to 28 percent in the towns of Jinji, Zongshizhuang, and Xinzhou, which are dominated by agriculture. In general, however, the tax burden of peasant households, of village inhabitants’ groups, and of village enterprises was higher than might be suspected based on the agricultural taxes listed in the budget. It is clear that a considerable portion of the agricultural taxes was passed directly on to the city and county governments without even being mentioned in the budget of the town.14 The financial situation seemed to be positive in Jinji, Zongshizhuang, and Pingle, more or less problematic in Xinzhou and Yuquan, and really catastrophic in Xiangyang, where the sum of expenditures was about double the amount of revenue. When we evaluate the importance of agricultural taxes in 2000–2001, we can observe that their share had decreased in only two cases (Jinji, Zongshizhuang) compared with 1993–1994, while in all the other zhen the share of agricultural tax had increased significantly, as, for example, in the towns Pingle and Xinzhou. Rural fees, though, were insignificant in 2000–2001 compared with their share in 1993–1994. (See Table 6.3.) When we consider just the industrial and commercial taxes for 1999–2000, we see that their amount is still decisive for the local tax income and reflects the economic structure of our analyzed zhen. In most cases the industrial and commercial tax was and is nearly in inverse proportion to the agricultural tax, even if the off-budget revenue skews this rather clear relationship. Still most problematic is the zhen of Xiangyang, as we have already seen in our detailed description of its industrial development. Zongshizhuang is also still influenced decisively by its industrial structure, though without changing the traditional areas of production in a significant way. (See Table 6.4.) When we add agricultural, industrial, and commercial taxes, the tax income came to about 60 to 80 percent of the total budget. This situation demonstrates how difficult it

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Table 6.4 Industrial and Commercial Taxes of Rural Enterprises, 1999–2000 Budget revenue

Jinji Pingle Xiangyang Xinzhou Yuquan Zongshizhuang

Industrial and commercial taxes

Million yuan

Million yuan

Percent

5.24 3.48 7.91 4.60 5.85 5.94

2.01 1.07 4.19 0.66 2.07 2.60

38.36 30.88 53.02 14.28 35.38 43.75

Source: Authors’ investigations, 1999–2000.

will be to reform the traditional tax system, since there seems to be no other way to balance revenue and expenditure than to collect various illegal fees. Structural Problems of the Towns’ and Townships’ Public Budgets Around the turn of the century, the main idea of the new reforms of the tax and fee system became to abolish the “off-budget revenue” and to combine all taxes and fees in order to reduce the tax burden for all inhabitants. In other words, the budget revenues of all towns and townships should consist only of the so-called regular budget and should abolish the two other forms of “off-budget revenue,” the “extra-budgetary tax” and “funds raised by the townships and towns.” The future budget of the towns and townships will include only the following taxes and fees as income: one-quarter of the VAT, all local industrial and trade taxes, income taxes for all rural enterprises, four different agricultural taxes, an administration fee, charges, and fines.15 At this time, the experiences of our analyzed zhen with the new tax system have been very limited. One of the consequences of the partly introduced new tax system is decreased revenues for nearly all townships and towns.16 After the reforms in 2000, the revenues of all Chinese townships and towns were drastically reduced. On average the budget revenue per town or township declined by 0.73 million yuan in 2000. However, the average indebtedness amounted to 3 million yuan in the same year, especially because of increasing costs for support of the local educational system and subsidies for local industry. When we generalize the deficit problem of a considerable number of our analyzed zhen, we can describe the situation in the following way. Due to this deficit—in many cases permanent—and the resultant compulsory increase of taxes and fees, the budget politics of most townships and towns were criticized not only by the central government but also by the local farmers and enterprises, since these two groups always feel undeservedly placed under financial strain. However, the local government must allow for a decisive contribution to many expenditures and to local development within all sectors. Therefore the local government is also under significant financial pressure.

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Local governments must spend a substantial part of their budget on public services, even though those expenses should be managed not only by the local administration but by higher-level administrative units as well. For example, there may be expenses for local education, such as primary and secondary schools. Though education is regarded not only as a local task but also as a public concern, the costs of which to be covered mainly by the counties, prefectures, and central government, many towns and townships must themselves pay between 50 and 70 percent of these costs. Other duties to be financed locally also include training of people’s militia and subsidies for family planning, among others. More than half of the local budgets are used to pay salaries and wages of local cadres, teachers, doctors, technicians, and so forth. The salaries for the local office and whitecollar workers in particular debit the public budget excessively. The indebtedness of the towns’ and townships’ public budget can be divided into two parts. The first part is the so-called visible debt, which includes bank credits or other official loans, including credits from the investment funds for rural development. The second part are the invisible debts, which cover outstanding wages, debts for public tasks, and unsettled bills for the expansion of the infrastructure. It is quite difficult to estimate the total indebtedness of the towns’ and townships’ budgets in China. The total amount was approximately 200 to 220 quadrillion yuan in 2000, which represents on average about 4 million yuan of debt per town or township. Different examples of this situation have been analyzed by a research center of the State Council. In the province of Yunnan, the average debt per town or township was 3.31 million yuan. The visible debts were used mainly for all areas of public infrastructure (streets, schools, irrigation systems, and the like). The invisible debt was used for daily allowances for travel, medical insurance contributions, fees for electricity and water, phone fees, and so forth, or for unpaid wages. Similar structures could be found in nearly all analyzed provinces, such as Qinghai, Hunan, and Jilin, or in the city of Harbin. For example, many public expenditures are hidden behind other labels, for example, the budget for schools behind the budget for construction of buildings for the local administration. Finally, the revenues of the analyzed zhen were developing quite differently, as we have seen above. We discuss elements of these different growth rates in detail below. While China’s revenues as a whole showed rather stable two-digit growth rates between 1995 and 1999 (see Table 6.5), the analyzed zhen revenues were quite different. The financial situation of Xinzhou and Zongshizhuang seemed to be negative, and a similar development could be observed in Jinji since the mid-1990s. This financial development depends mainly on the corresponding situation of the rural enterprises. While the firms in Yuquan and Pingle have developed stably during these same years, other zhen are in a transition period. For example, the government of Jinji tried to restructure or to subsidize traditional firms, as well as to introduce a new corporation, such as a dairy. There is no doubt that these attempts at industrial restructuring affect the local budget. Another reason for the public financial problems is the decrease in the number of collective enterprises, which could be controlled by the local authori-

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Table 6.5 Annual Proportional Growth Rates of Local Revenues, 1995–1999

1995 1996 1997 1998 1999

China

Yuquan

Pingle

Xinzhou

Jinji

Zongshizhuang

19.6 18.7 16.8 14.2 15.9

38.1 23.3 –17.4 37.6 11.8

–17.2 57.9 32.3 9.3 15.7

— 8.9 –13.5 4.6 –16.5

11.7 23.5 47.8 –13.0 –9.5

13.4 –12.6 –3.9 17.0 4.8

Source: Authors’ investigations, 1999–2000.

ties, and the rapidly increasing share of private enterprises, which mostly tried to reduce or even avoid their tax burden. According to the new tax system, the town and township governments will officially receive the following taxes and fees: one-quarter of the VAT and the whole industrial and commercial tax of collective and private enterprises at the town, township, or village level. The local fiscal revenues also include a tax on rural enterprises, four different agricultural taxes, administration fees, and penalty taxes, among others. Industrial and commercial taxes of all institutions at the county, provincial, and state level must be paid to the responsible higher-level administrations, even if these industrial or commercial institutions are located within the administrative area of a town. Since these institutions and factories play a minor role at the town level, their contribution to the total amount of taxes is not very important. However, 75 percent of the VAT of all local collective and private enterprises must be paid to the higher-level tax bureaus. On estimation, about 60 to 70 percent of all taxes generated within town and township areas must be handed over to the superior tax administrations. Tax Agreement between Township/Town-Level and County/City-Level Governments As a rule, until the tax reforms the township- and town-level governments signed an agreement with the responsible county- and city-level governments to pass on taxes according to the tax responsibility system introduced in 1988. This system applied to all administrative levels and was handled in various forms. Generally, the county tax offices laid down a tax quota; this quota was fixed with respect to a base year and took into consideration an annual increment of taxes. Local tax offices were required to ensure that the set tax target was fulfilled or even overfulfilled by the township/town governments. For this reason, the tax offices were not placed under the local governments but were branch offices of city and county tax bureaus. Since 1994, tax offices have been divided into two branches: one department is responsible for central taxes and the other for local taxes.

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Some examples of our fieldwork in 1993–94 may help illustrate the situation. According to the rules of the arrangements with respect to sharing above-target tax revenues, Yuquan was allocated a target for its expenditures (which was supposed to be covered by its own tax revenues) by the city government of Acheng (in Heilongjiang). The town government retained 70 percent of the above-target tax revenue as well as extra fees (e.g., fines charged by the local police). In 1993, the city of Wuzhong in Ningxia signed a tax agreement with all townships and towns under its administration, in which a tax target was stipulated for each township/town government. The town government of Jinji was required to sign an agreement that fixed the amount of taxes to be paid and the different kinds of taxes: industrial and commercial tax, agricultural tax, taxes on special agricultural products, and cattle rearing tax. If the planned tax target was surpassed, the surplus revenue had to be shared between the town (60 percent) and the county (40 percent).17 Similarly, the town of Xiangyang could keep 60 percent of the above-target revenue according to its tax agreement with the city of Guanghan in Sichuan.18 The town government of Pingle shared its tax surplus equally with the city of Qionglai/Sichuan.19 In general, the above-mentioned agreements referred to the budgetary revenue of townand township-level governments. Sometimes county or city governments retained taxes that (according to the legal financial system) should have belonged wholly to the township or town governments, as, for example, in the case of the urban maintenance and construction tax. Such practices on the part of comparatively powerful higher-level governments violated the principle—as stated in policies and regulations—that the urban maintenance and construction tax should be earmarked for local development. Since the administrative tax system has changed its structure, the tax income for the town and township governments has contributed to a decisive loss of the public income. Conclusion Like other indicators, the local financial system reflects the process of economic and social change in China’s countryside. The tax base for the budgets of town and township governments has been inadequate because of the weak position of local governments in the process of negotiating tax-sharing arrangements with higher-level governments. In many cases, budgetary revenue and expenditure are directly dependent on directives not only from the central but also from the city- and county-level governments. The tax reforms of 1994 and their modifications of 1998 have not improved this situation, although the tax revenue of local governments will not fall below a floor based on 1993 revenue.20 The introduction of elements of a market economy means cutting state subsidies and tolerating severe regional disparities in economic and town development possibilities. Only those local governments that have established new and profitable industries and commercial activities have been able to finance public tasks, such as urban construction and development. Since local governments “possess wide-ranging powers outside the authority officially granted them,”21 there is always a certain probability that numerous town and township governments collect extra and/or illegal fees and charges from their rural inhabitants.

7

Processes of Change in Administration and Politics Increasing Economic Factors of Politics: New Functions of the Local Bureaucracy Inflation of the Local Bureaucracy Economic reforms and their tendency toward a market economy had a decisive influence on the local bureaucracy and its work and functions. Economic development, not state and ideological control, dominates the activities of local party and administrative institutions. The increasing economic factors of politics can be seen in the reform of administration, in its concentration and greater effectiveness, and in the establishment of legal rules for administration and public service. According to formal regulations, civil service applicants are to be selected according to qualifications and not for political reasons. It would be an exaggeration to say, though, that the regulations for Chinese civil service employees passed in 1993 are comparative to the Pendleton Act, which was the nineteenth-century basis for the American civil service.1 In the new Chinese regulations, rights and duties, qualifications for employment, examination criteria, measures for promotion and for disciplinary acts, and requirements for advancement, demotion, and dismissal are documented for the first time.2 The problems of socialist administration, however, are still the same, as can be seen, for example, in the overemphasis on vertical structures or the insignificance of formal communication structures. The administration is still dominated by informal structures such as guanxi, patronage, and networks. This is also true for employment policies. The above-mentioned regulations are in line with the old form of hierarchization; they are meant to settle the status of privileges, not to specify roles and duties. Successful economic reforms first need an improved administration that concentrates on efficiency and rationality, changing structures and procedures of the bureaucracy, and contributing to a change of attitudes of actors in the interest of realizing aims for the whole country. The country needs administrators who are effective managers, not competent bureaucrats.3 The central problem of the civil service is the tremendous increase in the number of officials. At the beginning of the 1950s the ratio of cadre to inhabitant was 1:600; in 1992, it was 1:34.4 In 1992 there were more than 34 million functionaries. In fact, it might have been 40 million, as surplus cadres were listed under different names so as not to appear to surpass the limit of the cadre contingent.5 In the 1990s, their number grew 173

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about one million every year.6 That meant a tremendous financial burden on public households, which were already in a rather tight situation. The expenditures for the civil servants grew from 40.4 billion yuan in 1980 to 140 billion yuan in 1991, which was 40 percent of the state budget.7 The state can no longer pay this army of functionaries, especially as there are regularly two positions—one for the party and one for the administrative cadres—for one task. Therefore, the central authorities demand a reduction of the civil service. This is an even more valid requirement for local governments. During our research in Sichuan in 2000 we were told in Yanyuan county that in 1999 20 million yuan out of the financial budget of 25 million yuan was spent to pay the salaries of the more than 7,000 county officials. As one official explained, in 1937 there were 70 officials responsible for a population of 80,000 people, whereas in 1999 more than 7,000 cadres were in charge of 306,000 inhabitants—a change of the official-to-inhabitant ratio from 1:1143 to 1:43.7.8 During the First Session of the Eighth National People’s Congress in March 1993, a drastic reduction of costs in the civil service was announced.9 The general secretary of the CCP, Jiang Zemin, declared that the number of civil servants would be reduced by 25 percent until 1996. At the central-government level their number would be reduced by 20 percent, at the provincial level by 30 percent. This reduction was to be carried right through all levels, especially in rural areas, in other words, a great number of cadres would have to find a new job outside the state-administrative sector. Economic administrative organs were turned into economic companies. At the town and township level, functionaries were urged to become self-employed or were transferred to economic enterprises. A report on Xiangyang county (Hubei Province) showed how the political leaders wanted to solve the problem. In April 1993, 12,000 cadres from 600 villages were reported to have established 5,000 enterprises. The report positively pointed out that the functionaries had been “weaned from the milk” (duannai) and would no longer live on the peasants either by their salaries or by arbitrarily taking fees and charges.10 Since the end of the 1970s, the central government has tried several times to limit or reduce the number of cadres. De facto, however, as already mentioned, the number of officially registered state cadres had more than doubled from about 15 million in 1976 to 34 million in 1992.11 In 2001 the Chinese leadership decided once again that until the end of that year each institution at the county, town, and township level had to reduce its number of officials by 20 percent. The Bureaus for the Authorized Size of Government Staff (bianzhiju) were in charge of this reduction. Yet, until now, all efforts of limitation had just caused another increase, called by one author an “endless cycle of simplification, expansion, re-simplification and re-expansion.”12 In the China of today, the Parkinson’s rule seems to be proved once more; that is, bureaucracy is growing unendingly, and all efforts to reduce it end up in another increase.13 One example might demonstrate the indispensability of the bureaucracy. Chinese scholars have found out that in some counties more than 50 official permits are necessary to be allowed to open a small private restaurant, the equivalent of more than one permit per square meter of the average restaurant’s ground floor.14

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Economic Transformation of the Bureaucracy In the 1990s it was explicitly recommended by the party leadership that administrative organs be turned into economically independent companies, so-called gongsi. That transformation was to relieve the official budget, as the wages and bonuses of the employees of these organs were paid out of the revenues of that gongsi and not out of the regular budgets. That meant that at the zhen level the cadres concerned had to be paid by the profits of the town and township enterprises. At the same time, the latter might have been a stimulus for efficient administration and control as well as for establishing new local enterprises, as they were meant as a precondition for the size of the functionaries’ income. At the zhen level the administration of the local economic sectors (industry, agriculture, commerce) until the mid-1990s had already been transferred to some extent into such gongsi, no longer being part of the general administration. Those companies had to make a profit and to advise the different economic sectors: gongye gongsi (industrial company, responsible for the township enterprises), nongye gongsi (agricultural company, responsible for the agrarian sector), and in well-developed towns the shangye gongsi or di san chanye gongsi (in charge of commerce and the tertiary sector). The transformation of administrative institutions into gongsi was based on three factors: • Concentration of the administration on economic interests (such as profit, direction of development, acquisition of financial means for local development, growth of local budgets by profit-transfer, and efficient administration); • Attempt to reduce the administrative bureaucracy; and • The necessity that the functionaries’ salaries be in line with the general income increase. The gongsi were subordinate to the zhen governments, to which they had to transfer the profits from the enterprises. In almost all investigated cases, the local party secretaries were at the same time general managers (zong jingli) of the industrial companies and their deputies (vice party secretary, as a rule the mayor) were vice general managers. There were several reasons for the transformation of economic administrative institutions into gongsi. First, the officially mentioned ones: • to demonstrate the separation of administration and management (a separation that in fact did not exist); • the number of cadres for whom the government (of the responsible county) has to transfer wages to the zhen in the last two decades has dramatically increased. The original established numbers have been surpassed tremendously. Due to economizing and reducing the number of surplus cadres (fuyu ganbu), many functionaries were transferred into the gongsi and are thereby no longer on the state’s wage lists.

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The zhen solved quite a number of financial questions by means of the profits from the gongsi, that is, teachers’ salaries (of the minban teachers), subsidies for schools and hospitals, and measures for modernization and improving the infrastructure. The stricter separation of party/administration and economic enterprises demanded by the central government had led to a formal deconcentration, though in fact had not altered the grasp of the local political elite over enterprises. The local bureaucracy still treated gongsi in the same way they treated other subordinate administrative institutions. In contrast to former times—at least in sectors with a development-oriented elite—a more professional-oriented leadership was brought into power that was interested in legitimation by development. Economic reforms in countries such as China or Vietnam, in which Communist parties dominate politics and economics, are at the beginning only able to produce a hybrid market economy, as the bureaucracy still controls vast fields of the economy and especially the distribution channels.15 New strata arise, but they are still in a nascent status and have not yet developed into pressure groups.16 The experiences of the newly industrializing countries in East Asia reveal that where there exists no entrepreneurial initiative, bureaucracy has to initiate industrialization. These factors explain why in China local governments or cadres commence entrepreneurial activities and in some cases even have to in order to start local development. In fact, gongsi were the necessary result of hybrid market conditions. Gongsi had still more important functions. As they had to transfer the profits of the enterprises in the form of money or material premiums to the local political elite, the migration of qualified personnel was to be prevented. The tremendous income disparity between wages of functionaries at the zhen level—sometimes below the income of urban workers—and the income of managers and lessees of flourishing township enterprises, in many cases having a yearly income of several tens of thousands or hundreds of thousands of yuan, would necessarily lead to the migration of qualified zhen cadres into the private economy, if there were no further source of income for the local political elite. Gongsi were the institutions by which to realize a more or less legal transfer of income. That connected the personal interest in a high income with the objective necessity of development. Only those who were able to make rational economic decisions and who could work efficiently and successfully could earn a high income and keep their chances for a further advancement in the political hierarchy.17 This development in the mid-1990s was also to be found at the village level. The prosperity of villages, of the peasantry, and not least of village cadres depends on the economic development of a village. That person is considered to be successful who has entrepreneurial success in which the village community participates. That explains why the economy increasingly has become the dominant factor in villages. The economic transformation of politics can be seen among other factors in the increasing linkage of party and administrative structures with village enterprises. Our own investigations proved that at least in the main regions of economic growth, the greater portion of the village party secretaries were at the same time managers of industrial companies and directors of enterprises—at least in name.18

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The economic orientation had the result that the income of the local functionaries depends on the success of local enterprises. High profits mean high bonuses for the managers of “companies,” whereas losses mean the forfeiture of bonuses. That is why economic activity is the pivot of all activities of zhen and village cadres; the leading functionaries as a rule take for themselves those jobs that promise the highest profits. In fact, in many parts of China leading village functionaries are simultaneously heads of village firms. Where only private and no village enterprises exist, there is an interweaving of functionaries and private entrepreneurs. Especially in the nonprivate sector there is a constant exchange of individuals among local party organizations, local administrations, and leading positions in enterprises. For some years cadres become managers of an enterprise or they lead an enterprise by contract, which gives them an opportunity for financial enrichment. After some years, however, another functionary from the local leadership network replaces them. Having cadres as enterprise managers, however, is not just a way to create the uninterrupted enrichment of local functionaries in rotation; there are some more important intentions: • It serves the relationship between enterprises and local government, particularly with regard to profit transfers. This profit is used not only for the material supply of the local bureaucracy but also for local development. • A weakly developed entrepreneurship is the reason functionaries had to take over this function, at least in the nonprivate sector. In Dongting in 1993 almost 93 percent of the directors of town and township enterprises were former village cadres (they were usually simultaneously party secretaries in their enterprises). This promotes the development of local networks beyond party connections. Political alliances influence economic ones, resulting in permanent structures of supply, selling, and service. This “cadre capitalism” leads to political implications, as it favors the changeover of cadres from political to economic activities and accelerates the erosion of political ideology and structures. The change of values is clearly to be seen in statements such as “Only an efficient entrepreneur can be an able cadre.”19 At the same time, the intermingling of party, administration, and economy causes these various structures to become one economic entity. The Chinese leadership has criticized the growing tendency of combining party and government organizations with economic institutions.20 Our own investigations prove that tendency. In 1993 more than half of the 444 leading cadres at the town and township level in the county of Wuxi were simultaneously managers of enterprises. Of 131 promoted township functionaries in 1992, 62 were concurrently directors of township and village firms. Well-developed provinces, for example, Jiangsu, are further advanced. Thirty percent of the functionaries at the province level were to be sent off during the 1990s. That is why the provincial government urged the cadres to move from administration to the economy, that is, either to rent state or collective firms or to engage in the private sector. This move is more difficult to realize in less-developed regions, as there are few functionaries with adequate qualifications. Here only the small private sector might offer the capacity to absorb these functionaries.

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• The close relationship of firms to the local bureaucracy makes enterprise management easier. Tax relief or tax exemptions, and the supply of capital, credits, land, and raw materials with reasonable prices are more easily realized with the help of local government, the latter providing protection and assuming losses if necessary. In general, it must be stated that: • In regions with a relatively high degree of privatization, the role of the Communist Party is apparently decreasing. Where the cadres are unable to engage in the market, they become poor. The income of functionaries grows according to their engagement in the private sector. Many functionaries change over into the private sector or sell their power to private entrepreneurs (in the form of corruption).21 • In regions where the collective economy dominates, the role of the party is still untouched. Where the cadres are clever enough to take up market ideas and to start economic development, their prestige among the population as well as their income are growing. So far the majority of the functionaries are convinced that corruption and participating in the private sector are of vital importance to secure their income and to become rich. The position of a functionary seems increasingly to be of interest for individuals who are well off and who intend to use these positions for their own economic gain. In Guangdong Province an investigation in the first half of the 1990s revealed that the majority of the newly appointed functionaries were former private entrepreneurs, whereas a study in Hunan Province discovered that the number of functionaries who had changed over into jobs in the private economy was considerable.22 Where the economy becomes the decisive factor, it is quite natural that capable entrepreneurs become functionaries simply due to their success in the private sector and on the market.23 It is a typical feature of the local bureaucracy that it is not simply an agent of the central government or of the party, but furthermore is dependent on the general political conditions of the respective province and county. The bureaucracy has a double role. On the one hand, it has to behave loyally toward the superior institutions, on the other, it has to mediate between the rural population and the county bureaucracy. As Diaz and Potter put it, it has to submit to the demands of the higher political and economic institutions, but at the same time to the traditional expectations of the peasantry.24 Various publications prove the thesis that local bureaucracy does not only mediate between government and regions/ localities, but it also secures local interests against national ones.25 During our fieldwork we frequently faced that kind of behavior. The hiding of profits in order to use the money for local purposes and not to transfer it as taxes to superior institutions; deviant acts such as selling land to gain means for establishing economic enterprises; the hiding and falsification of statistics to reduce charges and claims of superior organs or to gain higher financial means, in order to regain control over villages and towns, to steer processes of modernization, and to concentrate resources on the development of urban construction, cities, and counties with low resources, all reflect the transfer of cadres.

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This very transfer into towns/townships has the following background: • Establishing a local elite interested in development and having the necessary qualifications; • Replacing rural functionaries by urban ones who are to bring “urban culture” to the countryside. This can clearly be seen in the efforts of the cadres to “urbanize” the town and townships, for example, by establishing trade centers, by improving traffic conditions, by creating plans to replace traditional rural houses with concrete multistory buildings, and so on. The transfer of cadres proves to be beneficial for local development, though it results from the deeply rooted distrust of city dwellers toward the rural population. A leading functionary in Jinzhou put it thus: “The cadres in the villages are unable to develop the economy in the townships either by qualification or ideology.” That might be true for less-developed regions but not for the better-developed regions in eastern China, where rural entrepreneurs were not only full of initiative but were also an important reservoir for new cadres. • A closer relationship between towns and villages with their administrative counties. The appointed cadres continue to live in the county seat while guaranteeing that local revenues are transferred to the administrative counties. Through the replacement of local functionaries in the zhen by others coming from a different town or township as well as by permanent rotation—a procedure typical for China—local networks are to be destroyed. Outside cadres can act more freely, as they do not belong to the local kinship or clan structure. A cadre in Pingle put it this way: “We outsiders can more easily criticize and call persons and villages by their real name. No local cadre would dare to criticize his own village, members of his clan, or inhabitants of his home village.” Administration at the County, Zhen, and Village Levels Cadre System Before we turn to the administrative structure from county to village level, we want to explain the frequently used term “cadre.” This term (Chinese ganbu) has two meanings. First, it comprises all party functionaries as well as civil servants in state offices and institutions, in the army, and in “people’s organizations” (renmin tuanti), except ordinary soldiers and “low-grade servants” (qinza renyuan) as well as ordinary workers in state-owned firms and employees in the state-owned service sector (hospitals, schools, research institutes).26 Second, “cadre” also stands for individuals in leading positions. One has to differentiate between party and administration cadres as well as military cadres. As the term covers party leaders, state president, and prime minister, as well as village cadres, it does not represent a homogeneous group. The cadre system in existence since the 1950s was remodeled by the “Provisional Regulations for the Public Service” from 1993.27 (See Table 7.1.)

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Table 7.1 Grades of State Cadres Grade

Level

1 2–3 3–4 4–5 5–7 6–8 7–10 8–11 9–12 9–13 9–14 10–15

Premier of the State Council Vice-premier/State councillors Ministers (buji)/Provincial governors (shengji) Vice-ministers (fubuji)/Vice-governors (fushengji) Heads of departments of ministries (siji)/Heads of provincial bureaus (tingji) Vice-heads of departments of ministries (fusiji)/Vice-heads of provincial bureaus (futingji) Heads of subdepartments of ministries (chuji)/Heads of counties (xianji) Vice-heads of subdepartments of ministries (fuchuji)/Vice-heads of counties (fuxianji) Heads of sections of ministries (keji)/Heads of towns/townships (xiangji) Vice-heads of sections of ministries (fukeji)/Vice-heads of towns/townships (fuxiangji) Employees of sections of ministries (keyuan) Office employees (banshiyuan)

Source: Renmin Ribao, August 19, 1993.

The grading is the same at each level in the party, the people’s congresses, and the political consultative conferences. This grading also regulates salaries and privileges.28 To become a cadre who is a civil servant paid by the state (state cadre,29 guojia ganbu), one has to be put on the official staffing schedule by the responsible personnel offices (renshibu). Organization departments (zuzhibu) are responsible for the party cadres. State cadres are paid out of the official budgets. Their salaries are part of the regular budget, whereas the other rural cadres (difang ganbu) have to be paid by extra-budgetary means. Each cadre grade is specially treated. Privileges increase according to grade level. “High cadres” (gaoji ganbu) from grade 5 upward enjoy the greatest privileges as far as salaries, labor conditions,30 extent and standard of flats, medical treatment, and pensions are concerned, as well as the number of servants paid by the state, the standard of the official car with driver, the right to go first class on trains and planes during official trips, and last but not least detailed information on China and foreign countries. This system is similar to the one observed during the time of the emperors, when the civil service was also divided into grades, the so-called ji hierarchy. There were two main categories: civil and military service. Since the Tang dynasty (618–907) each category was divided into nine grades, and each grade in turn into two classes, an upper (shang) and a lower (xia) one. Altogether there were eighteen different grades. Special insignias and salaries characterized each grade.31 The higher the rank of the functionary, the greater the share of privileges and material profits covering his complete income. The loss of an official position or the exclusion from the hierarchy mean the removal of all kinds of privileges as well as a significant reduction in living standard. The potential for ascent in such a system and the social security it offers invites individuals to become members of the party and to join some

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kind of network that guarantees advancement in the hierarchy as well as an adequate position in relation to the network group and the patron. Administration at the County Level The county connects the rural population with the larger cities or the province. The county leadership elaborates development plans for the entire county, particularly for economic development, a right that was granted in the context of the decentralization policies in the 1980s. The counties control the development of county-owned enterprises via decisions on personnel, resources, and loans. Moreover, they raise taxes on the order of the higher echelons, enforce quotas for agriculture assigned to them by superior authorities, and control land use. Therefore, the administrative net of a county is more dense than that of a town or township, simultaneously controlling the zhen by branch offices in the towns and townships. The county bureaucracy can be divided into six subgroups: • • • • • •

departments under the party committee departments of the city or county government departments under the people’s congress departments under the political consultative conference government institutions that were turned into gongsi institutions under superior authorities

Figures 7.1 through 7.4 demonstrate these facts by means of the example of Qionglai County. This pattern is relevant for almost all the county towns we visited, whereas the number of offices and commissions varies between thirty and fifty. Practically all counties and cities surpassed the centrally fixed limit. According to this limit, there were four categories of counties allowed to have a different number of administrative units: • Counties that were well developed and that had a large number of inhabitants: about thirty institutions with 750 employees; • Relatively well-developed counties with a comparatively large population: about twenty-five institutions with 650 employees; • Counties at a medium economic level and with an average number of inhabitants: about twenty-five institutions with 500 employees; • Weakly developed counties with a small number of inhabitants: about twenty institutions with 350 employees.32 This categorization is rather vague; it shows, however, that the number of organizations is dependent on the respective level of development and financial means. As a matter of fact, the upper limit is not enforced. At least our investigation has revealed that practically all counties in our fieldwork surpassed the upper level. At the beginning of

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Figure 7.1

Organization of the Party Committee, Qionglai, Sichuan, 1994

Source: Authors’ diagram based on information provided by the Qionglai Party Committee. Figure 7.2

Organization of the County Government, Qionglai, Sichuan, 1994

Economic and Planning Commission

Source: Authors’ diagram based on information provided by the Qionglai government.

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Figure 7.3

Organization of the People’s Congress, Qionglai, Sichuan, 1994

Source: Authors’ diagram based on information provided by the Qionglai People’s Congress. Figure 7.4

Organization of the Political Consultative Conference, Qionglai, Sichuan, 1994

Source: Authors’ diagram according to information provided by the Qionglai government.

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the 1990s, in all of China, the average number of cadres per county was 700 individuals; in larger counties it was more than 1,000,33 not including cadres with a rural hukou. To reduce costs, the central government demands a stricter observation of the quota and a reduction of the administrative bureaucracy, so local governments have to turn part of their administrative sectors into economic units. To be in line with the administrative reform, in counties and cities with a stronger economic capacity (Wuxi, Guanghan, Qionglai), administrative institutions changed their name to the above-mentioned gongsi. Though the name was new, we have determined that local governments still look upon gongsi as a unit under their power. The renaming, however, reduced the number of administrative offices almost by half. At all administrative levels there exists a dual structure of party and state. Since the beginning of the 1980s attempts have been made to disentangle the tasks of these two institutions. This shows that there is a genuine division of duties, though the division is not always clearly marked. The state is the formally executing organ, the executive, while the party, representing the interests of the people, is to control the abstract bureaucratic state so that it acts in the interest of the people. This separation of functions is the basis of the dual system, dominated by the CCP. At the county level, the party committee is still the decisive organ, though party and government have agreed on a stricter division of labor. This predominance is even stronger at the local level than at the central and provincial levels. The power of the CCP over the state can best be seen in the fundamental rules, established by the party, and according to which the “state” acts and decides on the personnel.34 As an investigation of Chinese political scientists among county cadres at the end of the 1980s revealed, the majority of the interviewed individuals believed that the leadership and the influence of the CCP at the county level had been weakened by the stricter separation of party and government tasks and that the labor conditions for the party committees in the counties had become much more difficult.35 This shows that the party nowadays is confronted with a greater variety of social forces and that the structures of decision making and enforcement have changed. Under these conditions the tendency to reduce the dual bureaucracy of party and administration is also growing. The merging of party and government organizations in the name of administrative reform at the local level increased to such an extent that the Organization Department of the Central Committee of the CCP in a central document in 1993 expressed its concern regarding this widespread phenomenon.36 Administration at the Zhen Level Townships and zhen are the connecting link between county and village. Their political obligations are to collect taxes and charges in the villages, to keep up public order, to control the villages, and to secure the organizational net (party, administration) in rural areas. Furthermore, they are responsible for local economic development and the elaboration of development plans, the propagation of the targets of the agricultural quotas set by the state, and the organization of public projects (such as irrigation and maintenance of irrigation facilities).

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At the zhen level the number of administrative offices has been drastically reduced due to smaller administrative areas and for financial reasons. At the zhen level, cadres can be divided into five groups: (1) state cadres (guojia ganbu); (2) contract cadres (pinyong ganbu), employed by contract after having been selected from a group of applicants; (3) part-time cadres who besides their party and administrative duties have a part-time job (ban tuochan ganbu); (4) elected leading cadres with a rural hukou; (5) low-grade cadres employed by the xiang or zhen government. In the 1990s the employment of zhen cadres was determined on the basis of four methods: (1) formal election (xuanren, of a party committee, a mayor and his deputies, a chairman of the people’s congress and his deputies), as a rule by advice and consent of the zhen and county party committee; (2) appointment by the zhen leaders (weiren, with regard to lowgrade cadres); (3) limited employment by contract (pinren, mainly for qualified individuals); (4) employment after examination (kaoren, mainly used for younger professionals). There were four main cadre levels: (1) party level, that is, primarily members of the party committee and the chairpersons of “mass organizations”; trade unions existed only in a few towns; (2) zhen-government level, with five to ten departments or section chiefs for special subjects working directly under the local government; (3) dual administration level, that is, offices that are nominally led by zhen and county but in fact are led by county offices as well as by branch offices of superior institutions; the county government installs the cadres and is responsible for their salaries and bonuses; (4) the level of economic companies, the gongsi (see Table 7.2) Administrative bureaus in zhen varied from place to place; they were dependent on local necessities and on the qualifications of the local cadre contingent. In all zhen there were administration offices for finance, civil affairs, and birth control. The number of departments depended on the financial means of the location. In economically strong towns there were also departments that had a wider range rather than only political and social administration (e.g., bureaus for science and technology, for a diversified economy, for auditing of accounts). In the latter case the economic administration was transferred into gongsi. In economically less powerful towns, gongsi and administration offices were merged into one (Pingle), or the transformation had not yet taken place (Xinzhou). As far as we could see, economic power and the number of cadres were not interdependent. The lower the economic power, the greater the number of functionaries, though state regulations suggest the opposite development. In the 1950s every administration level had a fixed quota of cadres (bianzhi). These proportions were far surpassed in all towns. As the counties give financial means to the zhen for only a fixed number of state cadres, the gongsi had to find a way out of the dilemma, as their number of employees was not subject to quota. In addition, there were “enterprise institutions” (shiye danwei) called “stations” (zhan) at the zhen level. They were former administration offices that had been transformed into economic units. They had no autonomous rights; in other words, they could not make independent decisions, but they were part of the administration departments. Their expenses were paid out of the agricultural or urban construction tax.

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Table 7.2 Administrative Structure Levels, Dongting Zhen, 1993

Party level General Office Party Committee

Government level General Office Finance Office

Responsibilities of the members: • Overall activities as well as Economic and Technological Development Zone of Wuxi county • Mass organizations, current work • Head of the General Bureau and Secretary • Organization Department • Discipline Inspection, United Front • Propaganda • Industry and Economic Administration • Village economy of Chunleicun • Public security

Bureau for Civil Affairs

Authorities subordinate not to the zhen government but to both the county and zhen governments Tax office Office for Administration of Industry and Commerce Police Department

Department for Documents

Court

Office for Science and Technology Bureau for Village and Zhen Development/Village and Zhen Construction Bureau for Culture, Education, and Health

Bank

Bureau for Birth Control Bureau for Land Administration Department for the Armed Forces Economic Companies (gongsi): • Industrial Company • Agricultural Company • Company for Services

Grain Bureau

Marketing- and SupplyCooperative Administrative Bureau for Machinery and Electronics Administrative Bureau for Electricity Communication Administrative Office Cultural Station Administrative Bureau for Agricultural Machinery Broadcasting Station

Source: Organizational Department, Dongting Party Committee.

In Xinzhou such zhan were responsible for advising on birth control, administrating agricultural machines, cattle, irrigation, forestry, broadcasting, rural enterprises, advice on agricultural techniques, as well as the local hospital. Seventy-nine individuals were supposed to work in this sector; in fact, however, 118 people worked there. We will demonstrate the problem of quotas in zhen by the example of Xinzhou. There the official number of state cadres was fifty-five, the actual one, however, sixty-five. The cadre roles are outlined in Table 7.3.

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Table 7.3 State Cadres, Xinzhou (totals in parentheses) (a) Government (37) Mayor (1) Deputy mayor (6) Head of the General Office plus 1 secretary (2) Department for Culture, Education, Health (3) Department for Finance and Taxes (6) Department for the Armed Forces (3) Department for Civil Affairs (3) Department for Public Order (3) Department for Birth Control (4) Bureau for Agriculture and Technology (3) Bureau for Personnel (1) Statistical Bureau (2) (b) Party Committee (12) Party secretary (1) Deputy party secretary (2; the third, the mayor, is included above) Head of the General Bureau plus 1 secretary (2) Individual in charge of organizational work (1) Individual in charge of United Front work (1) Individual in charge of propaganda (1) Individual in charge of mass organizations (1) Individual in charge of discipline inspection (3) (c) People’s Congress (2) Chairman (1) Vice-chairman (1)

Source: Xinzhou Party Committee.

There were an additional fourteen state cadres who had to be taken on due to reforms in administration (dissolution of qu, the former subdistrict, the county bureaus under the former people’s communes) and who functioned as directors of smaller administrative units under the zhen (guanliqu)37—an administrative level officially not in existence but informally created in order to solve the unemployment of former qu cadres. In general, the county governments have decided that the existing state cadres have to be paid but that there will be no new ones employed. Besides the state cadres there were functionaries with a rural hukou as well as temporary staff paid by extra-budgetary means, that is, by charges collected from peasant households. This group was not included in the above-mentioned number of cadres. As the increase in this cadre contingent was not controlled by the responsible county offices, this cadre group grew more rapidly in number than that of the state cadres. In Xinzhou there were more than 150 cadres. The peasants are right to place the blame on the increasing contingent of cadres with a rural hukou, because of that charges are constantly growing, with no corresponding benefit for the peasants.

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Table 7.4 Rural Cadres per Administrative Unit in the Provinces Investigated, 1991–1992 (average)

Cadres per xiang

China Guizhou Hebei Heilongjiang Jiangsu Ningxia Sichuan

Cadres per zhen

Cadres per village administration committee

1991

1992

1991

1992

1991

1992

30.0 15.5 32.5 32.5 63.7 28.2 16.1

36.7 40.8 36.7 31.4 62.0 28.2 22.8

47.6 29.3 47.4 39.1 71.3 25.0 22.5

56.2 56.1 52.0 49.7 70.1 22.3 48.9

5.1 3.8 5.2 4.5 7.6 4.4 4.9

5.2 3.9 5.3 5.0 7.6 4.3 5.2

Source: Authors’ calculations based on Zhongguo tongji nianjian (1993), p. 40, and on information provided by the provinces’ Bureaus for Agriculture.

Tables 7.4 and 7.5 demonstrate the quantitative structure of cadres at the zhen and village levels. The average number of cadres was greater at the zhen level than at the xiang level. Qualification as a “town” resulted in an increase in the cadre contingent. Every zhen had a different number of state cadres. In model towns to which functionaries were sent by the responsible county, the cadre number was high (particularly in Jinji and Zongshizhuang, where the greatest number of cadres was sent). Where the functionaries came from the local staff, their number was lower. As far as villages are concerned, the number of village cadres in better-developed villages such as Dongting was the same as in less-developed places such as Pingle, Jinji, or Zongshizhuang, though there the obligatory tasks were more difficult than in the developed villages. Extra administrative employees could only be paid by revenues from economic activities. (See Table 7.4.) Compared to the average figures from the China Statistical Yearbook, the numbers for the zhen we investigated during our fieldwork were in line with the average of 47.6 (1991) and 56.2 cadres per zhen (1992).38 (See Table 7.5.) With two exceptions the village administration committees (VACs) in our areas of study were at the national average of 5.2 (1992). It is interesting to discover that the average number of cadres in the provinces we examined had increased considerably in the early 1990s. That average number had doubled in every zhen in Sichuan (from 22.5 to 48.9) and Guizhou (from 29.3 to 56.1). The first reason for this is the general tendency to expand the bureaucracy; the second reason is the transformation of townships (xiang) into towns (zhen), this classification used by the new zhen to drastically increase the number of cadres. The number of townships in Sichuan decreased from 7,722 (1991) to 4,520 (1992) (–58.5 percent), and in Guizhou from 3,087 to 808 (–26.2 percent), whereas the number of towns in Sichuan grew from 799 to 1,696 (+112.3 percent), and in Guizhou from 410 to 659 (+60.7 percent). Furthermore, the zhen have an increase of personnel in the form of urban functionaries—in the interest of urbanization and rural development.

126 0 0 30 30 (100.0%) 96 30 0 7.4

1,913 456 279 (61.2%) 128 82 (64.1%) 1,329

32 28.5 5.9

Zongshizhuang

47.6 25.5 5.5

3,904 459 254 (55.3%) 762 412 (54.1%) 23,683

Qionglai

59 0 6.8

174 0 0 59 24 (40.7%) 115

Pingle

64 0 4.2

102 0 0 64 18 (28.1%) 38

Xiangyang

Source: Authors’ calculation based on information from the responsible Bureaus for Agriculture. *VAC = Village Administration Committee.

Total no. of cadres Xiang/zhen/village Xiang cadres State cadres Zhen cadres State cadres VAC*cadres Average number of cadres Zhen government Xiang government VAC

Jinzhou

Rural Cadres in the Investigated Areas, 1992–1993

Table 7.5

28.5 26.2 5.3

873 340 204 (60.0%) 57 49 (86.0%) 476

Wuzhong (1991)

32 0 6.6

78 0 0 32 31 (96.9%) 46

Jinji

0 0 6.9

184 0 0 67 47 (70.1%) 117

Dongting

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At the zhen level the cadre quota set by the central government is in many cases considerably surpassed. In 1993 the following numbers were recommended: • 45 state cadres for developed zhen with a large population • 30 state cadres for average zhen • less than 15 cadres for weakly developed zhen with a small number of inhabitants At the zhen level, too, the dual bureaucracy of party and administration is a tremendous financial burden. Here disentanglement—frequently propagated—is even less noticeable than at the county level. Party and government form a unit that is dominated by the party. The frequently repeated demand of the central government to separate these two institutions cannot be realized as long as the party as the “leading force” is superior to all other institutions. In fact, as a rule, the zhen mayor was deputy chairman of the party committee. The dilemma of requiring separation can be seen in the following slogan found in the government seat of a zhen administration: “Under the political leadership of the party committee let us separate the duties of party and government.” People’s congresses at the zhen level were of not much assistance. The chairmen for the most part were former zhen cadres who had once had a leading position and who, by having been transferred to this new place, were thus removed from the daily work. Most leading cadres in towns told us that people’s congresses are understood as an extension of the party committees and not as independent institutions or organs controlling government (as should be their proper function). It was not surprising to hear that in general people’s congresses at the zhen level were looked upon as “useless.” Elected every third year, a presidium (zhuxituan) directs the work of the people’s congresses between the sessions that take place once a year. The people’s congress formally elects the local government. A leading zhen official told us how things used to be: “The party committee of the zhen proposes the candidates. The people’s congress elects and the city government consents to the results of the election.” As a rule, this body does nothing else but meet once a year, and then the mayor reports on the work done. Local party committees for the most part appointed the delegates. Candidates were elected without having been presented to the voters, who therefore could not select among a variety of candidates. There are cases of election fraud and sometimes votes are bought with cash or material benefits.39 Where such practices are the rule, voters are not much interested in elections. Tables 7.6 and 7.7 demonstrate by the example of the zhen of Dongting the division of labor in the party committee and in government. Dongting was different from other zhen as it was economically far advanced and its political and economic functions to quite an extent were combined. (See Table 7.6.) Dongting was an excellent example of how much cadre policies have changed. Here, implementing the administrative reform in fact reduced the obligatory cadre quota of 46 state cadres. Eighteen cadres were transferred to economic sections (directors of enterprises, gongsi); the rest of the 28 cadres took over a number of duties. Twelve of them were sent to administrative villages as party secretaries or vice-secretaries. Departments

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Table 7.6 Members of the Dongting Party Committee, 1993 Party secretary

Deputy mayor of Wuxi county Chairman of the board, Dongting Enterprise Company Deputy director, Standing Committee of the Economic and Technology Development Zone of Wuxi county General manager of the development company of that zone

Deputy secretary Mayor of Dongting Member of the party committee, in charge of daily work as well as of mass organizations As mayor in charge of legal affairs, finance, public security, and civil affairs Member 1

Head of the general office and secretary of the party committee Director of the guesthouse of the town government

Member 2

Director of the Organization Department

Member 3

In charge of discipline inspection and United Front work

Member 4

In charge of propaganda work

Member 5

Deputy mayor of Dongting General manager of the industrial company Member of the party committee, in charge of administration of industry, and economy As deputy mayor in charge of industry, construction, and economic administration

Member 6

Chunleicun village party secretary In charge of the economic development of Chunleicun

Member 7

In charge of the armed forces, public security, people’s militia Village party secretary

Source: Dongting Party Committee.

of the party committee and of the zhen administration were merged, and new qualified employees were recruited. In 1992 there were 22 individuals between twenty and thirty years of age and with at least a technical college or university education. First they became management assistants of village enterprise companies. They had to qualify themselves for three years, at which point the best of them were taken over as zhen cadres. Furthermore, younger cadres were sent into villages and factories to gain practical experience. And until 1992, 60 retired technicians and university graduates from other places started to work in township and village enterprises. At the demand of the provincial leadership, Guanghan since 1982 has experimented with the system of appointing cadres by contract of limited duration (pinyong). By this system, qualified rural employees were to be appointed as functionaries by agreement for a limited duration. In these contracts—just as in Dongting—were described the rights, duties, and tasks of their work. Performance and overperformance were highly rewarded;

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Table 7.7 Functions of Dongting Zhen Government Members, 1993 Mayor

Deputy party secretary (compare Table 7.6)

Deputy mayor 1

General manager, industrial company Member, party committee zhen (compare Member 5, Table 7.6)

Deputy mayor 2

General manager, agricultural company Responsible for agriculture

Deputy mayor 3

General manager, company for tertiary sector Responsible for the tertiary sector

Deputy mayor 4

Director, development company of the Economic and Technology Development Zone, Wuxi county Responsible for village and zhen construction, inhabitants and village administration committees, and transportation

Deputy mayor 5

Director of the Labor Bureau, Development Zone, Wuxi county Responsible for birth control, culture, education, health, land administration, and village planning

Source: Authors’ table based on information provided by the Dongting zhen government.

nonperformance was punished with pay reductions or even dismissal. The idea was to do away with the system of lifelong employment for lower-level functionaries. This system had been introduced in Sichuan since 1983, and all over China from 1987 onward. Leading cadres in zhen were not yet included; the system was only used for cadres who needed special qualifications, as, for instance, for agriculture or enterprise management. To find employees on a contract of limited duration who were at all qualified, social securities had to be offered (flats, bonuses, pensions, etc.), as well as financial arrangements such as high salaries (e.g., high bonuses for successful performance), the chance of advancing in the local political hierarchy, and the expectation of getting a good job in the rural economy after the contract expired. This explains the transfer of functionaries from rural enterprises to the zhen administration and vice versa. In fact, however, the employment was permanent, as in any case the transfer between the economy and politics was guaranteed. Further education led to higher qualifications, another motive to work in the local bureaucracy. Only further education of local employees can satisfy the need for qualified management personnel and entrepreneurs. As a rule there are insufficient financial means to attract qualified personnel from outside. Qualified employees in village enterprises are rather prone to move into cities. As long as no strong local entrepreneurship exists and material and financial means are sparse, obviously only the local bureaucracy with its cadre policies will be able to direct manpower into townships and villages. The example of Dongting has demonstrated that further education focused primarily on solving local economic problems and on advancing local economic development. There is no longer any need for abstract political or ideological abilities. And that alone

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means economic transformation of politics and of local party organizations. Economic success is rewarded (by high income and bonuses) and is understood as a form of political quality. In Jinji there were special programs of the party committee to fight poverty, to enhance the number of pupils, to develop villages, to further educate cadres, and so on. In some branches there were financial rewards for progress. Here again can be seen the connection between personal material profits and general interests. There was even a bonus for regular attendance at meetings held by party organizations in villages. The obligation to participate varied according to age. Over the course of a year, the cadres had to attend at least the following number of meetings by their party organization: • party members in offices and enterprises younger than sixty years of age: twenty meetings; those older than sixty: four meetings • Peasant party members under forty-five years of age: twelve meetings of the village party cell (dang zhibu) and six meetings of the party subgroup (dang xiaozu) in villages; those between forty-six and fifty-nine years of age: nine meetings of the village party cell and six meetings of the subgroup; those sixty years of age and older: four meetings of the cell and the subgroup In most regions, distinct systems of responsibility for local cadres had been established. Zhen and villages received a list of set activities from the counties and cities, and at the end of the year the work of the local leaders was checked against this list. The result of this evaluation determined income/monetary and material bonuses, political status, and further possibilities for advancement. In Dongting, a check system consisting of 100 points (jiguan ganbu baifen kaohe zhi) was used. It was the basis on which every cadre was to be evaluated at the end of the year. The maximum score was 100; in general it was the rule that the higher the number of points, the more important the work. The income was dependent on the number of points, 100 points being the equivalent of a base income.40 In Dongting there were the following regulations: 1. Fulfillment of tasks assigned by superior authorities (total 15 points): • • •

adoption of political directives and law and professional knowledge; achieving a specific political and professional level (5 points) industrious, efficient, and orderly activities (5 points) successful fulfillment of the targets (5 points)

2. Fulfillment of basic and economic tasks (total 10 points): • •

taking the initiative to connect tasks assigned by superior authorities to economic activities (7 points) drawing up guidelines for economic development and implementing them in the interest of the community (3 points)

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3. Fulfillment of criteria of “advanced (xianjin) activities” (10 points) 4. Fulfillment of assigned tasks by a subunit (fengong danwei) (total 50 points): • • • • •

fulfillment of economic tasks (15 points) outstanding cooperation and coordination by a subunit (10 points) fulfillment of major tasks, for instance, the state’s grain quota, implementation of irrigation projects, fulfillment of birth planning targets (10 points) achieving more than 95 points for all tasks in a subunit (10 points) examination of mass organization (Youth League, Women’s Federation, Trade Union, People’s Militia) activities reveals that they meet the demands (5 points)

5. Ideological level and general attitude of a person (total 15 points): •

• • • •

participation in meetings of the party committee and/or the government, in study sessions of concerned authorities or institutions, as well as a high level of participation in those activities (4 points) correctly observing working and resting times (4 points) participation in all activities organized by one’s danwei (2 points) observing state and other secrets (3 points) mutual support, help, and learning of various danwei (2 points)

In this case there was an attempt to rationalize the activities of the cadres at the zhen level. Single clauses were sometimes rather abstract and were usually regarded as fulfilled, when the most important factors, such as the fulfillment of economic tasks, the primary aims, as well as work discipline, were completed. Furthermore, the defined goals and objectives for management activities were explained in detail. The economic targets were output, sales proceeds, turnover, and profits; the noneconomic targets were birth quotas, land use, public security, and so on. In Xiangyang as well as in Guanghan, the system of the “five necessities” (wu ding) was practiced. For each of its subordinate administrative units, the city had established the number of administrative offices, cadres, financial means, tasks, and aims, as well as bonuses. Within this framework, the administrative units could act independently. Xiangyang could decide for itself on the employment of additional cadres but received no extra funding from the city. Such new employees had to be paid by extra-budgetary means. Administration at the Village Level All throughout Chinese history, the relationship between state and village had been a serious problem, as the state was dependent on the villages as far as resources and supplies were concerned. The clan was bearer of the traditional form of village administration. The state expected the villages to fulfill their share of charges and obligatory work (taxes, labor, recruitment of soldiers, etc.). Yet, constantly, the state strived to control and to exploit the villages to a greater extent.41

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Of decisive importance in administrative villages (xingzhengcun), the former production brigades legally are today the village administration committees (VAC; cunmin weiyuanhui). At the end of the 1970s as a result of the rural reforms they were spontaneously formed in villages based on former models. Since the beginning of the 1950s the CCP has attempted to control the peasantry more strictly. By direct interference it intended to force the villages into a collective development concept. As these policies in the middle of the 1970s proved to be inapplicable, at the end of the 1970s family farming was again permitted. This return to family farming and the corresponding forms of contracts, negotiations, and realization required stronger village autonomy and administration. The towns and townships could no longer steer and regulate economic individualization and privatization. As throughout history, conflicts had to be directly dealt with and solved at the village level to keep the state out of conflicts in connection with the village bureaucracy and to make government verdicts more acceptable to village communities.42 The VACs are to take over this function. Their emergence proved that the policies of controlling villages from above and making them a part of society had failed. The party leadership tried to turn these committees into regular institutions, formalizing them in 1982. In 1985 they were to be found all over China. On June 1, 1988, the Law Regulating the Organization of Village Administration Committees went into effect. The VAC was defined as an “autonomous organization” by means of which the village inhabitants “administer and educate themselves as well as serve their own interests.” The main tasks of these committees are regulation of the public affairs of villagers; filling the state grain quota, concluding contracts with peasant households on agricultural land use and administering that use and ensuring that the peasants meet their obligations; developing village industry; preserving public security and performing conflict mediation; as well as transmitting opinions of villagers to superior authorities. Furthermore, they are responsible for birth control. According to the above-mentioned law, the VACs are to be elected for three years by all inhabitants over eighteen years of age, or, in larger villages, by representatives of all households. Serious inner-party debates had preceded the passing of the organizational law. Its opponents—primarily officials in rural areas—were concerned about a politicization of the villages, a further increase in local clan power, and thus a loss of control over the peasantry.43 Its supporters, however, referred to the necessity of increasing village autonomy in order to relieve the state administratively and to enhance the village committees’ acceptance vis-à-vis decisions of higher echelons. Here a contradiction became obvious between the central state on the one side, which is interested in “low-cost” local conflict resolution as well as in an increase in “democratic legitimization” without its power monopoly being affected, and the local cadre bureaucracy on the other side, which saw its power of influence affected by a functioning village participation and which was afraid of conflicts between autonomous villages and superior township administrations.44 The Fifteenth Party Congress in the autumn of 1997 decided on an improved implementation of the system of village elections. In 1998 the National People’s Congress

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debated a revision of the above-mentioned 1988 organizational law concerning ruralbased organizations in order to correct the obvious defects and deficiencies of the practice so far applied. The primary points of controversy in the debate were the following: whether the VACs were also to be in charge of economic management; the settling of the relationships among VACs and county and township authorities, as well as the relationship between village party committees and VACs.45 Thus the central government really touched upon the local points of controversy; as the annoyance of the rural population reached a critical level because of cadre corruption, the growing burden of taxes and charges, as well as inefficient mechanisms to control village concerns. The mechanisms of participation and control provided by the original organizational law were not sufficiently institutionalized and specified to reduce this potential conflict. The intensity with which the party leadership has pursued the reorganization of village administrations and attempted better implementation of the system of village elections since the end of the 1990s is therefore an expression of a new effort to stabilize rural areas. In fact, the following patterns are intended by the party leadership: • The attempt to stabilize and to better control village administrations that are more and more infiltrated by family clans and religious secret societies as well as personally and organizationally weakened by the move of village cadres into the private sector or into economic business (by means of more effective control over their financial behavior, over the general spread of the illegal purchase and sale of land, as well as over birth control in villages); • Efforts to recruit new and capable individuals who enjoy the trust of the majority of the village inhabitants, who are able to develop the village economy, and who have the potential to effectively curb corruption; • Endeavors to enforce state law and abolish clan law; and • Attempts to strengthen the rural population’s confidence in the party. By the beginning of 1998 about 60 percent of the villages are said to have elected their VACs directly.46 In this procedure, however, there was frequent law-violating interference by superior offices or party organizations—for instance, in the nomination of candidates; or clans or entrepreneurs simply took over leading positions in VACs; or votes were bought.47 Furthermore, local cadres often attempt to maintain their control over villages with the help of village party committees. Where village administrations do not follow the orders of the party, external cadres may be appointed—either as village leaders or as “assistants” of the village leadership.48 In fact, open and fair competition with regard to political positions and clear delineation of competence between villages, on the one hand, and townships, on the other, are still lacking. However, it would be wrong to regard village elections simply as a superficial (and seemingly unsatisfactory) attempt to maximize efficiency and stabilize authoritarian power and control. With regard to their consequences for the CCP, the elections possess quite an ambivalent character, as they allow the village inhabitants (in spite of all the implementation deficits) a certain degree of participation—though in its present form it is participa-

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tion controlled by superior offices, as every election has to be approved of by the higher administrative bodies. The village inhabitants have the opportunity to participate in the selection of candidates and in the development of their programs. That means they have the opportunity to articulate their interests and to have a hand in the selection of individuals who have greater flexibility and tact in realizing village interests vis-à-vis townships and counties. The idea of “democratic elections” by the population alone encourages a tabling and realization of interests. Though originally not the intention of the party, village elections have strengthened the power of local levels vis-à-vis the state. The rural population might use them to extend their social space, for instance, by appointing candidates who are not members of the party and/or who are economically oriented, or by fighting the tax and fee policies frequently arbitrarily decreed by townships and counties. As a matter of fact, villages tend to realize their right to nominate candidates who are not members of the Communist Party.49 Increasingly, there are violent protests, where the elections of nonparty members are not accepted or where they are even annulled by superior bodies. There are also frequent reports of organized opposition by village inhabitants under the leadership of their elected head against the political demands of their township or county administrations. It is most likely that over time the system of village elections will have a significant impact on townships and counties and will also lead to a strengthening of the readiness of the population to participate politically. A signal in this direction was the first direct election of a township leader (xiangzhang) in the township of Buyun (Sichuan province) at the end of 1998. Though this election was described as illegal by the Chinese newspaper Fazhi Ribao, at the same time it was positively cited as an example that democracy is not an exclusive product of the West.50 In the meantime, experimental elections at the township level have become a widely debated issue in China. As a matter of fact, though, during our research in the first half of the 1990s these rights were to be found only on paper. There were either no elections at all or irregular ones, as the leader of the VAC in a village under Zongshizhuang zhen put it when asked for the date of the next election: “There is neither a set period nor will there be a new election. Why have a new one, when the village administration committee is fulfilling its duty?”51 In some villages not all inhabitants but only their “chosen representatives” were allowed to vote. In many villages, if there were elections at all, they were performed by “village administration groups” (cunmin xiaozu, the leading body of natural villages, zirancun). Members of the VACs were appointed by the responsible party committee, the town and township governments, or the “leadership group” in the village (lingdao banzi: party secretary, village head, accountant), or they were affirmed on their behalf by acclamation. Furthermore, there were serious interferences. Though by law the VACs are to be elected anew every third year, at the beginning of the 1990s just half of them were elected. The other half were appointed and dismissed by the zhen government. Elections were frequently seen as a kind of public opinion survey.52 While VACs are autonomous by law, being neither state organs nor government institutions and having nothing to do with province, town, and township governments (though

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at the town and township levels the representatives of the Bureaus for Civil Administration had an advisory function [zhidao] for VACs),53 locally affairs were handled differently. The town and township governments regarded themselves as competent and superior offices, which was why they arranged village matters directly or indirectly. This was done by controlling the financial means of the villages or by transferring salaries and bonuses for the village cadres from the zhen governments. On the other hand, zhen feel that they must interfere with village autonomy in order to execute the duties assigned to them by counties and cities, such as providing the grain quota, revenue, birth control, recruiting soldiers, and so on. According to a study by the Ministry of Civil Affairs at the beginning of the 1990s, the VACs could be divided into three categories: • Good or relatively good VACs (about 15 percent): functioning normally; • Average or slightly problematic VACs (about 65 percent): not very active, lessqualified functionaries, few activities, almost no economic success; • Paralyzed or mostly paralyzed VACs (about 20 percent): almost no activities or no activities at all.54 A fundamental problem of the VACs is that they administer administrative villages, and such villages usually comprise a greater number of natural villages. In the zhen of our fieldwork there were between seven and eleven villages per VAC. Circumstances can easily result in a clash of interests among natural villages, which can end up paralyzing a VAC, or larger villages and major clans might attempt to realize their own interests visà-vis other villages or clans. Solutions such as a VAC for each natural village would be too expensive, as that would result in a multiplication of committees and cadres. It would not only entail a higher financial burden on the peasantry, but also generate reduced control by the zhen and county bureaucracy. That result would counter the interests of the local party and administrative institutions, as it would lead to a loss of power and a decrease in income. The separation of natural and administrative villages has a tradition in Chinese social history. Schurmann has pointed out that the former are an ecological entity, whereas the latter form a political entity. They can be identical, or administrative villages might turn into natural ones. Whenever the state wanted to strengthen its power over villages for any reason, the administrative unity of villages became important.55 Today the state tries to execute this control through the dual instruments of party committee and VAC. As opposed to the county and zhen levels, at the village level the formal separation no longer exists. In the villages of our fieldwork there was no separation of party committee and VAC, and there were no separate meetings. If there were conferences at all, their status (party or VAC) was undefined. In both institutions the work was done by the same individuals, the party secretary being the head. In eight of the sixteen villages we investigated, the party secretary was also the head of the VAC. In a further seven cases, the party secretary was deputy director of the VAC, and the VAC director was identical with the deputy party secretary. Though the members of

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the village party committees should be elected by the village party members, in reality they were primarily appointed by the party committee of the responsible zhen. The party secretary or the head of the VAC is expected to develop a useful strategy that will lead to the improvement of the general welfare of the village community. That task appears to be quite natural, due to his social obligations toward the clan or village community to which he belongs. If he is unable to act accordingly, he will lose all his prestige. At that point he is not of much use as a mediator between the zhen and the villages, as he is no longer taken as a representative of the village community and has to rely entirely upon the tolerance of the township government. The latter demonstrates that a village leader has to have more aims in mind than just the general welfare of the village community; he must be accepted by the superior bureaucracy, have good connections and consequently good chances to advance in the political and economic hierarchy, and must be as independent as possible from the bureaucracy so as to follow his own ideas of economic prosperity. Greater autonomy is the result of economic success, diminishing the financial dependence of the villages on the towns and townships. The VACs in the zhen of our study area had between five and eighteen members, the village party committees between four and seven. In all villages the VACs had the following officials: chairman and deputy chairman, accountant, chairwoman of the Women’s Federation, head of the People’s Militia, and secretary of the Communist Youth League (CYL); in some cases, those responsible for birth control (Jinji, Yuqi, Wuxi county), representatives for public security (Wuxi, Zongshizhuang, Pingle), a cashier, and a mediator (Zongshizhuang) were members as well as leaders of village administration groups. In economically advanced villages, VACs also included the individuals responsible for village planning, the heads of the commissions for agriculture and agricultural technology, and the secretary of the VAC (Dongting). The party committees consisted of the party secretary, one or two deputies, sometimes an accountant, the head of the CYL, and representatives of the village party branches (of natural villages). They were in charge of traditional political sections (propaganda, organization, mediation) and they were the leaders of economic sectors in economically powerful villages. Those working in the party committee and the VAC usually had part-time jobs (half a day); only in economically powerful villages did they work full-time. Only some of the village cadres received a regular salary from the zhen government, which was paid out of charges transferred from the villages to the zhen (tongchoufei). These included the following individuals in all villages: the VAC chairman, the party secretary, the accountant, and sometimes the chairwoman of the Women’s Federation (e.g., for her activities concerning birth control). Exceptions were Jinji, where the vice director of the VAC, the secretary of the CYL, the head of the People’s Militia, and the deputy party secretary received salaries, and the villages in Zongshizhuang, where all members of the VACs received a salary (here the members of the party committee were concurrently members of the VACs). All other members earned only a monthly allowance. The villages in our field study can be divided into four categories:

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1. Where the collective village economy was strong, as, for instance, in Jiangsu, the village economic organization had the decisive power. Party organization, VAC, and economic gongsi were more or less merged. These villages were relatively wealthy, and the income of the functionaries was higher than that in the responsible zhen or township. They were relatively independent from the zhen, and the village party secretary had the ability to impact the zhen administration. 2. Where villages were poor, the collectively village-owned industry was weak or nonexistent, as, for instance, in Guizhou. The position of the village officials was nevertheless strong, as they had the decision-making power regarding resources and as alternative sources of income and power were not yet available. In the long run, however, the cadres there would lose their power, as they had no stable economic resources, only political ones (contracts with peasant households with regard to land use and agricultural responsibility). In turn, where the private sector flourished, there were major income disparities among the village inhabitants, increased by labor force migration into urban areas. Village cadres only benefited from this development if they transferred into the private sector or cooperated with it. In such villages, clans or families were the decisive forces. The party committee and VAC had more or less resigned. Independence of the zhen was greater where villages were financially and materially self-determining; it was relatively reduced where the villages had to rely on the financial and material support of the zhen or the township (such as paying subsidies for salaries or allowances for village cadres, providing food or operating free of charge, and offering free medical treatment). 3. Where a collectively village-owned industry was nonexistent and the private sector was dominant, more and more private entrepreneurs took over administration and party duties, or village functionaries were engaged in private enterprises (compare the example of Yuwang (Table 8.7). 4. Village party committees were strong where village functionaries controlled the village economy (themselves or with the help of relatives or their clan) and where they got rid of competitive private entrepreneurs by making them migrate. Economic success determined the independence of a zhen. We do not share the opinion that cadres are more powerful where the market is less coordinated.56 The market is only one factor of power, and it merely reduces the influence of the functionaries, if they are not interested in the market. On the other hand, weakly developed market structures do not automatically imply powerful cadres. In some cases, the power of the cadres is declining; in these cases, functionaries oppose a market extension and are unable to introduce a market system into the village economy. Problems and Changes in the Traditional Party and Administrative Structures Town and village functionaries are right at the bottom of the income scale, where they are unable to produce a changeover to a market economy or to enliven the local economy. Whereas at the beginning of the 1980s in rural areas the income from administration and party activities guaranteed a high salary, today the opposite is the case. The salaries of

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town and village cadres in the mid-1990s were almost the same as they were at the beginning of the 1980s. In poorer areas there was not enough money to pay cadres regularly and on time. Pensions were no longer paid to village cadres. Furthermore, increasing demands were placed on town and village party secretaries. They are no longer responsible for just passing on planned economic orders from higher to lower echelons; they no longer are required to just control the fulfillment of quota; they are no longer only responsible for settling family and neighborhood quarrels. They now have to be successful in establishing and administering industrial enterprises, in obtaining sufficient financial means for townships and villages, and in solving problems in connection with material supply, production, and sale. It also must be taken into consideration that the most capable among the village cadres increasingly tend to become migrant workers, traders, and entrepreneurs, and thus by leaving the village are lost for party and administrative activities. It is believed that in the 1990s up to 20 percent of the xiang and zhen cadres were traveling all over China as migrant workers.57 In a single township in the province of Hubei in the mid1990s, 120 of 513 village cadres had resigned their position, among them 47 village party secretaries and 29 village heads. Major reasons were low income, increasing pressure from higher administrative bodies as well as from the peasantry, and growing brutality and acts of revenge by peasants toward village cadres.58 More and more village cadres gave up their activities in party and administration because increasing difficulties and demands, ideological pressure from above, low incomes, and growing pressure from the peasantry, which believes it is represented poorly by the functionaries and so blocks their work. According to Chinese surveys in the mid-1990s, up to 90 percent of village cadres intended to give up their positions and wanted to earn their living in the economic sector.59 At the VAC level all over China in the 1990s, 20 percent were believed to have given up their work; in more backward regions, as much as 50 percent had supposedly done so.60 The above-mentioned pressure on local cadres is of great importance. Enquiries as to the mood of local functionaries have revealed that 61.9 percent of them noted the new market orientation as “harsh” (you yali), 37.2 percent even as a “massive pressure” (yali hen da).61 The party, too, has great difficulties in recruiting new members. Even the party organ, the People’s Daily, complained that in rural areas fewer and fewer young people are willing to join the party. It has lost its attraction because of the ineptitude of many functionaries, corruption, a change of ideals among young people, and the conservatism of party members as far as the private and market economy, trade, and earning money are concerned.62 The lack of junior party members is not only obvious in the decreasing percentage of younger party members (the percentage of those under age thirty-five appears to have dropped from 30 percent in 1987 to 21 percent in 1993),63 but also in the declining number of members in the junior organization, the CYL.64 This tendency could clearly be seen in the zhen and villages of our research area; in some cases the CYL had recruited no new members for years. The sale or leasing of collective enterprises had the result that enterprise party organizations were dismissed by the new management or had to give up their activities. Reasons

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included the burden of “double administrations,” rationalization and efficiency, reduction of expenses. Consequently, in the county of Xinchang (Zhejiang Province) in the 1990s only a few of the 49 sold or leased rural enterprises still had party organizations,65 a fact verified by our investigations. The loss of party power leads to growing difficulties in finding suitable functionaries in villages, and the number of villages without a party cadre has been growing.66 Increasing conflicts between village cadres and village inhabitants in the 1990s favored this development. As village cadres are mainly paid out of fees from the peasants, the peasants are more often turning against the functionaries, judging them as incapable, corrupt, and not interested in the public interest. In rural areas brutal acts against functionaries were becoming increasingly popular. Studies in different parts of China have revealed that the “relationship between cadres and the general public” in villages is extremely precarious. An investigation among rural functionaries in Hunan revealed that 47.5 percent of the interviewed cadres pointed to “tense relationships,”67 a percentage that might be far underestimated, as cadres usually dislike acknowledging such tensions, which might be seen as a result of their own behavior. An interview among peasants in the county of Hanshan (Anhui Province) revealed that only 13 percent of the individuals questioned considered the relationship between cadres and the general public as good or relatively good.68 It is a serious problem that many of the capable, younger functionaries move into the private economy, that is, become self-employed or lease an enterprise. These transfers mean that the currently shrinking group of functionaries is scarcely being replaced by young blood. University graduates take a job in the bureaucracy only in order to profit from the implied privileges and networks, but later prefer freelance activities. Low salaries and the declining prestige of lower-level functionaries enhance this phenomenon. A Chinese study in Beijing from 1992 showed that 76 percent of the interviewed functionaries who intended to give up their positions and transfer to the private economy were younger than forty years old. Ninety percent of them were university graduates.69 As long as the economy prospers due to successful economic development, superior offices tolerate village- and township-level cadres’ enriching themselves. The danger is that the group of functionaries in minor positions consists more and more of unqualified individuals—people without any chance of success in the economic sector. The cadre transfer from cities into townships and villages must also be seen against this migration background. If the township and village elite turns from a functional into a corrupt elite, the political order is in danger, as can be seen in the high and still-increasing number of rural uprisings since the 1990s. On behalf of the central government, in 1994–1995 the provinces attempted to send cadres from superior offices as temporary party secretaries into villages or to nominate party cadres from towns and townships as “advisers” to village party committees. Such measures might not prove to be very successful, as county and township cadres do not like to work in villages. They are afraid of conflicts with the peasantry and, as members of a higher section in the hierarchy, they regard working in “backward villages” as a kind of punishment. Furthermore, village communities perceive them as outsiders who threaten village autonomy. In addition, peasants complain that urban cadres, sent

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“to support villages,” drive around in an official car to visit wealthy peasants in the villages to demand “gifts.” As the county bureaucracy is unable to give all leading positions in the villages to officials from towns and townships, village cadres are trained in special economic courses to learn how to become rich and to be models for acquiring wealth for their villages.70 In Sichuan alone in the 1990s, 10,000 village cadres were said to have taken part in such courses. And in Jinzhou the first academy in the province of Hebei was opened for village cadres, specializing in further economic education. During these studies, cadres receive practical training in the running of a village enterprise. More and more successful private entrepreneurs are asked to lead activities in villages. As capable individuals leave or move into the private sector, it appears to be necessary to recruit new village functionaries from among the group of private entrepreneurs. Successful private entrepreneurs have shown that they can organize and are talented in economics and furthermore have good connections with the local bureaucracy. They are obviously predestined for such tasks. The number of cases in 1994 in which private entrepreneurs had directly taken over one or all leading positions in villages was relatively small. The trend, though, is obvious, supported by official propaganda. In September 1994 the Liaoning Daily reported on a zhen near Dalian in which the party committee between 1989 and 1991 had “appointed” three entrepreneurs as party secretaries of three poor villages (according to law, the party secretaries must be elected by the village inhabitants). By establishing successful enterprises (village enterprises), within a few years these villages had become wealthy model villages.71 And in the county of Longhui (Hunan province) in 1995, more than 80 percent of the party members among the private entrepreneurs were said to have become leading cadres (party secretary, village leader) at the village level or on the town residents’ committees.72 Whether such news is true or not, it propagates the appointment of successful private entrepreneurs and makes them politically acceptable. In the following discussion we try to explain the development of party structures by means of the example of Zongshizhuang.73 There the number of party members had grown by 11.6 percent between 1978 and 1992. The percentage of party members compared to the total population diminished from 22.3:1 (1985) to 26.5:1 (1992). Zongshizhuang had the highest percentage of party members of all zhen (3.78 percent). For Jinji (1993) and Xinzhou (1994) the percentage was 1.69 percent; for Yuquan it was only 1.24 percent. In China in 1977, the quota was 3.69 percent; in 1993, 4.56 percent; at the end of 2000, 5.2 percent (of a total of 64.51 million members), the percentage being much higher among the urban population than among the rural population. In the villages of our study area, the ratios were similar to those in the townships, ranging between 1.2 and 2.0 percent. Once again, Zongshizhuang was an exception. This exception might be explained by the fact that this zhen had been turned into a model community in its county and thus had experienced a massive transfer of urban cadres. New party members had mostly been transferred from outside the zhen (327 members, or 51.3 percent) and decreased to just 311 members, or 48.7 percent. The loss of members can be explained by transfers (224 members, or 54.0 percent) or by death (191 members, or 46.0 percent). (See Figures 7.5 and 7.6.)

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Figure 7.5

Development of CCP Membership, Zongshizhuang, 1979–1992

Source: Authors’ diagram, based on information provided by the Zongshizhuang Party Committee.

Figure 7.6

New Admissions to the CCP, Zongshizhuang, 1979–1992

80 Transfer to Zhen

70

Admissions 60 50 40 30 20 10 0 1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

Source: Authors’ diagram, based on information provided by the Zongshizhuang Party Committee.

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Table 7.8 CCP Members, by Profession, Zongshizhuang, 1985 and 1991 1985 Number Peasants 891 Workers 64 Skilled workers 53 Administrative cadres 51 TVE* workers/staff 33 Others: Managers of collective enterprises 6 13 Teachers (minban) Retired cadres 9 Tertiary sector employees 6 Pensioners 3 Total 1,129

1991 %

Number

%

78.9 5.7 4.7 4.5 2.9

851 53 61 63 50

73.5 4.6 5.2 5.4 4.3

0.5 1.2 0.8 0.5 0.3 100.0

29 11 11 15 14 1,158

2.5 1.0 1.0 1.3 1.2 100.0

Source: Zongshizhuang Party Committee. *TVE = township and village enterprise

The data concerning the structure of the party members in Zongshizhuang in 1985 and 1991 reveal a change toward a higher level of education: whereas in 1985, 15.2 percent had finished the upper level of middle school and had graduated from either a college or a university, and 61.2 percent had only been to a primary school or had never attended school, the corresponding proportions in 1991 were 18.9 percent and 50.9 percent. (For purposes of comparison: in 1983, 17.8 percent finished the upper level of middle school or above; in 1993, 38.2 percent.) And while the percentage of peasants and workers decreased, that of all other groups increased. This factor is particularly true for the employees and managers of collective (zhen) enterprises; there the number naturally grew with the increasing importance of this sector. The number of professionals (academics, administrators, managers, teachers) grew from 10.9 percent to 14.1 percent. (See Table 7.8.) This appears to show the growing professionalism of the party membership and of the zhen development. However, the actual reason is the transfer of cadres from towns, rather than independent development. The decrease in the number of minban teachers (locally employed and locally paid—not paid by the state) can be explained by the fact that they were increasingly taken over into public service. (See Figures 7.7 and 7.8.) While the percentage of those under thirty-six years of age decreased from 25.1 percent to 21.8 percent, that of members over fifty-five years of age increased from 23.6 percent to 24.2 percent. There is no doubt that in Zongshizhuang the party had lost its attraction for younger people, a fact also to be found in all the other zhen. (See Figure 7.9.) In almost all zhen of our study area the number of CYL members was either stagnating or decreasing. In some zhen, as, for instance, in Xinzhou, there were no data on CYL membership, as the latter was said to be too closely connected with the party. Therefore it was declared to be too difficult to figure out the number of members. On the national scale the CYL in 1994 still had more members than the party (CYL, 61.5 million; CCP, 54 million members).74 In contrast, in the zhen and villages of our research area, the CYL usually had fewer members than the party. Only Zongshizhuang was an exception: as a model village for political work here again it set standards.

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Figure 7.7

Individuals Leaving the CCP, Zongshizhuang, 1979–1992

70 Transfer to other places 60

Deceased

50 40 30 20 10 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992

Source: Authors’ diagram, based on information provided by the Zongshizhuang Party Committee. Figure 7.8

CCP Members in Zongshizhuang, by Education, 1985 and 1991

50

46.9

1985 in % 1991 in %

39.7

40 30.2 30 23.6 20 14.3

14.3

11.5

11.2

10 1.3

1.4

2.4 3.2

0 University

College

Senior Junior Middle School Middle School

Primary School

Illiterates

Source: Authors’ diagram, based on information provided by the Zongshizhuang Party Committee.

While the percentage of members who had joined the party before the founding of the PRC constantly went down due to aging, the percentage of those who had become members of the CCP in the post-Mao era in fact rose. This percentage of 31.8 percent (1991) was significantly below the national one (1994: 47 percent). (See Figure 7.10.) The share of men rose slightly from 90.0 percent (1985) to 90.4 percent (1991), whereas the percentage of women went down from 10.0 percent to 9.6 percent (from 1,129 to 1,158). The development differed significantly from that on the national scale.

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Figure 7.9

CCP Members by Age, 1985 and 1991

Source: Authors’ diagram based on information provided by the Zongshizhuang Party Committee.

Figure 7.10 Zongshizhuang Party Members, by Time of Joining

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In general it must be stated that the economic transformation of politics in rural areas has slowed down the increase of party members and their mass organizations. We found such a development almost everywhere in our study area. This shows that economic success can be understood as an alternative to a political career. As far as economic transformation is concerned, a case in a zhen of Wuxi county demonstrates this pattern of thinking even inside the party. There the party committee decided that everyone who intended to join the party had first to talk with a member of the party committee and that the candidate had to pay for the meeting: rural inhabitants 10–15 yuan, urban inhabitants 15–20 yuan, and factory cadres more than 20 yuan. This profitable deal, regarded by the responsible functionaries as a procedure in conformity with market ideas, was intended to be an additional source for cadre salaries and bonuses.75 The orientation of functionaries toward the economy, market, entrepreneurship, and profit has changed attitudes, the actions of party functionaries and members as far as politics and organization are concerned, and especially their approach toward the functions of the party and the political system, and it has thus undermined the value and organizational system of the CCP. And indeed, this must be regarded as an important part of the change in the political system. State bureaucracy at the zhen level is primarily characterized by inflexibility, low interest in innovation, low economic efficiency, administrative thinking about security, and an inclination to advance one’s own career. The orientation toward economic development has initiated a growing economic transformation of the bureaucracy. At the zhen level a contract system for cadres has been partly realized, a first step in abolishing the system of lifelong employment. Career and income have been bound to economic success, and mechanisms of stimuli and sanctions have been introduced. This applies to party functionaries as well as to administrative cadres. As long as there is no system of checks and balances, guanxi, corruption, traditional and informal organizations playing a more and more important role, and the difference between normative laws and the actual behavior of functionaries and institutions, which undermines their legitimacy, the decline of political institutions might continue. Problems of the Local Administrative Hierarchy: The Relationships among Counties, Zhen, and Villages County–Zhen Relationship Not only provinces, but also cities, counties, and villages are striving for greater selfdetermination as far as their development is concerned. Here, too, economic power governs the degree of self-determination. In general, our survey has revealed that the counties administer townships and towns rather rigidly with regard to politics, economy, finances, and taxes. Cities and counties can influence zhen directly not only by tax policies but also by means of city- and county-subordinate institutions and enterprises in the townships. The zhen’s greatest autonomy is to be found in economic development. Though the general direction of development is dictated by the county authorities, in the 1990s

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zhen were responsible for the development strategy of township-owned enterprises. Concurrently these enterprises were their primary source of income. The taxes from these enterprises had to be transferred completely to the county tax offices, which then, according to regulations, passed on a large amount to the provincial and central authorities. The tax bureaus in the zhen had to ensure that the set tax quotas were fulfilled or even overfulfilled, which explains why these offices were under the county or city government, not under the zhen. From the county or city government zhen received out of the tax revenue the salaries and wages for the civil servants as well as the funds necessary to run administrative services. Apart from credits and grants by the county or city government for special purposes, funds for development must still be acquired by the zhen themselves. There were no fixed quotas for profit transfers and for the payment of charges, fees, and taxes. They were in every case negotiated by counties and zhen and by zhen governments and enterprise managers. This bargaining is an important factor of participation in China that is made even easier by network connections. Economically strong zhen are therefore connected with the city and county governments through their personnel. The party secretary of Jinji was also the chairman of the people’s congress of the superior Wuzhong City; the party secretary of Dongting, deputy mayor of Wuxi county. In general it can be stated that the better the income sources of a zhen, the stronger and more independent its position vis-à-vis the county. Zongshizhuang was especially strictly controlled. The responsible city of Jinzhou not only secured this control by the above-mentioned appointment of urban cadres, but also skimmed off almost all financial means from the zhen for its own purposes. All fees for education in rural areas had to be completely transferred to the city, whereas the town and village schools were left to decay. Zhen indirectly oppose this rigid control by superior authorities. By not revealing the real profits of zhen and village enterprises, they attempt to evade the transfer of taxes to superior echelons, a factor reflecting a growing communalism. During our fieldwork in Ningxia and Jiangsu we encountered two extreme examples of this phenomenon. Our review of the annual accounts of enterprises in Jinji revealed that the firms we investigated were for the most part suffering losses but concealed them by not correctly recording the total production costs, thus simulating profits. Paying interest to the banks was possible only with the help of new bank credits. To obtain extra financial means from the town and more credits from the province, a quasi-joint venture had been established that also incurred tremendous losses. All this happened on demand and with approval of the zhen leaders. On the one hand the zhen needed financial means and considerable bank credits to finance its plan of development, including an extensive renewal of the town (buildings, streets, infrastructure, and technical equipment for the enterprises). Therefore, proof of success was necessary, and superior organs could not be informed of losses. On the other hand, the salaries of the functionaries depended on the current account balance. Losses by enterprises would have considerably reduced the bonuses of the zhen leaders; thus, profits had to be simulated. In Dongting and to a certain extent in Zongshizhuang we came across the opposite

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conditions. There the firms we examined made ample profits. In the current account balances, however, costs were maximized to simulate losses. This happened with the agreement and on demand of the zhen authorities and (in Dongting) even of the county officials to avoid tax transfers and to be able to use these financial means for local improvements. Dongting and Wuxi were special cases, typical of communalism. In 1993 the county seat was located in the city of Wuxi, which was superior to the county. As the most wealthy county in China, it had for years been interested in independent development, without interference from Wuxi City. According to information from the county government, ten zhen had applied to the people’s congress of the county in 1990 to establish a new county seat outside the city. The county’s request, however, was turned down by the city; most likely the economic and financial role the prosperous county was playing for the city was the reason for that denial. Concurrently, the city government applied to the provincial authorities asking for the incorporation of ten county-level zhen into the city. The county government opposed this consolidation and decided itself to install its own county seat. The county chose the zhen of Dongting and turned it into the county seat. The city agreed that part of Dongting would be turned into a “development zone” (kaifaqu) for industrial enterprises but opposed its advancement to a county seat. Once it became aware of the city’s concession, the county government decided to declare another part of Dongting a “development zone” (jianshe qu) and then proceeded to construct the county seat to confront the city with a fait accompli. The financial means for the modern, large, and somewhat luxurious administrative buildings and the extension of Dongting zhen in a grand style (including a television tower, modern business streets, a center with conference halls, a theater, a dancing hall, cinemas, casino, hotel, fitness center, and supermarket, costing 56 million yuan for the latter alone) were to be acquired from the income from leasing land to enterprises, the sale of real estate belonging to the county in Wuxi City, profits from local enterprises, credits, and last but not least, charges collected from the population. Up until 1993, the county had received through informal channels high credits that on the order of the central authorities were to be repaid, as they had been granted outside official credit regulations. That, however, was not possible, as the money had already been invested in construction. The financial gap caused by the extensive construction was to be closed by retaining tax revenues from local enterprises rather than transferring them to higher echelons. The unjust tax system, discriminating against local levels compared to the central level, was the reason for the above-mentioned phenomenon of balance falsification and tax fraud. As the villages, townships, and counties could keep only a minimal amount of taxes, they were forced to find their own financial means. As the higher echelons expect local development to be accomplished by the local bureaucracy and make their income dependent on that very development, and the local population, too, expects the same, financial means as a rule are not sufficiently available; local governments bleed either peasants or enterprises, or, when that is no longer possible, they try to direct tax sources into their own budget. The excessive pillage of the peasantry by charges and by the issue of “white slips” is also connected to this. Agriculture does not bring any direct income to

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local governments, as all agrarian taxes must be transferred to superior echelons. Another instrument of control by which the counties check zhen are the institutions in the zhen that are subordinate to the county offices. Conflicts frequently result. For example, supply and marketing cooperatives (gongxiaoshe) in the towns and townships have nothing to do with the local governments, so they have no influence on the distribution of important goods for the agricultural sector, such as chemical fertilizers, petrol, or pesticides. When employees of cooperatives direct such goods into other channels, the local government is helpless. The situation is similar with regard to credit cooperation, as the local government has no influence on lending policy, but it is forced to function as guarantor and is responsible in the case of insolvency. Another example can be seen in the Bureaus for the Administration of Industry and Commerce, which establish commercial buildings for shops, sell them to private entrepreneurs, and levy administrative fees on the private sector; these financial means go without exception to the county, and not to the zhen government. Zhen–Village Relationship The urbanization of towns in the form of a zhen establishes a closer connection between the villages and the zhen. As shown above, the VACs are legally responsible for administration, and they are supposed to act autonomously. As a matter of fact, however, zhen control the villages and their leaders rather strictly. Our investigation revealed that mostly zhen party committees appointed or dismissed the leading functionaries and thus through personnel policies controlled the villages. The zhen leaders execute economic control by setting defined goals and objectives, and financial control by checking village finances. The financial means of the village administration consist primarily of • Fees that the zhen levy from the villages (and which the villages levy from the peasants) and which are retransferred from the zhen back to the villages, such as “charges for collective accumulation” (to pay the village cadres, to finance welfare, development, and investment funds of the villages); • Profits (10–20 percent of the net profits go to the VACs); charges and fees of village enterprises; • Income by leasing land to peasant households; • Sale or leasing of land to enterprises or zhen (transformation of agricultural to nonagricultural land); and • Leasing of collectively owned agricultural machines to peasant households. In general, the inflows must first be transferred to zhen governments and, after having been checked, are to be retransferred to the villages. That is the way zhen attempt to control the financial situation and development of villages. Large expenditures must be approved by zhen governments. According to regulation, every year the village has to deliver a financial plan and report to the zhen. At the time of our research, checking was done by the “management administration station” (jingying guanli zhan) belonging to

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the agricultural company (nongye gongsi). In Xianyang and Zongshizhuang, the village accounting clerks operated directly under the nongye gongsi of the zhen. The degree of the zhen’s control over the villages depends on the villages’ economic capacity and success and on the standing of the local leaders (in both the villages and the zhen). Economically powerful villages with competent leaders enjoy higher prestige and therefore greater autonomy than villages with a weak economy and leadership. In Jinji, the villages, being almost completely financially dependent on the zhen, had no chance of participating in decision making or in bargaining with the zhen leadership. According to information provided by the zhen leaders, villages just had to follow orders and to fulfill their duties and set charges.The zhen controlled the village cadres by checking their presence. The village party secretary had to agree if a village functionary wanted to be absent from the village for three days; a longer leave had to be approved by the zhen government. Village cadres had to hand in monthly reports. Salaries were paid only after the performance of duties had been reviewed and approved. The justification for this control was the “laziness” of village cadres. Village cadres, however, evaded such control regulations by hiding the income of village enterprises and dividing it among themselves, by selling village land to firms, and by not reporting longer absences to the zhen leadership. In Zongshizhuang, all village revenues had to be transferred to the zhen (except for 500 yuan in smaller villages and 1,000 yuan in larger ones), which was to transfer the money back to the villages. In this way the misuse of village finances by village cadres was to be curbed, misuse being the rule before the introduction of such measures. If the villages intended to spend larger amounts of money, they had to apply to the zhen government for approval. The village accounting clerks had to deliver monthly financial reports to the zhen, and they had to set up financial plans a year in advance. Village cadres, however, also counteracted these measures, by hiding the correct revenues, by leasing village enterprises to cadres or family members, and by secretly dividing profits among themselves. In Wuxi county the economically powerful villages were much more autonomous. There the functionaries were better off financially and materially than the zhen or county cadres, and they even had a standing in the zhen. As mentioned above, the zhen control the villages not only by checking their finances, but also by contracts with the village leaders, in which defined goals and objectives are documented, as are bonuses for attaining these goals, as well as by regular monthly meetings between zhen and villages. On such occasions, work reports must be delivered and problems discussed. The major topics of such meetings in the zhen we investigated were the fulfillment of the sales quota to the state (grain), the payment of charges to the zhen, as well as birth control. At the same time, the zhen cadres regularly controlled the development of the various villages. Zhen cadres themselves were responsible to the county leaders as far as the fulfillment of village duties was concerned. In cases in which the county norms were not fulfilled (that is, the village did not meet its obligations), a reduction of bonuses resulted, which meant a loss of income as well as of prestige not only for the village but also for the zhen functionaries.

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Pressure and control on villages by zhen leaders are not sufficient to make them fulfill their duties. Personal relationships are just as important. The process of reform has split up the relatively homogeneous interests of the brigade and commune cadres of prereform times, when their jobs had consisted of merely fulfilling the economic plan, the control of resources, and guaranteeing public order. The differentiation of interests (those of zhen, villages, and individuals) and the loss in power of party and administrative institutions due to a greater variety of ways of life and the return to the family and private economy have led to a greater importance of informal ways of communication compared to formal ones. Problems at all levels can more easily be settled by gifts or favors or during banquets.76 Furthermore, in this way the transfer of functionaries from other places can be counteracted, for guanxi can be established even between those without common origin or belonging to the same local network. A village cadre in Sichuan described the situation as follows: The cadre, sent by the county, also has to observe guanxi. Without establishing and carefully observing local relationships, he can’t reach anything; he is just helpless. At the same time he wants a pleasant life: Fish on public holidays, local specialties for the family—who is not pleased by that? Not to take gifts would be an insult; to take them implies obligations. Good relationships make life easier for the cadres as well as for the masses.

8

Rise of a New Social Stratification and of New Local Elites Stratification Stratification, first of all, means the existence of disparities among different groups of people.1 The order of stratification and the relationships among dominant social groups have changed during the reform process in China. The recent differentiation is a result of the transition to market patterns, a growing social division of labor, social differentiation, disparities in income, and the opportunities offered by private entrepreneurship. Making use of market possibilities, market gaps, disparities in income due to legal, illegal, crypto-private, or hidden economic activities are the reasons for the growing disparities. In rural areas much higher incomes in the nonagricultural sector simultaneously increase the disparities in terms of earnings and living standard. The growing stratification has not only economic consequences but also social, political, and psychological ones. The market has created new sources of power that are just barely becoming obvious in economic life. Stratification and disparity are no longer the result of just political criteria, for example, party membership, class origin, and cadre rank, but also of economic factors. Economic success increasingly leads to an ascent in social hierarchy that in former times was possible only by means of political connections. Thus, party membership is losing its importance; the significance of political capital is decreasing. According to our investigations at the zhen level, we can differentiate thirteen strata. We understand “stratum” to mean groups that within their ideal hierarchical order have the same social features, demarcating them from other groups. We intend to classify these strata, which are not organized but which have an influence on the community as a “social block,” into five categories according to power and prestige to demonstrate their position in the local power hierarchy and furthermore to discern their standing in public opinion.2 We refer to the results of our investigations, to interviews, and to informal discussions. The catalog of the five categories comprises the following factors: • political power: in other words, the possibilities of direct influence on political decision processes in zhen and the direct effect on decisions and control over essential resources • economic power: primarily refers to direct possibilities of influence on economic processes and to direct control over decisions in enterprises; economic power at the 215

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same time has an effect on politics, for example, when individuals with economic power influence political decisions (with the help of guanxi, bribery, donations, etc.) • social prestige: social reputation and rank of a person’s position in the social hierarchy; this prestige can stem from the potential for influence in the interest of the community, from political, economic, or professional success, from the style of living, or from experience and knowledge profitable for the community (e.g., professional prestige). As social prestige does not necessarily mean that the individual is part of the local community (e.g., when zhen functionaries from elsewhere are transferred into a zhen where they have no social relationships), it might be useful to introduce another element of valuation: local prestige • local prestige: the prestige an individual enjoys due to being part of local structures (e.g., by coming from a locally important family or by having a religious function); it further refers to social components of power such as guanxi, direct impact on local groups, access to locally or regionally important networks, and the acknowledgment of a person’s local function by the local community (legitimacy); • utilitarian power: high income and wealth make use of goods, money, and services in the interest of direct influence on the four factors listed above and consequently in the interest of gaining power, a factor that sociology calls “utilitarian power.” Wealth is not only an economic factor; it is also important in social and political standing. That is why this factor can be considered an independent variable of influence. We do not intend to put forward a detailed picture of professional hierarchy or a class analysis. Social stratification could be fixed on the basis of various criteria (such as income, power, authority, prestige, privileges, or property). We proceed instead from a multidimensional approach, combining various elements, such as control of resources, power, prestige, and social connections. Furthermore, we will not put forward a detailed delineation of status groups, but rather a situational picture that was obtained in the localities of our research. Subjective assessments and intuitive measures are part of such a classification, though such factors are by no means exceptional in stratification analyses.3 This leads us to the configuration of stratification shown in Table 8.1. Table 8.1 presents an ideal-typical model, which varied only slightly locally and regionally. In principle, it proved to be effective for every town in our survey. According to our own investigations, our findings differed only slightly from those given in Table 8.1, with two exceptions. The prestige of professionals was by far the highest (more than 80 percent), whereas the status of cadres was ranked only fourth. At the national level the status of the various strata is not homogeneous. It differs according to region, economic situation, political atmosphere, and the political culture of a locality. In the following discussion we attempt to differentiate the power and status of the respective groups. The managers of successful collective enterprises, that is, economically powerful enterprises making a profit, are considered to be capable people with good connections to the local political hierarchy. Usually they come from the same town or township and

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Table 8.1 Order of Stratification in Zhen, by Factors of Political and Economic Power, Social and Local Prestige, and Prestige Status High status

(2) Manager of largescale nonprivate enterprises

(3) Large-scale private entrepreneurs with financial power important for a for zhen and villages

Upper medium (4) Other cadres status

(5) Professionals (in education, health, culture, and technical sectors)

(6) Other large-scale (7) Manager of private small-scale entrepreneurs rural enterprises

Lower medium (8) Employees in status collective enterprises

(9) Small-scale private entrepreneurs (getihu)

Low status

(1) Leading party and government cadres

(10) Contract workers (11) Laborers working (12) Small-scale in collective enterin private enterprises peasants prises (without migrant workers)

(13) Migrant workers

Note: We did not include the traditional knowledge elite, as its power and prestige have an impact primarily on villages.

have a high income. As a rule, private entrepreneurs are similarly classified. Sometimes, however, this group is unpopular, as it is perceived as disturbing the village structure, which is built on egalitarian and traditional status symbols. The local bureaucracy often regards private entrepreneurs as “neocapitalist” elements that have become rich by exploitation of manpower and at the cost of the general welfare. Here we can see the traditional ideas of an egalitarian community but also the impact of the ideological propaganda of prereform times. Private entrepreneurs try to improve their image by providing social support to needy families, to the village community, to the towns, and to local officials. In villages in particular, they attempt to hide their living standard in order to avoid envy and not to displease the community and bureaucracy. Private entrepreneurs are interested in a good relationship with the local bureaucracy in order to be free in their economic operations. Usually such relationships are good, if the utilitarian status is used to assist such liaisons. The local political leaders in the zhen still get their prestige from the power with which the county government has entrusted them. Before the economic transformation of politics, this prestige was not related to income or wealth. But a process of change has begun. Now the prestige of the local leaders is no longer dependent merely on power but also increasingly on the success of the development of the local economy and infrastructure. If local cadres are successful in improving the local economy and living standard, they enjoy high prestige; if they are corrupt, incapable, and dependent on the support of the county town or the private sector, they gain prestige and authority only due to their function in the bureaucratic hierarchy, and they will lose their popularity.

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Other functionaries are more or less dependent on the local political leaders and have only a limited range of power. Their utilitarian power is low, particularly as capable functionaries are rather willing to switch to private enterprises or to become self-employed. Teachers, physicians, artists, scientists, and technicians, if not part of the political or economic elite, belong to the local knowledge elite. For the most part, they are nonlocals employed in enterprises, and they usually work only for a period of time in one place and consequently are but loosely integrated into the local community. Alternatively, they work in the cultural, educational, or health sectors and have no power because of their low utilitarian status and therefore they possess only low-level local prestige. The status of a peasant depends on his position in the economic and social structure. Agricultural entrepreneurs, clan elders, and village functionaries have a higher status than do simple peasants. Our category “peasants,” however, does not include these individuals; we include only those who have small farms. If they work in agriculture on a large scale, they are private entrepreneurs. The status of a peasant with a small farm is low, especially when the farm is run by the family alone and they make no effort to engage in nonagricultural activities in order to improve their living standard. Employees in rural collective or private enterprises, who are forced to transfer to the nonagrarian sector due to the situation either in their family or in their village, have—as far as their job is concerned—a lower status than peasants; that does not apply, however, to their economic status. Though they have higher incomes, they lack social security. Furthermore, they have lost their independence and have become wage earners. The term “peasant,” though, has to be differentiated further. Peasants may belong to several strata, for example, if they spend part of their working time as village cadres or as employees in a nonagricultural enterprise or in the private small-enterprise sector. The determinant of status is the activity that takes up most of the time and that in the long run is the primary source of income. As far as employees in collective and private rural enterprises are concerned, we must differentiate between employees in administration or management and workers. The first enjoy a higher status and, especially in village and private enterprises, frequently are relatives or friends of the manager. Workers, however, are often recruited from other villages to avoid problems of status and hierarchy in the village or clan community. In the category of workers, one has to differentiate between those working with a contract for a longer period and having a higher status and those working only temporarily. Right at the end of the scale are the migrant workers, who are not part of the community to which an enterprise belongs. As a rule they come from poorer regions. The local community regards them as the group with the lowest social status, and they suffer from various discriminations. In the villages, this social differentiation exists in a reduced form. Where clans are strong, the traditional knowledge elite (clan elders, religious personalities) enjoy the highest status. In other cases the hierarchy of the strata equals that at the zhen level—it is dependent on the economic and social structure of a village. Within strata, fluctuation is relatively high, and individuals’ awareness of strata is still low. That is not surprising, however, as development theory shows that in processes of development, quasi groups come into existence possessing a low level of strata awareness and

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which are still embedded in traditional structures. Only gradually do they turn into “strategic groups with a lively consideration of interests and the means of power to realize them.”4 The various strata are not homogeneous, however, but have an inner differentiation. There are larger and smaller, poorer and richer peasant households due to land ownership, land quality, choice of cultivation, possibilities of input, access to markets, number of employees, and so forth. Rural cadres consist of state cadres (who work mostly in zhen and/or who have been sent into the townships and villages by the counties or zhen), leading cadres with set salaries who are exempted from production work, and simple village cadres with low grants. Private entrepreneurs comprise small family enterprises with a low income, medium and large enterprises, as well as multimillionaires. Therefore, it is still too early to speak of classes. Though the individual strata have common traits such as property, control over social resources, and income, stratification is still in the process of fluctuation and development. A common basis of interest as a precursor to class consideration is still developing. The process of social development, that is, the dissolution of prereform strata and the forming of a new order of strata, is not yet finished. This applies to upward and downward mobility as well as to lateral, in other words, spatial mobility. In the sense of Bourdieu we may speak of individual strata as “ensembles of actors with similar positions” that due to “similar conditions” develop corresponding dispositions and interests and consequently similar practices and political and ideological ideas.5 Certainly there are significant differences in development among various regions. In less-developed areas (western China) the percentage of the rural workforce is much higher, whereas the percentage of peasant workers, managers, and private entrepreneurs is lower than in the better-developed eastern part of the country. New Local Elites The process of stratification and differentiation is the basis for the rise of new elites. When we speak of “elites,” we refer not only to the local political elites but also to the economic and intellectual elite, that is, according to Pareto, to the dominant as well as nondominant elites.6 Elites can be defined in two ways: by their position in a stratified hierarchy (stratification elite) and by their function (functional elite).7 We are primarily interested in functional elites. Keller, in line with Karl Mannheim, discerns functional elites as “strategic elites” that formulate social aims and are able to realize them due to their influence; that is why they understand themselves as developmental elites.8 Elites possess the necessary power to either start or impede development. Thus, we understand by “elite” a heterogeneous group that can either hinder or advance development. That applies not only to political and economic elites but also to intellectuals who are the driving force behind all change in developing countries.9 In rural China, mainly three groups belong to the elite: • political elite: the political leadership at the county level and below (zhen, townships, villages) • economic elite: managers of larger enterprises and prospering private entrepreneurs • knowledge elite: the heads of big family clans and the new intellectual elite

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The knowledge elite can be part of the political and economic elite. The local intellectual elite is also to a great extent part of the political and economic elite. The political and economic elites must be differentiated in terms of their functions. The experiences in newly industrializing countries in East Asia prove the thesis that political elites are mainly responsible for modernization. There the state has realized the process of modernization with the support of the bureaucracy by focusing all centrifugal streams in the main interest of renewal and against all social opposition and difficulties. In contrast to economic elites, the state has the advantage of being able to streamline all heterogeneous interests, typical of the economic sector, in order to reach the superior aim of development, by force if necessary. That seems to turn the state into a guarantor of modernization processes. Such a project can only be successful, however, when there are new economic elites and due to economic change and to a reform of the traditional bureaucracy and institutions. There is no process of change possible where the political system is decayed and without initiative. Economic change leads to the rise of economic elites that influence the bureaucracy from below and contribute to the change of institutions. Only such a slow process of change and the replacement of traditional bureaucracy and institutions by modern ones are the preconditions for the rise of new political elites and for the advancement of modernization. The entrepreneurs themselves cannot initiate such a process of modernization. The central government must commence and provide the necessary general setting, a factor given in China. Furthermore, institutions must be altered. That means for China that the intended market conditions demand institutions and individuals that are able to act accordingly. That is why the economic reform makes the change of elites and bureaucracy necessary. Change of elites refers to the emergence of new elites that in principle differ from the old ones. They are younger, better-educated, and modernizing-oriented and represent new values, attitudes, and aims. In the following analysis we will concentrate on the formation of elites “from below,” not on the technocratic level from above, as the process from below—within the frame of social change—is spontaneous. The interests of the new rural elites are not identical with those of the technocratic elite appointed by the state. The new rural elites consist primarily of successful industrial or agricultural entrepreneurs who have become wealthy. These entrepreneurs were once mostly functionaries, urban middle school graduates sent to the countryside, members of prerevolutionary elites, or former private entrepreneurs, as well as former members of the army. As a rule these groups possess a certain level of education and experience and a good relationship with the local bureaucracy. The experience and ability of this group of entrepreneurs are accepted, just as their role as employers and benefactors in the interest of the community is. Local governments support and encourage this group, as they foster or finance public projects, contribute to local taxes by a constantly growing percentage, and provide new jobs. After a while the community accepts such individuals—starting at the village level— as natural leaders. It does not matter whether they are party functionaries or not. Not a small percentage of this new economic elite consists of individuals from families that until the beginning of the 1980s were regarded as “class enemies,” that is, from families of former landlords, entrepreneurs, Guomindang civil servants, or other members of

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the former local upper class.10 In these instances not only do traditional family wisdom and attitudes prevail, but also the fact that this group of individuals for decades had the lowest social position but at the same time a comparatively high level of education and knowledge. As this group of individuals had and to a certain degree still today has no proper chance of upward advancement due to political reasons (they have not been allowed to become party members), many of them made use of the economic liberalization and became entrepreneurs.11 This tendency is confirmed by a Chinese study revealing that families of former landlords and rich peasants today on average have a higher income, a better dwelling and living standard, and a higher degree of education, and a greater percentage work in the nonagrarian rural sector and the private sector than other rural inhabitants. Concurrently they have more relatives abroad than others; these relatives are able to support them in establishing or operating a private business. Due to decades of suppression, this group of individuals at least on the surface is better adjusted to social rules.12 To be economically successful, this group needs especially good contacts to the party bureaucracy, as social prejudices are still alive. The stigma of “class enemies” no longer officially exists, but it is still present in the minds of the people. As far as village party functionaries are concerned, they possess good connections to the superior bureaucracy, which offer them profitable methods of supply and sale and enable them to act as intermediaries between the bureaucracy and the village community. It is therefore not surprising that former party functionaries or individuals related to major rural cadres are to a great extent large-scale and influential private entrepreneurs. Such relationships are sometimes strengthened by marriage (between relatives of private entrepreneurs and functionaries) or they already exist because the individuals belong to the same clan. Private entrepreneurs without such relationships and functionaries without an economic footing are disadvantaged by this development. In villages this leads to a connection of the interests of private entrepreneurs and local cadres, called by some a “hybrid class.”13 Concurrently, older party functionaries recognize that they may not meet the necessary “market conditions.” For decades they had to act according to the planned economy. They are afraid of the new policies connected with a “market economy.” An article in the journal Nongye Jingji Wenti describes that they had been used “to get orders at meetings, to pass on production plans, and to check their implementation.” Most functionaries do not really understand their tasks under the conditions of a market economy. For them this kind of economy means the levying of fees, penalties, and other charges from peasants to “enrich” themselves and their institutions. All this leads to an increasingly bad relationship between cadres and the peasantry.14 Where the exploitation of the peasantry becomes in fact oppressive, there are frequent riots against functionaries as well as against party and state institutions to demonstrate opposition. During the last few years there has been a considerable increase in rural uprisings.15 Furthermore, many members of the old bureaucracy have become discredited due to corruption and various compulsory measures inflicted upon the peasantry. By the process of reform, this group of individuals has lost much of its power and prestige. Yan pointed out that in the villages of his research, village cadres no longer received gifts from the peasants as had been the rule at festivals for decades but, on the contrary, were increasingly attacked.16

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Local Elites at the County Level Party organizations are still the dominant institutions. The members of the local party committee, with the party secretary at the top of the hierarchy, are the political elite at the county level. The dominance of the CCP can best be seen in county towns that administer the zhen and in which state and larger collective enterprises are concentrated, and through the bureaucracy and state power in rural areas. The county political elites consist of mayors, the chairmen of the people’s congresses, the chairmen of the political consultative conferences, and the local commanders of the military forces as well as their deputies. Retired leading cadres with high prestige as local “elder statesmen” also belong to the political elite. The subelite consists of members belonging to standing committees of the above-mentioned institutions as well as heads of offices and their deputies. An analysis of the leadership structure of seven localities at the county level in our research areas reveals the following process of change within the local political elite. • Rejuvenation of the cadre contingent: The average age of the members of the standing committee of the party committee was between 41 (Jinzhou) and 46.5 (Guanghan). The change in age structure in Jinzhou may be taken as representative for the general development (see Figure 8.1). • Higher level of education: The percentage of leading functionaries graduating from a university or technical college has increased considerably. Nowadays it seems to be almost impossible to get a leading position with only a certificate from a junior middle school or a primary school. Moreover, party schools contribute in that capable officials can improve their educational standard by additional studies. The further education of party secretaries and mayors at the zhen level takes place in party schools of the districts or shi; that of other members of the zhen leadership as well as of village heads and village party secretaries in the party schools of the counties (or cities); and that of other leading village cadres in the party schools belonging to zhen. This means that this further education always takes place in the party schools at the next higher administrative level. Depending on the education program, it may last from several weeks up to two years. For a dazhuan certificate, one needs two years of schooling. “Dazhuan” in the proper sense of the word means a polytechnic or technical college. It refers to further education in party schools or studies organized by the party and lasting between one and two years. • Replacement of “revolutionary cadres” by “technocratic cadres.” At the beginning of the 1980s functionaries who had joined the party before the founding of the PRC or before the Cultural Revolution were replaced. The individuals who took over their positions had been specially chosen and educated for a cadre career. This can clearly be seen in the growing number of those among the functionaries who call themselves “cadre” by profession. This group is more strongly economically oriented.

NEW SOCIAL STRATIFICATION AND NEW LOCAL ELITES

Figure 8.1

Change of Age Structure: Leadership in Jinzhou County, 1978–1992

54

52.5

52

Average Age

50

50.1 48.3

48 46

223

48

48

44

49.2

45.2 45.3 44

42

40.9

40 40.2

38 36 1978

1983

1988

1992

Standing Committee of the Party Committee City Government (Mayor/Vice-Mayor) People's Congress of the City (Standing Committee) Source: Authors’ diagram based on information provided by the Jinzhou Party Committee.

Table 8.2 demonstrates how this process of change took place in Wuxi county. There are differences between the people’s congresses and the political consultative conferences. Before retiring, outstanding older functionaries frequently are transferred to leading positions in these institutions. This is clearly explained by the higher average age (without a major change) and the lower level of education within the leadership of those institutions (see the case of Wuxi county in Table 8.2). The development in Wuzhong City significantly demonstrates the alterations in the structure of the people’s congress: compared to 1980 the percentage of workers and peasants has constantly decreased, whereas the number of intellectuals and cadres has increased (see Table 8.3). The structure of the people’s congresses is not just arbitrary but it is set by the responsible party committees. The change reveals a shift of focus (knowledge, education, and expertise are necessary for local development) and consequently an alteration in the “role of classes” (workers and peasants are no longer a “leading power”). The increasing number of cadres tolerates stricter control by the party, which still regards intellectuals and their knowledge with some suspicion. As a matter of fact, the role of the people’s congresses at the county level is marginal. One article on their role states, “The party is the leading force and the people’s congress has to submit to the leadership of the party.”17 The above-described process of change is also to be found among the subelites (leaders of offices). Furthermore, the managers and party secretaries of larger enterprises, that

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Table 8.2 Structural Change of Wuxi County’s Leadership Government (mayor/deputy mayor)

Party committee (members)

Members Average age Education College/University Senior middle technical school Junior middle school Former profession Worker Peasant Soldier Scientist/Technician Culture/Education Cadre

People’s congress (chairman/deputy chairman)

1978

1992

1978

1992

1981

1992

13 52.4

9 46.3

9 51.5

9 43.9

6 58.7

5 57.6

3 4 6

8 1 0

3 4 2

9 0 0

2 1 3

3 2 0

1 1 1 2 2 6

0 0 1 0 0 8

1 1 0 2 1 4

0 0 0 0 0 9

0 0 0 3 1 2

0 0 0 0 0 5

Source: Party committee of Wuxi county.

Table 8.3 Social Composition of People’s Congresses (PC) of Wuzhong City, 1980–1993 Workers

Peasants Intellectuals

Cadres

Soldiers

Religious leaders

Others

8th PC

51 (14.6%)

191 (54.6%)

30 (8.6%)

60 (17.1%)

6 (1.7%)

3 (0.9%)

9 (2.5%)

9th PC

30 (11.5%)

110 (42.3%)

32 (12.3%)

48 (18.5%)

32 (12.3%)

8 (3.1%)

0

10th PC

29 (10.5%)

110 (39.7%)

38 (13.7%)

92 (33.2%)

4 (1.4%)

4 (1.4%)

0

11th PC

17 (8.1%)

74 (35.2%)

32 (15.2%)

75 (35.7%)

5 (2.4%)

7 (3.3%)

0

Source: Wuzhong People’s Congress.

is, of state-owned and larger collective enterprises, are the economic elite at the county level. They belong primarily to the local party and administrative hierarchy. They are closely connected to the local administration and often must qualify themselves for economic and administrative duties by some kind of rotation that implies working for a couple of years in various enterprises.

NEW SOCIAL STRATIFICATION AND NEW LOCAL ELITES

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Elites at the Zhen Level In zhen, the prestige and power of the party and administration usually depend on economic power. In places with flourishing township-owned enterprises whose profits have a positive influence on the living standard and image of a town, the political leaders enjoy higher prestige, a better standing, and more power to achieve their aims in the county bureaucracy and in the county. Not only is this profitable for the income of the township functionaries, but at the same time they gain a better chance to climb the hierarchy and to become a county cadre. The changes in the cadre structure, as described for the counties, are also to be found at the zhen level. Here the political elite consists of the same kind of groups: the leaders of party committees and of the government. Party committees have between seven and twelve members; the mayor is supported by three to six deputies. The party committee usually is the decisive organ, the party secretary in particular, followed by the government and the people’s congress. Administration cadres in zhen explained these facts by the following sentence: “If the party secretary does not nod his head, nothing can be arranged” (shuji bu dian tou, banbucheng shi). The change of elites goes right down to the zhen level. In the seven towns we researched, the level of education of the political core leadership (party, local government) had changed remarkably compared to the 1970s. The percentage of functionaries with primary and junior middle school education today is much lower than that of individuals with higher education. An elite interested in development has replaced one dominated by ideas of revolution and by the peasantry. This process is the result of outside influence, not inner development. Furthermore, cities and counties in charge of the zhen transfer young urban functionaries into leading positions at the zhen level; the level of education is also improved by further education and qualifications of young cadres, not by recruiting new individuals. The majority of the functionaries at that level are individuals with the above-mentioned “dazhuan education.” The average age of the political leaders in the seven zhen of our research area was lower than the one at the county level. In party committees it was between forty-five (Xiangyang) and thirty-eight (Zongshizhuang); in the top positions (mayor and his deputy) between forty-four (Xinzhou, Yuquan) and thirty-two and a half years of age (Zongshizhuang). Only in exceptional cases did graduates of the junior middle school hold leading positions; none of the leaders attended only primary school. The majority were graduates of professional or polytechnic schools. Tables 8.4 and 8.5 reveal that the average age has not changed much. The educational level, however, has gone up. The latter does not necessarily mean that local individuals took part in further education. The actual reason is the transfer of cadres from county towns. Counties and cities tried to develop some townships into “model places” and therefore sent capable young people into the zhen. These people usually had a contract with the county government, in which certain economic goals were laid down that had to be realized. There were bonuses for fulfillment and overfulfillment—a good recommendation for further advancement in the county hierarchy. Nonfulfillment meant a reduc-

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Table 8.4 Changes in the Leadership Structure of Zongshizhuang, 1978–1993 Zhen government

Party committee

All members Average age Educational level Primary school Junior middle school Senior middle school/technical school College of higher education University

1978

1985

1993

1978

1985

1993

7 37.3

6 38.2

8 38.0

3 36.3

3 42.3

4 32.5

2 1

0 4

0 1

1 1

0 1

0 0

3 0 1

2 0 0

0 6 1

0 0 0

0 2 0

2 1 1

Source: Zongshizhuang Party Committee. Table 8.5 Changes in the Leadership Structure of Dongting, 1978–1992 Zhen government

Party committee

Total members Average age Educational level Junior middle school Senior middle school Former profession Peasants Intellectuals Members of the military Sex Male Female

1978

1992

1978

1992

17 44

9 44

17 45

16 46

12 5

1 6

12 6

4 11

17 0 0

7 0 2

16 1 1

11 1 4

15 2

8 1

15 15

3 1

Source: Dongting Party Committee.

tion of bonuses and salaries and was likely to have a bad effect on the future political career of the individuals concerned. The individuals sent into the towns remained there for three or four years. They mostly did not live in the zhen but in the county towns, and returned to their urban positions after their contracts had expired. In many cases the fluctuation of leading cadres was considerable. A comparison of the structure of leaders in Zongshizhuang in the years 1978, 1985, and 1993 showed that only one of ten leading functionaries from 1978 was still left in 1985

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Table 8.6 Composition of the Salary of the Party Secretary of Yuquan, 1994 (in yuan) Basic salary Additional allowance for length of work Allowance for grain, coal, and so forth Allowance for newspapers and magazines Bonus Qualification allowance Other allowances (e.g., for vegetables) Allowance for transport Allowance for work in rural areas Total

166.00 33.00 5.26 16.00 65.00 20.00 77.50 1.50 48.00 432.26

and only one of the leading officials of 1985 was still to be found in the leadership structure of 1993 (deputy party secretary as chairman of the people’s congress). The incomes of the political elite depended on the situation in the town’s economy. As the leading cadres were heads of the respective gongsi, these functions provided them with comfortable incomes. In 1993–1994, with the exception of one location (Xinzhou), all administrative offices for the economy at the zhen level had been changed into such gongsi. The grade of the cadre’s salary is generally regulated. According to the “Preliminary Regulations Concerning Employees in the Civil Service” (from October 1, 1993), the leading cadres at the township level belong to ranks 9–13; in special cases they can be promoted to grade 8 (special credits, eminent functionaries sent into towns). The example of Yuquan may be taken as representative of all zhen included in our investigation. The party secretary had a rank of 8, the deputy party secretary and the mayor a rank of 11. The monthly salary of the party secretary was 570 yuan (after a retroactive salary increase from August 1, 1994), the monthly salary of his deputy 530 yuan. A simple employee received between 370 and 380 yuan per month. The base salary consisted of the salary due to position (zhiwu gongzi) and bonuses according to age and active years. The salaries of the members of government ranged between 350 and 390 yuan per month, the mayor earned 378 yuan, the chairman of the people’s congress 406 yuan. The head of the administration of the collective economy had the highest income, though he had the lowest education due to his relatively advanced age and his work in the countryside for many years (double bonus). Obviously the seniority principle is still in existence; age is more important than qualification. (See Table 8.6 for a breakdown of a sample salary for a party secretary.) The basic salaries of zhen functionaries were not much higher than those of urban workers. Therefore, these salaries are not the motivation for improving the economy and administration and are not the basis for income disparities. Such disparities are due to bonuses, privileges, and incomes from other activities. In cases in which the degree of development demanded by the responsible county (or city) is fulfilled or overfulfilled, the leading cadres received bonuses of some thousand yuan. The highest incomes stem

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from bonuses and profit-sharing in the economic administration. The head of the industrial company (also the deputy party secretary) in Xiangyang received between 10,000 and 20,000 yuan per year as payment for his work in this company. The amount of the income depended on the economic power of a town. The party secretary as general manager of the industrial company (at least in name) received similar bonuses and profitsharing as the other leaders of gongsi. By the example of the group of leaders in Dongting the sources of the main income of these functionaries can be demonstrated. In Dongting in 1992 all cadres had an average yearly income of about 10,000 yuan, the leading cadres sometimes tens of thousands of yuan. In some areas a growing percentage of income paid to the zhen cadres was derived from local “share-enterprises.” In Pingle, for example, thirteen of sixteen zhen enterprises were “stock companies” (gufen hezuo gongsi). Typically, every employee and recently employed person could buy shares valued at between 500 and 1,000 yuan, depending on the enterprise, an amount in many cases that surpassed a peasant’s average yearly income. As these shares were not available on the market and were not allowed to be offered publicly, they were not shares in the common sense of the word but certificates of forced loans. The zhen governments formally held one-third of the shares, by primarily providing land for the enterprises, a phenomenon at that time strictly forbidden by superior authorities but nevertheless generally practiced. By this nominal percentage of shares the industry gongsi dominated most supervisory boards and made sure that the dividends were used for local development and for use by the local elite. In addition to monetary income, nonmonetary income was also of importance. In Dongting, for instance, the local government erected comfortable homes that were sold at a “special price” to members of the local political elite. At first, local offices fixed a low price for the sale of such homes to political leaders. Afterward, the prices were drastically raised. In Xiangyang the party secretary had just bought for his personal use a (secondhand) Mercedes Benz 450 for 1 million yuan; in the zhen of Dongbeitang (Wuxi county), the party secretary and the mayor were allowed to make personal use of a Mercedes Benz 300, “borrowed” from a local joint venture. Other nonmonetary income included an advance in cadre rank, or getting urban hukous for family members who had only rural residence permission. Furthermore there were no-cost privileges, for example, an official car with driver, drivers paid by the government, a free phone in the flat, gifts from enterprises called material or monetary “bonuses,” and payment for activities as “adviser” on supervisory or administrative boards. In towns with low economic power, functionaries must rely on donations from the private economy, fees for acting as intermediaries, or on incomes from corruption. The economic elite in zhen consisted of large-scale private entrepreneurs and managers of larger town-owned enterprises. According to the system of chengbao described earlier, these enterprises were mostly taken over by managers on a contract basis. In regions where town-owned enterprises were unable to compete or where almost no well-funded enterprises belonging to the township existed, the private entrepreneurs became more and more important, eventually becoming part of the economic elite. Quite a number of them were crypto-private entrepreneurs (owning enterprises that were registered as collective ones).

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229

The managers of zhen enterprises primarily were recruited from among active or former cadres or individuals with good connections to the local political elite. Particularly among prospering large enterprises there existed a constant flux between zhen cadres and enterprise management. Due to the lack of suitable managers, smaller zhen enterprises in less-developed areas (Jinji, Pingle, Zongshizhuang, Xinzhou) with labor-intensive production were often run by functionaries who could not meet the requirement of either management or the market. Such enterprises mostly had losses (especially in Jinji and Pingle). Larger-scale enterprises were transferred to experienced managers, as these firms were of vital importance as far as the income of the political elite, zhen development, and prestige with regard to the superior administration (county/ city) were concerned. Here successful managers could qualify themselves in order to advance in the local administration hierarchy. Examples can be found in the factory for packing paper in Xiangyang, where the first former general manager, in 1994, was deputy party secretary and head of the industry company and the second manager was zhen mayor; as well as in a plant producing cement in the same zhen, whose former director at the time of our research was party secretary of the zhen. The heads of such enterprises, of central importance for the zhen, frequently were concurrently members of the local party committees and thus protected the network of the political and economic elite, for it was this very network that guaranteed the flow of enterprise profits to the political elite and promoted the further development of the zhen. By having the exclusive right of appointing directors in zhen enterprises, the political leaders could manage and control development according to their own interests. Concurrently, the directors were thus totally dependent on the bureaucracy. They were forced to operate according to market conditions, necessary for economic success, as well as according to the expectations of the bureaucracy to meet local interests and in that way to secure their own positions and careers. In societies where the market is dominated by cadres, it is of vital importance for the survival of an enterprise to cooperate with the bureaucracy, for it is the bureaucracy that determines subsidies, credits, taxes and charges, wages and bonuses, the enterprise budgets, the use of profits, market access, supply of raw materials, and so on. Yet, Kornai is right in arguing that such managers give priority to the bureaucracy, not to the market.18 From a political and economic point of view, however, these managers are dependent on the political elite. Leading positions in larger enterprises are the best sources of income. The chengbao contracts made it possible for the manager of an enterprise to receive between 1 and 3 percent of the profit as a bonus after having overfulfilled the obligations documented in his contract. Bonuses were reduced if the set standard was not reached; by overfulfillment the manager could, however, expect an extra bonus of 30–60 percent of the amount surpassing the standard. The basic salaries of managers ranged from 250 to 500 yuan per month. In small enterprises the monetary bonuses exceeded 10,000 yuan per year; in flourishing larger firms with more than one hundred or even several hundred employees, some 10,000 yuan; and in exceptional cases, more than 100,000 yuan. They were paid not only monetary but also nonmonetary bonuses, such as being given houses, limousines, condominium flats with a value of tens of thousands of yuan, urban hukous, and so on. The directors of larger zhen enterprises as a rule had their own cars and a spacious, luxurious home.

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Only in a few zhen enterprises had party branches been established. None of the enterprises we visited had trade union organizations. As a rule the manager was also party secretary to avoid competition and unnecessary double salaries and to document the absolute authority and power of the manager. The political elite is of greater importance than the economic elite, though the latter has a constantly growing influence on policies and decisions. The leading managers in some zhen were also members of the political elite—in some zhen influential managers were members of the party committees or deputy mayors—or they could influence political decision-making processes by means of their connections to the political elite and in the interest of profit maximization. The personal dependence on the zhen government that appoints or dismisses managers in zhen enterprises more or less prevents this group, which belongs to the economic elite, from becoming politically independent.19 Economic independence, however, is growing with the process of decollectivization, freeing zhen enterprises with a chengbao or leasing system from bureaucratic control at least as far as enterprise operations are concerned. The manager of a collective enterprise described the political-economic positions in the zhen in the following way: The party secretary and the mayor are the political leaders; in economic life we entrepreneurs are at the top. From the political point of view the political leaders can sack me at any time, though they have to consider the development of the enterprise. However, if they want to dismiss me, I am helpless. In the enterprise, however, I am the one who decides.20

When we asked who were the five most influential individuals in the zhen, we were told that besides the party secretary and the mayor this status belonged primarily to the managers of large zhen enterprises, who usually had functions in the county or city, such as, for example, deputies of the people’s congress or of the political consultative conference. In some cases important private entrepreneurs with transregional influence were also mentioned. Elites at the Village Level As described above, the leading members of the party committee and the VAC are the political authorities in the village. At the same time that they control the village enterprises, they also constitute the economic elite. Furthermore, in villages there is an economic elite consisting of successful private entrepreneurs, well-off peasants, and the managers of village-owned enterprises (mostly cadres or their family members). The traditional elite—clan elders and religious personalities—is of relatively great importance. In most villages these different elites have intermingled. Interconnections were more obvious at the village level than at the zhen level. Figures 8.2–8.4 and Table 8.7 show the close connections among administration, economy, and party at the village level. Political and economic powers here are clearly intermingled. The separation of functions is much more complicated, as the predominance of the party over administration and the economy at the local level is much greater than at the central level.

NEW SOCIAL STRATIFICATION AND NEW LOCAL ELITES

Figure 8.2

Wangyiba Village Administration, Wuxi County, 1993

Figure 8.3

Village Administration Committee of Chunleicun, Dongting Zhen, 1993

231

The development of autocratic structures, as could be found in the village of Wangyiba, was not exceptional. The party secretary of that village legitimized himself among the village community by dismissing by force the former party secretary, who had hindered development; furthermore he made it possible for every one of the more than 1,000 employees of the only village enterprise to receive a monthly average income of 6,500 yuan, consisting of wages and bonuses. Concurrently, employees were provided with

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Figure 8.4

Village Administration Committee of Kongmuzhuang, Zongshizhuang Zhen, 1993

private homes of about 200 square meters, which they could purchase for the at-cost price of 80,000 to 90,000 yuan. The party secretary was therefore the one who could decide on all village matters (see Figure 8.2). In the enterprise itself there was a oneman-autocracy. As the general manager and concurrently party secretary proudly put it, “The enterprise has neither a party branch, a branch of the Youth League, nor a trade union organization. I am the one who decides everything” (Interview, Yuqi zhen, Wuxi county, September 10, 1993).

NEW SOCIAL STRATIFICATION AND NEW LOCAL ELITES

233

Table 8.7 Village Committee, Yuwang, Pingle Zhen, 1994 Chairman Simultaneously: Vice party secretary Director of the only village-owned enterprise First vice chairman Simultaneously: Party secretary of the village Accountant of the village Employed by the management of the private enterprise of the second vice chairman Wife works in the management of the paper factory of which the second vice chairman is the director Second vice chairman Simultaneously: Owner of a private enterprise producing fishing nets Director of the village-owned paper factory, he holds 89 percent of the shares Director of the enterprise company of the village (annual income > 300,000 yuan)*

*According to information provided by the village party secretary, September 22, 1994.

For village functionaries there are two sources of enrichment: by economic administration (companies for enterprises, industry, agriculture, or for the tertiary sector) and ensuing bonuses as well as by activities in their own or collective firms. In rich villages the incomes of cadres were much higher than in zhen. In less economically powerful villages the cadres divided 10–15 percent of the net profits of the village enterprises among themselves, coming up to just some hundred or thousand yuan per person. Furthermore, there were bonuses for fulfillment or overfulfillment of the tasks set by the zhen government or incomes from (illegal) sale or leasing of village-owned land to zhen or other enterprises. Where the township- and village-owned industry is weak and the private economy dominates the economic life of the villages, the village cadres are self-employed or they contribute to the private economic activities of family members. Here village-owned enterprises are mostly privatized. Where the private sector is weak and the collectiveowned economy strong, the village functionaries (by means of their administration of the village economy) as well as the village itself profits from this sector. Another form, which we encountered primarily in the south, is the dominance of politics and the economy by clans (jiazuhua). In many places clans had taken over the party committee, the VAC, and the larger enterprises. They had bound the village economy in a net of clan activities comprising supply, material procurement, production, packing, transport, and sales, and they had a decisive influence on networks from the villages right into the cities and other regions. That led to collective wealth, though primarily for clan members. Management

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functions were transferred to members of the clan; simpler and less qualified activities were given to employees from other places. Rural residents are more open to the private economy than urban residents or functionaries at the city, county, or town level, which explains why successful private entrepreneurs in villages are the nucleus of the economic elite. There were exceptions in rich villages in Wuxi county, where the village functionaries had strong economic power and due to competition attempted to limit the private sector to work-intensive trades and the tertiary sector. More and more private entrepreneurs strive to gain social prestige by giving donations and other gifts to the village and zhen governments. They not only support the political elite but—to be generally accepted—also finance projects of infrastructure and the establishing of schools and clinics; they provide donations for reducing poverty, and support friends, village residents, or former colleagues by issuing credit free of interest and by providing new jobs. Our research revealed that the prestige of private entrepreneurs is not only dependent on their income but also on their services for the community. In the private enterprises where we made enquiries, such donations ranged from thousands to millions of yuan. For instance, a private entrepreneur in Dongting had paid more than one million yuan for waterworks and the extension of the kindergarten in his home village. A private entrepreneur in Xiangyang regularly supported poor peasant households with monetary and material donations; others had spent many thousands of yuan for infrastructure establishments. In Zongshizhuang in 1991 two private enterprises had presented 120,000 yuan for road construction; in 1992 a village received a new school from their donations. An enterprise in Pingle contributed 20,000 yuan for new roads, 10,000 yuan for teachers’ salaries, and several thousand yuan for smaller projects in the township. In almost all townships the leaders were of the opinion that private entrepreneurs had done a lot for the improvement of the infrastructure and for the creation or development of welfare and of cultural and educational institutions. There are both voluntary and enforced “donations.” While voluntary grants are to improve the prestige of the donor or the guanxi with the local bureaucracy, compulsory donations must be paid in order not to lose guanxi and to circumvent the arbitrariness of local officials. There are two forms: (1) Some functionaries or offices ask for grants, and the private entrepreneur knows that he cannot refuse without suffering negative consequences. Every private entrepreneur complained that refusing a “request” from tax officials leads to a severe increase in taxes; if civil servants of a power station are involved, electricity might be cut off; the police might ignore complaints and accusations or there might be even prosecutions by the police. (2) Offices or local governments enforce charges or fees. A private entrepreneur told us that the zhen government had required from every private entrepreneur in the small-scale sector the payment of 150 yuan for the construction of a new government building, and the larger-scale entrepreneurs had to pay 600 yuan. Shortly afterward, another 100 or 500 yuan was charged for road construction, and even larger amounts for the erection of a new bridge. In Xiangyang private entrepreneurs were forced to “donate” tens of thousands of yuan for bridge construction, 300,000 yuan

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for a new park in Guanghan, and another 100,000 yuan for a public park in the city of Deyang (to which Guanghan belongs). Private entrepreneurs become indispensable and are promoted by local government when they purchase shops and flats in the towns, urban hukous in the zhen, and pay a growing share of the local tax income. That factor has an especially positive effect in zhen where the zhen- and village-owned enterprises are weak or stagnating. Private entrepreneurs are not generally unpopular in villages and peasants do not dislike and envy them everywhere. They attempt to hide their wealth and feel that they are politically without much influence.21 Dislike for private entrepreneurs might be found in towns with conservative political leaders, especially when private entrepreneurs have come from other places and lack local protection. Normally, however, private entrepreneurs are integrated in rural communities by guanxi and family relationships, particularly where functioning clans exist. Preconditions for this integration are that they do not use their financial power against the community but for its profit and that their immediate social neighborhood shares in their wealth. Certainly, they take great care not to show off, as they want to protect themselves against being asked for donations by offices or individuals, against acts of envy and revenge by poor, unsuccessful families, and against criminality. They are usually confronted with some kind of social envy and are not as well integrated in political networks as are managers of collective-owned or cryptoprivate enterprises. As our interviews have shown and as described above, a certain change is visible and the successful private entrepreneurs are increasingly integrated into the economic elite. As the private sector is absolutely necessary for rural and urban development, province, city, and county governments increasingly support the private sector or help to improve its image. When private entrepreneurs let the community share in their wealth, their prestige grows and official as well as individual envy decreases. Such obligations are nothing new. It is tradition in peasant societies that there are customary obligations vis-à-vis village communities. It is expected that wealthy village residents and clan members share part of their means with members of these groups or with the entire village and support them in case of need. This moral tradition, called by Scott the moral economy of the peasants,22 is still alive. Obviously, the most influential individuals in villages were not always the party secretary or the chairman of the VAC. In many cases they were the clan elders, wealthy and successful peasants (zhuanyehu), and mainly private entrepreneurs, first among them those who supported the village financially or who had functions in the county or city superior to those in villages. It was interesting that the party secretary and the accounting clerk were of the same opinion concerning the five most influential individuals in the village of Laoying (Yuquan): • owner of a private furniture factory, member of the people’s congress in the provincial capital of Harbin, member of the standing committee of the people’s congress in Acheng, chairman of the Association of Private Enterprises in Yuquan • a private owner of a chicken farm with a very high income doing a lot for the village

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• owner of a private distillery using production waste for rearing cattle and who at the same time runs a dental practice • chairman of the VAC, at the same time owner of a quarry • private corn farmer; he was called the “corn king” of the region due to his high output (13,000 kg/mu) Summary Stratification and new elites have fundamentally changed the social structure in rural areas. Since the early 1980s the composition of the local elite has changed due to a growing differentiation and an alteration of social stratification. Though a social stratification had existed since 1949, there are significant differences between the stratification at the beginning of the reforms and that of more recent times. Prior to reform, stratification was primarily determined by political criteria. Party membership, cadre rank, class, and ideological reliability were the preconditions for belonging to the elite. Individuals considered class enemies, such as former landlords, rich peasants and their families, as well as members of the former political elite, formed the lowest stratum. Family origin and class status were by and large identical. Today stratification is mostly determined by economic premises (economic success as entrepreneurs).23 Diversification of the ownership system, social mobility, and a growing division of labor—as mentioned above—are the fundamental reasons for the growing disparities in income and social stratification. The degree of this development in such a short time is remarkable. The number of billionaires can still be guessed in China—they number several hundred—according to information from the sociologist Lu Xueyi in 1992; not so the number of multi-millionaires.24 Chinese statements such as “China creates a market economy without polarization”25 are far from reality. However, it is almost impossible to get reliable statistical data on income due to hidden income sources, the enormous underground economy (a great number of employees in the state sector have two jobs), disguises to avoid taxes or official arbitrariness and social envy, as well as the lack of registration capacity. According to statistics in 1995 there were more than 5 million households with a yearly income of more than 50,000 yuan (2 percent of all households).26 There are serious debates regarding the high income of private entrepreneurs. Conservative functionaries have suggested an upper limit to incomes, and the population has many prejudices (e.g., the opinion is widespread that entrepreneurs come from low-class families, are antisocial, and are interested only in profits). Economists, however, have found out that in postsocialist societies capable people of poor origins frequently became rich in the transition phase from a planned to a market economy, though not only by legal means but also by privatizing state property. Nevertheless, one really needs all kinds of pioneering profits. They are necessary as an economic stimulus. They are indispensable for the capital formation resulting from them. There is no substitution even for the most brutal forms of self-financing by profits stemming from enterprises and private entrepreneurs. Future wealth is not based on the correct distribution of incomes and assets, which is just from the very start.27

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As we have seen, the change in the elite is primarily to be found at the township and village levels. That, however, does not necessarily lead to the conclusion that there is a simple transfer of power from the old to the new elite. For that a different political system would be necessary. As long as the present system still exists, the members of the economic elite can only secure for themselves influential positions by being members of the party. However, political power and political influence no longer result merely from being party members. Power execution and therefore participation is also available by means of corruption (such as bribing cadres) and the guanxi network, frequently giving private entrepreneurs in rural areas considerable influence over political and economic decisions. Due to their relationships, officials engaged in the private economy frequently have the chance to use state and party-state institutions for their own economic interests. The above-described changes in local power and social structures have already meant an alteration in the political system. The new elites have become part of the elite by economic processes rather than by political processes. They represent new values, new symbols of status, and new political and economic aims and interests contrary to the original intentions and ideas of the party. In China we find the rare case that the change of elites in the 1990s was not engendered by a revolutionary or an evolutionary process, but rather was initiated and fostered by the political leadership in the form of a policydriven elite transformation.28 Functionaries, in former times led by ideology, today are primarily interested in economics. This promotes the career of economically successful cadres and consequently a change in elites. Locally, cadres are still the decisive elite in policy making. Managers of prospering enterprises as well as some larger-scale entrepreneurs increasingly play a major role in social life. However, as far as political decisions are concerned, their influence is still limited. Their living standard, however, is the highest. Economic power does not necessarily generate an increase in political power. In rural areas party leaders are still the dominant force. They are of greater importance than the economic elite. That is why a dualism of political and economic power has emerged, though it does not automatically mean that political power is at the same time economic power and that the latter per se guarantees political influence. Nevertheless, economic competence tends toward political power, not least to realize economic interests and to reach a higher social status. The new elites represent economic interests. They develop, however, social as well as political interests in participation and they try to influence future policies by means of their utilitarian power potential. In China politics is a high-ranking activity; playing an active part in politics means a step forward in status.29 The diversification of the ownership system and the rise of a new elite have done away with the existence of a uniform political elite and have led to its differentiation. Particularly in rural areas a dualism of economic and political power has come into existence, though with considerable regional differences. Economic classes and class contradictions have reemerged. In rural areas, large-scale private entrepreneurs attempt to enhance their political influence, and functionaries try to gain more economic power by turning to the private sector. Local party leaders support influential entrepreneurs’ participation in local politics; through this they intend to achieve better social control and

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material profits; entrepreneurs need political protection, better relationships to the bureaucracy, and greater power. The current elite clearly consists of two groups: prosperous cadres and new entrepreneurs. At the same time, there was a change of elite in national, regional, and local party leadership. Market conditions and the necessity for technological transformation are responsible for the formation of a new political elite. That goes right through all levels, from the central to the local. For instance, the percentage of party members who graduated from senior middle school or an institution at a higher level rose from 17.8 (1983) to 38.2 percent (1994).30 In 1987 the number of scientists on the Central Committee of the CCP had already risen to 20 percent, compared to 2.7 percent in 1977. In 1986, 78 percent of the urban mayors had been educated at an institution of higher learning; 75 percent of them were engineers or scientists (in comparison: in 1981 only 2 percent were engineers or scientists). All mayors under fifty years of age had graduated from institutions of higher learning.31 In 1987 62 percent of the leading cadres at the county and city levels were university graduates (1978: 2 percent); in 1994 about 80 percent.32 This development reveals the necessity for higher qualifications in central, regional, and local activities. Cadres are selected according to economic and technical competence. At the same time, Schüller’s thesis is affirmed that economic reforms are an instrument to replace the traditional leading elite by a new elite and to stabilize the political system.33 In cases in which low-level officials lack the ability to engage in self-employment, they attempt to increase their income by selling power, that is, by corruption. A research paper on the township of Longgang (Wenzhou City) informs us of the reasons for the growing pauperization of local cadres. In 1993 “poverty households” (pinkunhu) in that location consisted of households with an income below 30,000 yuan per year (in comparison: in China in 1993 the urban yearly income was 2,337 yuan per person, the rural income 922 yuan). The head of a township with a yearly income of less than 2,000 yuan had a top salary among cadres; however, compared to the general standard of incomes he was just as “poor as a beggar.” In the eastern part of China there exists the slogan of the “poor and low middle cadres” (pin xia zhong gan), paraphrasing Mao’s expression, “poor and low middle peasants.” In Wenzhou about 30 percent of all functionaries were said to be “impoverished” in the 1990s.34

9

Value Change and Interest Articulation

Changing Attitudes, Values, and Ideology The economic and social process of change has generated a rather comprehensive alteration in attitudes and values. In the following discussion we do not intend to describe this change in detail, but to analyze our interview findings concerning different attitudes. Scientific documentation of the change in values and attitudes makes time-series investigations necessary, a process we did not intend. The term “attitude” is relatively easy to grasp. It is the disposition or willingness to react to an object with certain (positive or negative) feelings, perceptions, and conceptions as well as forms of behavior.1 It is more difficult to define “value,” especially since in the social sciences there is no clear definition of this term. Kluckhohn’s definition is the most common. He describes value as a conception, explicit or implicit, distinctive of an individual or characteristic of a group, of the desirable which influences the selection from available modes, means, and ends of action.2 It can be taken as a measure or hierarchies of aims guiding people’s actions. Values represent social standards as well as norms of behavior and bases for behavior motivation.3 In contrast to value, ideology is orientated toward aims and is instructive in ways of action to reach this goal; it is a kind of belief system.4 Based on its ideology, the CCP had tried to develop distinct forms of attitude and norms of behavior, which is why there is a correlation among attitudes, values, and party ideology. Social change led to a further differentiation and has initiated a process of altering attitudes and values. Uniform attitudes and values valid for all generations and classes increasingly disappear. Positive attitudes and values, necessary for the cohesion of society, lose their effect and are replaced by individual ones. As can be discerned by the findings of our interviews, the majority of people are well aware of this development, and most of them regret the decline of social ethics.5 In the early 1990s a nationwide opinion survey on interpersonal relationships revealed that 72.8 percent of the people interviewed were of the opinion that people had become “egoistic” and 78.2 percent were convinced that “corruption has become the only way to success.”6 In this process of change the development of a private economy plays an important role, for it promotes values such as competitiveness, creativity, responsibility, reliance, efficiency, discipline, and punctuality.7 Attitudes have changed with regard to respected values as well as toward their rank order, and current values are differently and newly interpreted. This refers, on the one hand, to economic ethical ideas and to the attitude 239

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toward competence and efficiency and, on the other hand, to the reevaluation of social behavior and symbols. This process of change is more rapidly spreading among young people, in urban areas, in more advanced regions with a higher degree of social mobility, as well as among migrant workers and other members of the rural labor force who have turned to nonagrarian sectors. Concurrently the awareness of the relativity of values is growing,8 and this cognizance has an influence on the reevaluation of political values and the dominant ideology. Surveys among young people in the second half of the 1980s revealed a number of principal ideas concerning the change of values: • individualization of attitudes toward life • emphasis on individual interests and ideas, increasing dislike of models • new priorities of interests, less interest in politics, and consequently a reduced influence of the party • the desire to think independently and a growing aversion toward dependence • an increasing interest in professions that promise a greater freedom of independent and individual decisions • a growing pessimism concerning the future • the belief that the party is necessary for one’s career but no longer the social and ideological guiding force9 Our own interview results in zhen enterprises underline these findings. Attitudes of Staff and Workers in Enterprises at the Zhen Level With the questions cited below we intended to delineate the following attitudes: • • • • • •

attitude toward current processes of change and differentiation attitude toward family and individuals attitude toward standard of living, life enjoyment, and status symbols attitude toward professional and status groups attitude toward the party and its functionaries role of guanxi for employment

As the authorities rejected questions that were too critical, the original catalog of questions could only be used in a reduced form. The results for question A, How important are the following issues in your life? are shown in Table 9.1. Earlier surveys showed that family was the most important factor: 93.6 percent were of the opinion that family happiness was “very important” (83.2 percent) or at least “important” (10.5 percent). Thereafter followed the factor concerning the future of the children (62.5 percent “very important,” 19.6 percent “important”). Other factors were of minor importance. Only 34.6 percent argued that “enjoying work” was “very impor-

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Table 9.1 Question A: How Important Are the Following Issues in Your Life? (in percent) No Rather comment unimportant Family happiness (F) Professional advancement (P) High living standard, high income (L) Advanced vocational training opportunities (P) Move to a big city (L) Improve one’s family’s reputation (F) Fortunate future for the children (F) Enjoy one’s job (P) Buy a luxurious car (L) Enjoy leisure time (L) Traveling in China (L) Traveling abroad (L)

Neutral

Rather important*

Total

1.7 14.9

1.0 22.1

3.7 26.1

93.6 36.9

100.0 100.0

4.1

14.0

22.5

56.5

100.1

11.6

15.8

19.6

53.0

100.0

37.5 10.3

34.5 12.8

13.3 19.3

14.6 57.6

99.9 100.0

7.2

4.0

6.6

82.2

100.0

4.9 52.4 13.1 24.9 47.4

5.8 24.9 22.1 23.1 24.7

22.3 9.8 32.3 21.9 10.2

67.0 12.9 32.5 30.2 17.6

100.0 100.0 100.0 100.1 99.9

Source: Authors’ survey. F = family sphere; P = professional sphere; L = life enjoyment/personal status. *Combined results of “Very important” and “Important” responses.

tant” (32.4 percent “important”). For 32.2 percent a “high prestige of the family” was “very important,” for 25.4 percent “important.” Our 2001 survey principally confirmed those findings with only slight differences. The results of combining the answers to the three categories of questions—family (F), profession (P), and enjoying life/status (L)—are shown in Table 9.2. Factors concerning family were more important than those concerning profession and status/enjoying life. Family matters came first, followed by profession. Both are preconditions for enjoying life and acquiring status symbols. Yet, most of the individuals we interviewed lacked the material means to gain status symbols such as traveling or purchasing a luxurious car, factors to be found in many answers. Interestingly, the factor enjoying life/status has gained in importance. In 2001 33.5 percent regarded that factor as “very important” or “important” (1993–1994: 19.1 percent), whereas the importance of family decreased to 75.3 percent. This can be attributed to growing individualism among the rural population and a distinct awareness of one’s personal life and lifestyle. Table 9.3 reveals the differences among zhen by way of the arithmetic mean. Differences among zhen in 1993–1994 were relatively small, and priorities were the same everywhere. In the most developed place (Dongting), the factor “family happiness” was right at the top with 96.4 percent. Thus, development does not necessarily mean a reduction in the value of the family. This was different in 2001. In Zongshizhuang there was a strong

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Table 9.2 Summary: Importance of Life Spheres (in percent)

Family Profession Life enjoyment/status

No comment

Unimportant

Neutral

Important

Total

0.3 1.7 2.2

3.2 9.2 32.4

16.4 32.3 46.4

80.1 56.8 19.1

100.0 100.0 100.1

Source: Authors’ survey. Table 9.3 Summary: Importance of Life Spheres in Zhen (arithmetical mean from 1 [unimportant] to 5 [important]) Dongting Zongshizhuang Family Profession Life enjoyment/status

4.3 3.6 2.5

4.5 3.9 2.7

Jinji

Pingle

Xinzhou

4.2 3.7 2.8

4.2 3.3 2.4

4.0 3.5 2.4

Yuquan Xiangyang 4.2 3.6 2.8

3.5 3.1 1.9

feeling of pessimism which expressed itself throughout the answers. The reason might have been the failure to develop that location and the stagnation that occurred there in the late 1990s. In this respect Zongshizhuang differed clearly from other locations. The lower the educational level, the less important the value of the family. Status symbols and enjoying life also depend on the material opportunities to realize them. This might explain why, in the answers we received, the importance of values in relation to status was growing in line with a better education (frequently correlated to income level) and vice versa. This was also true for 2001. The importance of professional factors also depends on the educational level: the higher the latter the more important the former. The responses to question B, What would you do if a larger amount of money were available to you? are shown in Table 9.4. Providing an education for one’s children had priority. Somewhat less than half of the individuals interviewed would try to become self-employed. More than one-fourth would build their own house. Personal security (savings) was of relatively small significance, as were the acquisition of status symbols and enjoying life (question A). For the rural population even today the possession of land is the primary means of security, as well as social security granted by clan or family and hidden forms of safety (religious beliefs). This also holds true for 2001, though the priority of children’s education (36.1 percent, still first) and self-employment (23.3 percent, still second) had decreased. Education for children has become rather expensive (because of high school fees), and it is now much more difficult to obtain the necessary capital for self-employment. The percentage of those willing to donate for “charitable purposes” was relatively high in 1993–1994. Here, still, the tradition became manifest of letting the community

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Table 9.4 Question B: What Would You Do If a Larger Amount of Money Were Available to You? Responses

Percentage

1,209 919 596 327 324 264 212

54.9 41.7 27.1 14.9 14.7 12.0 9.6

206 189 173 60 57 31

9.4 8.6 7.9 2.7 2.6 1.4

Provide a good education for one’s children Establish an enterprise Build/purchase a house Charitable purposes Change place of residence Inland journeys Save the money in a bank account and use the interest to gain one’s living, buy shares, invest, or grant credit Personal advanced professional training Buy a car Journeys abroad Create savings for happy family occasions Stop working and enjoy one’s life instead Others

Source: Authors’ survey.

Table 9.5 Purposes of Investments

Investments for private purposes Investments for economic purposes Status/happiness of life Others Total

Responses

Percentage

1,905 1,281 425 33 3,644

86.5 58.2 19.3 1.4 100.0

Source: Authors’ survey.

participate in one’s wealth, primarily out of obligation, secondarily to increase one’s social prestige. The readiness for such donations was much smaller in 2001 (merely 7.5 percent). The high percentage of those willing to invest either in the education of their children or in their own further education reveals that investment in the professional future has been understood as an important task. If we compress the data according to goalorientation, we find the situation outlined in Table 9.5. Private and family interests, such as the education of children and the living standard, were more important than economic independence. Though for the majority, private happiness of the family seemed to be of higher value than the step toward economic independence, nevertheless, that does not mean the latter is of minor interest. The private entrepreneur still has a rather unstable status; he is dependent on guanxi, on the

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bureaucracy, and on everyday policies. Development after 1979 has demonstrated that the peasantry has a considerable potential for entrepreneurship, which could still grow with the reduction of regulations, the removal of barriers, and the extension of the market. That explains why the answers primarily had a private touch, showing a mood of hesitation among the rural population, a reluctance that can be explained by personal fears and political risks. From a local perspective, there were quite a number of differences. With 53.8 percent Dongting had the highest percentage of answers concerning investments in private interest. Compared to the national standard, relatively high incomes and a high standard of living are obviously responsible for the increasing interest in further growth of this standard. Concurrently in Dongting a larger number of people than in less-developed areas might have understood the significance of a qualified education for their children, which would generate growing incomes in better-developed regions. Nevertheless, also in Dongting, one-third of the individuals interviewed intended to invest in the economic sphere. With the exception of Zongshizhuang, in less-developed areas the percentage of those interested in economic investments was much lower. Local fruit growing, access to bigger markets (Shijiazhuang), and good transportation connections might explain why a greater number of people there were interested in private economic activities. The desire to build a new home varied from place to place. In poorer zhen such as Xinzhou or Pingle, 47.9 percent and 36.2 percent, respectively, were willing to do so; in Dongting merely 31.6 percent. The reason might be that the population in southern China is more interested in comfortable homes than that in northern China. In the three northern Chinese zhen of Yuquan (23.0 percent), Jinji (18.4 percent), and Zongshizhuang (14.9 percent) the fewest people wanted to have a new home. As far as professional status is concerned, technical (61.2 percent) and administrative employees (57.6 percent) were more willing to invest in the economy than workers (44.8 percent). That can be explained by their standard of knowledge and estimations of possibilities of competition and performance related to it. The interest in economic investment grew with the level of education: 43.7 percent of those having attended a primary school were willing to do so, as were 46 percent of the graduates of a junior middle school, 60 percent of graduates of a senior middle school, and 74.1 percent of university graduates. Among the age group between twenty-five and thirty-five, investments in terms of private interests were dominant. In contrast, it was economic investment among the group between twenty and twenty-five years of age. Individuals older than thirty-five years preferred economic investments, though with growing age this interest decreased. That proved to be true for all locations of our research. The responses to question C, mark the statements with which you agree, are documented in Table 9.6. The answers reveal that social differences were taken as a given by almost everyone. Individual and family characteristics such as industriousness and competence were discerned by two-thirds as one major source of a better standard of life. Less than half considered the development of income disparities as unavoidable; only one-sixth would

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Table 9.6 Question C: Mark the Statements with Which You Agree Agreement

Percentage

Within every society there are rich and poor citizens. That is a rather natural phenomenon.

1,805

81.9

The capable and industrious will be rewarded by prosperity.

1,464

66.3

Financial wealth is not always achieved through an honest manner.

1,126

51.2

The polarization of society into rich and poor people has to be accepted and considered a necessary evil on the way to a developed national economy. It is only a transitional phenomenon.

1,074

48.8

Within a township major income gaps inevitably create envy and resentment; therefore, the government must not permit such gaps to occur.

355

16.1

have preferred some kind of limitation or regulation by government. This comparatively small percentage is relative to the fact that more than half were of the opinion that wealth was not always the outcome of industriousness and competence but rather of illegal behavior. This answer reflects the prejudices against growing income disparities leading to social envy. In the egalitarian thinking of peasant societies, village inhabitants feel menaced by more successful neighbors, and they are ashamed in cases in which they themselves are not successful. As such societies are convinced that an individual cannot decide his destiny, success is not taken as the outcome of industriousness or competence of a single person or family, but as luck or resulting from activities detrimental to the community.10 In this we saw a remarkable change of attitude, as two-thirds of the individuals interviewed declared individual characteristics to be the reason for success. When we condensed the answers, we found contradictory behavior: 94.1 percent of all individuals accepted differences in income, 57.0 percent rejected them, and 49.7 percent did not comment. This underlines the ambivalence of the rural population toward growing income disparities. On the one hand, they are regarded as unavoidable and necessary; on the other hand, they are perceived of as an annoyance in rural society as well as for the relationships inside village communities. These answers must be evaluated in connection with age. The younger the individual, the higher the percentage of those in favor of income differences; the older, the greater the number of opponents. More older than younger people believed in material wealth due to competence and industriousness. A larger number of younger people, however, were of the opinion that wealth was not primarily legally obtained. Many more older people than younger regarded envy and resentment as outcomes of income disparities and accepted them as a natural effect. Many more younger people than older had a positive attitude toward social differentiations.

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Table 9.7 Question D: What Do You Think of the Statements Below? (in percent) Rather agree

Rather disagree No comment

Total

Growing inequalities in incomes and status are necessary consequences of reform policies.

60.1

28.3

11.7

100.0

A socialist market economy cannot function without a strengthening of the private sector.

72.4

18.1

9.5

100.0

The current administrative cadres are insufficiently prepared for the introduction of a socialist market economy.

44.5

33.3

22.2

100.0

State-owned, collective, and private enterprises are not equal.

56.4

34.6

9.0

100.0

State-owned enterprises enjoy preferential treatment.

30.3

55.1

14.6

100.0

Source: Authors’ survey.

The acceptance and approval of income gaps increased with the level of education: 47.4 percent of the individuals interviewed who had attended a primary school agreed to such disparities, as did 47.9 percent of people with a junior middle school education, 56.5 percent of graduates of a senior middle school, and 61.5 percent of university graduates. The responses to question D, What do you think of the statements below? are shown in Table 9.7. The answers to question D showed that the majority of the individuals interviewed see the necessity of increasing inequality and income disparities, but also recognize the development of the private sector and different forms of ownership. The total disapproval (“absolutely wrong”) of the private sector (3.5 percent), social differentiation (5.9 percent), criticizing cadres (7.5 percent), and equality of all forms of ownership (7.9 percent) was small. The majority rejected an advantageous treatment of state enterprises. Almost half of the individuals interviewed saw functionaries as the weak point in further development. Only one-third thought that they were capable of accomplishing their present duties. Here we found considerable differences among the various zhen. In Zongshizhuang, with the highest percentage of private entrepreneurs, and in Dongting and Yuquan, where for a long time the private sector had been suppressed and the collective sector favored, a high percentage of the individuals interviewed supported the expansion of the private sector in the interest of the development of a market economy, whereas in places with a dominant collective industry (Xiangyang, Jinji) the percentage was smaller. The argument that the administrative cadres were not really prepared to meet the demands of a market economy was supported by a high percentage of individuals in zhen with major economic and administrative problems. However, only a small number agreed in locations with a prosperous economy and obvious signs of development (Xiangyang, Dongting,

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Table 9.8 Question E (1993–1994): What Do You Think of the Prestige of the Following Professional Groups? (in percent)

Scientists and technicians Managers of nonprivate enterprises Private entrepreneurs Administrative cadres Individual entrepreneurs Peasants Workers/staff in state- or public enterprises Workers/staff in private enterprises Workers/staff in individual enterprises

Rather high

Rather low

Total

81.5 68.7 60.5 52.4 40.0 37.5

18.5 31.3 39.5 47.6 60.0 62.5

100.0 100.0 100.0 100.0 100.0 100.0

32.0 22.0 21.4

68.0 78.0 78.6

100.0 100.0 100.0

Source: Authors’ survey.

Jinji). The equality of enterprises with different forms of ownership was more clearly indicated in poorer zhen than in better-developed ones with a flourishing collective sector. But in the latter a higher percentage rejected the argument that state enterprises should be treated preferentially, as they were primarily interested in the development of the collective-owned rural enterprises. The answers of different age groups were more or less the same with regard to the equality of different enterprises and the necessity of private economic development. Individuals over thirty-five years of age thought worse of the abilities of cadres than did the younger ones. The higher the educational level, the more negative the judgment about cadres. It is remarkable that university graduates more than all other groups rejected the expansion of the private sector. As individuals integrated in urban life, they partly shared the prejudices against “uneducated” rural private entrepreneurs; they preferred employment in the socialist sector, however, due to social security and prestige. The responses to question E (1993–1994), What do you think of the prestige of the following professional groups? are documented in Table 9.8 and Figure 9.1. Scientists and technicians (individuals with a university degree and knowledge) enjoyed the highest prestige in 1993–1994 as well as in 2001, followed by managers of nonprivate enterprises. Whereas in 1993–1994 entrepreneurs in the private large-scale sector (with high income and economic capability) ranked third, in 2001 third place was taken by the administrative cadres. As far as administrative cadres were concerned, responses varied in 1993–1994: 47.6 percent thought that they had rather low prestige. The majority of the interviewed people disqualified all other groups. In 1993–1994 private entrepreneurs of small firms (individual entrepreneurs) were preferred to peasants. In urban interviews both groups had considerably negative results, perhaps due to the ambiguous character of peasant workers. Peasants esteemed themselves higher and had less prejudices against small-scale entrepreneurs than did urban dwellers.

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Figure 9.1

Assessment of Professional Groups

Manager of public enterprise

Source: Authors’ survey.

Due to the higher position in the hierarchy of enterprises, workers/staff in the state and collective sector primarily enjoyed a better form of social security and better working conditions as well as higher wages. They possessed a higher status than laborers in the private sector, the latter having the lowest prestige in the eyes of all individuals interviewed. With 14.3 percent the local cadres had the same rather low prestige level as peasants. And small-scale entrepreneurs were below even the workers/staff in the state and collective sector. In the category “low,” peasants gained the highest percentage of answers (27.2 percent). As far as prestige is concerned, they were to be found below the laborers in the private sector (workers/staff in private enterprises, 16.4 percent; those in individual businesses 16.9 percent). In 2001 the prestige of managers of public enterprises and cadres had increased, whereas the prestige of small-scale entrepreneurs, workers in companies of all forms of ownership, and peasants had decreased dramatically. The results of question E (2001), What do you think of the prestige of the following professional groups? are documented in Table 9.9. An analysis of the zhen reveals that the answers did not vary much. The prestige of

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Table 9.9 Question E (2001): What Do You Think of the Prestige of the Following Professional Groups?

Scientists and technicians Manager of public enterprises Administrative cadres Private entrepreneurs Individual entrepreneurs Workers/staff in public enterprises Workers/staff in individual enterprises Peasants Workers/staff in private enterprises

Rather high (%)

Rather low (%)

79.9 76.0 63.5 58.9 33.3 16.5 14.2 12.8 12.0

20.1 24.0 36.5 41.1 66.7 83.5 85.8 87.2 88.0

Source: Authors’ survey.

cadres was “very high” in places where economic development was relatively successful, for instance, in Yuquan (28.6 percent), Xiangyang (20.8 percent), and Jinji (16.3 percent). In spite of economic success in Dongting, the percentage was lower (11.2 percent), which might be due to the great number of “pretrial” prestige objects that cadres desire. In order to realize them, political leaders forced upon local enterprises and the population considerable financial burdens. Furthermore, migrant workers (in Dongting about one-third of all individuals interviewed) evaluated functionaries even more negatively than did the local workers. As local cadres are more or less unknown to migrant workers, migrants might have assessed functionaries according to their feelings about their own local cadres at home. In Xiangyang, for instance, migrant workers (about 10 percent of all individuals interviewed) evaluated the prestige of cadres lower than did local employees. In less-developed zhen the term “very high” (for cadres) was scarcely used: 6.3 percent in Zongshizhuang, 7.1 percent in Pingle, and 11.7 percent in Xinzhou. That also applied to the evaluation “rather high.” While in Yuquan (1.0 percent), Xiangyang (2.7 percent), Jinji (5.1 percent), and Dongting (5.1 percent,) the percentage of “low” was below the average of the survey, in Zongshizhuang (11.6 percent) and Pingle (8.2 percent) the negative evaluation was extraordinarily high. This might be explained by the fact that the leadership in these two places consisted primarily of functionaries transferred from the county town who did not live in the zhen; furthermore, these functionaries had replaced older, local functionaries who were considered incompetent and corrupt. The evaluation of managers resembled that of administrative cadres. In places with prosperous zhen enterprises their prestige was very high, whereas in zhen with unsuccessful collective enterprises their prestige was below the average. The prestige of cadres and managers obviously depended on economic success, their influence on local development, and on the incomes of the employees. The prestige of peasants was also dependent on the development of a location. The status of a peasant was low where collectively owned enterprises prospered and the wages

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were much higher than the incomes from agriculture, and vice versa. Where the collective nonagrarian sector was in bad shape, the prestige of the peasants was higher. This situation for the most part also applied to larger-scale private entrepreneurs. The better developed the nonagrarian collective sector, the lower their prestige, and vice versa. The older the interviewed individuals, the higher their evaluation of administrative cadres and managers, while scientists and technicians were equally acknowledged by all age groups. Individuals below twenty-five years of age assessed the image of private entrepreneurs in the large-scale sector much more negatively than the age group above twentyfive years. The reason might be that the first group consisted primarily of laborers in the private sector where poor working conditions were rampant. Furthermore, jobs in the private sector were evaluated more negatively than jobs in the nonprivate sector. As a rule, older individuals did not assess the private entrepreneurs according to their working conditions but according to the income they received as well as according to their abilities as entrepreneurs trying to find their way between the arbitrariness of cadres and successful entrepreneurial activities. In general, it has been stated that private entrepreneurs (like managers) were models and that they have contributed to the advancement of social expectations, entrepreneurial initiative, career, and competition in rural areas. The negative evaluation of the prestige of cadres, peasants, larger-scale private entrepreneurs, and workers/staff (independent of the sector of ownership) increased in line with a higher level of education. The prestige of managers and individual entrepreneurs, however, grew with the educational level. Individuals having attended a primary school or a junior middle school and workers assessed the prestige of managers lower than did other people. That might reflect the conflict of interests between workers and management. The answers of this group revealed, though, that private entrepreneurs with small firms had a lower status than cadres, technicians, or university graduates. There were no regional differences in the positive evaluation of scientists and technicians: The higher the educational level, the more positive the evaluation of their prestige. Only university graduates themselves believed that they were right at the bottom of the scale of prestige. That might be due to the widespread opinion in society that university graduates have little prestige, a low standard of income, and a modest social position compared to other social groups. The responses to question F, What relationships do you have to the management of this enterprise? are shown in Table 9.10. Only 5 percent of respondents to this question argued that they had no particular relationship to the management; 54.7 percent had guanxi in some way or other; almost one-third were related to individuals in the management, were on friendly terms with them, or came from the same geographical area. In better-developed regions the percentage of those without personal relationships with the management was much higher than in other places. Obviously, better economic development seems to reduce the importance of guanxi structures as far as employment is concerned, which is why in Dongting, Yuquan, and Xiangyang relatives were of less importance than in other locations (see Table 9.11). In Zongshizhuang (66.6 percent), Pingle (41.8 percent), and Jinji (40.0 percent) employment was realized by means of relations, friendship, and geographical origin. Corre-

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Table 9.10 Question F: What Relationship Do You Have to the Management of This Enterprise? Responses None Kinship/Clan Friends Good relationship in general Fellow townsmen Others Total

Percentage

110 319 252 1,205 151 56 2,093

5.3 15.2 12.0 57.6 7.2 2.7 100.0

Source: Authors’ survey. Table 9.11 Relationships to Management in Examined Zhen (in percent) Dongting Zongshizhuang Jinji None Kinship/Clan Friends Good relationship in general Fellow townsmen Others Total

Pingle

Xinzhou Yuquan Xiangyang

15.5 5.6 9.9

3.3 24.8 30.5

12.9 22.5 17.0

0.0 16.2 12.8

0.0 24.8 1.3

0.0 4.1 5.8

1.0 2.4 1.0

68.3 0.0 0.6 100.0

26.9 10.3 4.2 100.0

47.1 0.5 0.0 100.0

57.0 12.8 1.1 100.0

62.9 9.7 1.3 100.0

78.4 4.5 7.2 100.0

71.8 18.2 5.7 100.0

Source: Authors’ survey.

lations have shown that the percentage of those with guanxi to the management increased with employee age: 6.1 percent of the individuals below twenty-five years were without such relationships, but 1.3 percent of the individuals over forty-five enjoyed them. The same applied to the relationships of friendship and locality. As far as the educational level was concerned, the group of university graduates was remarkable: 11.1 percent had no relationship to the management. That is easily explained. Rural enterprises urgently need specialists and are willing to employ them without relationships. The responses to question G, How do you evaluate your present working conditions and your quality of life? are documented in Table 9.12. Here, the findings of 1993–1994 were very similar to those of 2001. The preferences and deficiencies of the zhen were clearly marked. If the family was close by, individual freedom and possibilities of employment were more important than in the village and

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Table 9.12 Question G: How Do You Evaluate Your Present Working Conditions and Your Quality of Life?

Career prospects Leisure time and recreation Medical care Income Educational opportunities Shopping opportunities Housing conditions Working conditions Employment opportunities Finding a spouse Individual freedoms Family relationships and connections

Arithmetic Mean

Number of Answers

2.56 2.80 3.08 3.12 3.12 3.33 3.37 3.47 3.52 3.68 3.79 4.20

2,009 2,112 2,117 2,165 2,085 2,051 2,143 2,172 2,138 2,050 2,152 2,158

Source: Authors’ survey. Note: very good = 5, good = 4, average = 3, bad = 2, very bad = 1.

had even been increased by economic development. In general, working and living conditions met expectations. Conditions concerning further education and higher income were less positive. Stress, long working hours, and lack of opportunities for upward mobility were considered by the respondents to be serious problems. This contains a certain potential for conflict, as individual liberty brings with it limited opportunities for leisure, recreation, and career. Income alone was not regarded as compensation for this. Job contentment increased with income and age. Workers and individuals below twentyfive years were the group with the greatest number of discontent people; most content were individuals in the management of enterprises as well as cadres and individuals above forty-five years of age. The same applied to the verdict on material standards. All age groups more or less were of the same opinion as far as individual freedom as a positive value was concerned. While satisfaction with work, material, and family situations as well as individual freedom increased in line with educational level, university graduates with all these assets were the most discontent group. On the other hand, the degree of contentment increased with income. The responses to question H, To whom do you turn in case you encounter problems with your job? are analyzed in Figure 9.2. The answers (several answers were possible) revealed that the majority of the interviewed individuals discussed their problems primarily with family members and relatives, friends, and colleagues. Undoubtedly, discussions with people outside one’s enterprise do not necessarily solve the problems. And as no associations representing the common interest of employees exist, for some people the party organization may be the only institution that might find a solution. Consequently, almost 25 percent of the

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Figure 9.2

253

Question H: To Whom Do You Turn in Case You Encounter Problems with Your Job?

individuals asked would turn to the party. This percentage appears to be relatively high. Yet, in turn, more than 75 percent would not have turned to the party. When “party” was mentioned, as a rule it meant not only the party organizations in enterprises (if they existed, they were identical with the management), but also superior party institutions such as the zhen leadership. If party members had problems, they primarily turned to the responsible party organizations. Due to organizational obligations they felt more strongly bound to consult with this organization. The percentage of those party members increased with income level and vice versa: party membership pays off; it increases one’s income. In general, the correlation of income and a helping hand showed that with growing wages and salaries an increasing number of the individuals interviewed turned to the party. There are several reasons for that. Those with a lower income and with local origins have a closer connection to their local family structures. Migrant workers, however, as a rule are not party members. In case they lacked local bonds and guanxi, even a smaller number of migrant workers than local workers would turn to the party for help (Dongting: 12.3 percent). For them, friends and colleagues had priority (Dongting: 58.2 percent), as family members mostly lived far away from their place of work. Confidence in the help of the party depended on age. The younger the individuals, the lower the percentage to turn to the party (see Figure 9.3). The growing difficulties the Communist Youth League is having in attracting new members is explained by the reduced confidence younger age groups had in the party, as already mentioned above. A correlation with educational level reveals that individuals with a low educational level (illiterates, primary school) and graduates of middle schools tended to a higher percentage to turn to party organizations than did individuals having a university degree. Younger people and academicians preferred other means for solving problems (they would rely on themselves or guanxi), which might be taken as a sign of individualization and might increase the wish to establish interest groups of one’s own.

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Figure 9.3

Individuals Who Would Turn to the Party for Assistance with Employment Problems, by Age Group

Source: Authors’ survey.

The responses to question I, What is currently your most serious personal problem? are documented in Table 9.13. Financial problems appeared to be more important than problems concerned with job and family. This reveals that while peasant workers changed to the nonagrarian sector due to income reasons, this sector cannot solve their material problems. This also proves discontentment with compensation. This dissatisfaction was increased by extremely long working hours in rural factories (particularly as most workers were also engaged in agriculture), by poor labor conditions, and by the lack of possibilities for further education and career. All this might in the future lead to conflicts between entrepreneurs and workers. The correlation makes it obvious that professional discontent decreases with the degree of guanxi to the management: 65.7 percent of the individuals interviewed with general guanxi had job problems, but only 13.4 percent with kinship relations, 7.5 percent coming from the same location, and 5.9 percent having friends within the management had job problems. There was no great difference among age groups. The number of discontented people, however, grew with the level of education. The higher the level of education, the smaller the number of people reporting that they had “no problems,” and vice versa. The same applied to problems of further education and marriage. The higher the level of education, the greater the number whose main personal problems were in these fields.

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Table 9.13 Question I: What Is Currently Your Most Serious Personal Problem? Respondents

Percentage

1,096

43.9

Professional/job problems Insufficient leisure time No advanced training opportunities Other professional problems Poor working conditions

612

24.5 7.7 7.3 5.1 4.4

Family problems Housing conditions No educational/professional opportunities for children Problems in married life Hukou problems

365

14.6 6.6

Other problems or none None Others

424

17.0 13.6 3.4

2,497

100.0

Financial problems

Total

4.7 2.0 1.3

Source: Authors’ survey.

Though there were considerable differences among the interviewed individuals as far as economic development and policies in their home zhen, their level of education, and their age were concerned, their answers led to the following results: In social life the family has priority. Yet, economic patterns today play a greater role in family structures than do traditional “Confucian” patterns. Individualistic thinking and behavior are increasing but are still subordinate to the sense of family. The status of the family and the future of the children are the focus of all future planning. Social disparities and stratification are accepted. The attitude toward this process, however, is ambivalent, as egalitarian ideas of village harmony and social community are endangered. The process of urbanization has significantly destroyed traditional concepts of a “self-sufficient village” and led to a greater interest in the well-being of the family. The answers clearly show interest in improving material living conditions. The change into nonagrarian activities leading to migration and new social contacts has caused an alteration of attitudes and values. Various forms of ownership are accepted and are accepted as equal. Trade and commerce receive a new and more positive evaluation. This is an important basis for the further development of the market and the private sector in rural areas. People possessing knowledge have the highest professional image, that is, scientifictechnical and other academic experts. The model in rural areas is not the hard-working peasant, for decades called by the party “the big brother” (lao da ge), not the “red” expert, the cadre, but the well-educated specialist. Such an attitude promotes the desire

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for a good education for one’s children and the wish for upward mobility and leads to the attitude that as far as cadres are concerned only the well educated are generally accepted. The specialists and the entrepreneurs increasingly are becoming models. Yet it is not important whether the entrepreneur is the manager of a nonprivate enterprise or the owner of a larger private enterprise. There is a skeptical attitude toward cadres’ ability to meet current economic expectations. This skepticism is the result of the domineering and corrupt behavior of many local functionaries. The population identifies cadres with the party not in the form of an abstract institution but in the form of the local bureaucracy. Thus, skepticism toward functionaries at the same time reflects suspicion vis-à-vis the party. As far as the solving of acute problems at the job is concerned, the role of the party is of no great significance. That is particularly true for young and educated individuals. Social relations (guanxi) still are of crucial importance in everyday life. The answers reveal an increasing differentiation in the outlook on life of the rural population, a growing realization of problems and thus a change from ting hua, that is, the patience and suffering of the peasants, to canyu, the desire for more participation. The personal sphere of life is no longer taken as a homogeneous unit but as one factor in a more far-reaching context. The rural population (in our survey the peasant workers) obviously has a more positive attitude toward the market, differentiation, economization, and entrepreneurship than the majority of the urban labor force in the state and collective sectors. Urban surveys show a considerably higher percentage of individuals who reject social differentiation, the development of income disparities, the equality of ownership sectors, and private sector development.11 Chinese surveys reveal, too, that a much smaller percentage of peasants identify themselves with the official values established by party and state. They are more interested in the primacy of the economy, they do not wait for support from the state, and they are more inclined to take risks as entrepreneurs than are other social groups.12 The reasons are that the rural population to a greater extent has kept its psychological independence due to stronger traditional roots, poverty, and the lack of (statesponsored) social security; they are more willing to take risks as they have nothing to lose socially, unlike the employees in the socialist sector with safe jobs. In fact, activities in the private sector are the most important and only self-determined opportunity for material success and advancement in social rank order. Here the change of the peasant-rural subculture, described by Rogers in ten points, becomes obvious.13 Though such a list seems to be static and illustrates more negative and old-fashioned aspects of the peasantry, these factors still characterize the traditional Chinese village, so that there is a close relationship to our survey. It shows that the partial leaving of agriculture and village, activities in the zhen and factories, and the resulting broader outlook on life and more social contacts cause a change in the peasant-rural subculture. This is to be seen in more interpersonal contacts and new ideas and experiences beyond the ones typical for villages, in market activities, in investments and entrepreneurial activities, in the desire for material success, a better education for the children, as well as in growing empathy (see Table 9.14).

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Table 9.14 Trends in the Change of the Subculture of the Peasantry Traditional patterns

Trends of change

Mutual distrust in interpersonal relations outside one’s own social reference group (village, clan)

Growing interpersonal relations outside one’s own social reference group

Perception of limited goods (e.g., land)

Perception of material improvement

Dependence on and hostility toward government authority

Independence from and hostility toward government authority

Family-oriented (traditional, focusing on social security, order and protection, ritual function)

Family-oriented (economic functions of the family become more and more dominant)

Lack of innovativeness

Orientation toward the market

Fatalism

Turn to entrepreneurship

Limited aspirations

Investments

Lack of deferred gratifications*

Interest in education, vocational training, demand for loans, and the like

Limited worldview

Broadening of worldview

Low empathy

Growing empathy

*Sociology calls rewards that do not immediately follow actions “deferred gratifications,” for example, for education (and therewith related higher income in the future), investments, borrowing, saving, and so on. Immediate advantages must be sacrificed in favor of prospective and greater ones.

People’s ideas of values have become differentiated. Values such as sacrifice for the collective and altruistic behavior in the sense of the model hero Lei Feng have lost their significance even among the rural population. The process of family orientation, individualization, and privatization has generated values such as consumption, and family and private happiness. More and more people turn to nonagrarian fields of activities, maximization of income, or inner contemplation. The erosion is accelerated by an understanding of the “market economy” by many people in terms of economization of all patterns of thinking and acting, all things and individuals taken as objects of marketing, and all social sectors and activities submitted to the interest of profit. This tendency of change in values is summarized in Table 9.15. Orientation Toward Traditionalism Alterations in the process of social change are not necessarily connected to the rise of “modern” categories but may engender a renaissance of traditional patterns. During our survey we came across such patterns as, for example, the role of guanxi, the significance of clans and clan leaders in rural areas, particularly in central and south China, and the revival of folk religion. The renaissance of clans in villages is of crucial importance. The members of a clan

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Table 9.15 Trends in the Change of Values Communist Party– emphasized values prior to reforms To be collective-oriented To lead a simple life To practice modesty To practice altruism To be hard-working for one’s collective and socialism To love the party

Current trends of values To be family- and individual-oriented To be money-making, raising one’s living standard To enjoy one’s life To practice family and individual egoism To be hard-working for oneself and one’s family To make use of and bribe the party

consider themselves to be a kin group because of their common descent. Out of such a constructed kinship, economic and social obligations result in particular. A clan may consist of up to several thousand people. It is headed by the eldest member of the clan and a group of elder men and provides its members with economic and social protection. An internal clan law regulates clan matters. The vacuum created by the erosion of party and administrative structures in villages is gradually filled with traditional values. In many places in south and central China, traditional clan organizations have taken over village administration, and the activities of local functionaries are often bound to clan interests. A survey of five villages in Hubei Province in the early 1990s revealed that 41.8 percent of the individuals interviewed were convinced that village functionaries merely acted in the interests of their clan; 45.9 percent thought that they were only interested in their own profit (including clan interests), and only 12.3 percent thought that the functionaries acted in the best interests of the village inhabitants.14 The weakening of political control has led to a revival of traditional structures (kinship relations, secret societies, clans) that locally have even started to organize themselves politically. All over China there are reports on the new power of clans and on violent and bloody clan fights concerning forests, irrigation, building lots, and borderlines of fields and lanes.15 In regions where clans dominate the villages, they have frequently taken over local power in the form of VACs. With the establishment of people’s communes in the second half of the 1950s, the traditional clan connections were supposed to be destroyed. With the disbanding of the communes and the return to family economic activities in the 1980s, the role of the family and clan in rural areas increased16 and the economic function of traditional family structures was revived. As long as the village residents were organized in production brigades, family and clan connections were of no great importance. It was the return to family economic activities, at first in agriculture, that made family relations essential again. Thereafter, mutual aid and support of the production process, the need for capital when starting a business or establishing an enterprise became more and more important. Individuals could not rely on fictitious collectives, but had to rely on family or clan bonds. This process of the growing importance of family groups in the economy stimulated economic dynamism.

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Partly, traditional organizational structures take over the functions of support, protection, and law institutions, as the current administrative institutions are no longer able to react to social change and consequently to new demands, and as there is therefore no legally guaranteed and social security for the individual person. Thus, the clans take a stand against party and state institutions. This phenomenon can be seen in the effort to place members of one’s own clan in party and administrative bodies; furthermore, clan members value their institutions above party and state organs. Locally, clan justice and laws frequently are more important than state law. The above-described migration of village functionaries into other fields of activities facilitates this process. Where bureaucracy fails, clans return as a necessary instrument for protection, mediation, and support. They do not need the acceptance and valuation of the community (as do the party or administrative bureaucracy), but are a direct instrument of the village community. Thus, clans more and more frequently fill the vacuum, which we can see, for instance, in the traditional structure of many rural enterprises where clan firms primarily employ clan members. Village enterprises and their traditional structure are an important factor in the growing traditionalism. Many enterprises prefer to employ members of their own clan. Some villages have a network of family enterprises (jiating shengchan lianheti) that are economically interlinked, have common networks, and cooperate with one another. In this way, clans gain more economic and political power, as their networks influence political life by placing members in influential positions, or as they buy important cadres for their network by means of corruption. In answer to our question regarding who has the greatest prestige in the village, especially in southwest China we frequently got the answer “the clan elder.” The “clanization” (jiazuhua) of enterprises goes right through from village to township enterprises. The leasing of collective enterprises, giving the lessees (managers) the opportunity to decide independently whom to employ, had the effect that relatives frequently occupied leading positions in such enterprises. In better-developed areas as a rule management consists of family members. Simple jobs and production are left to workers from outside. In some cases the entire workforce had the same family name. The reason for “clanization” is the revival of the economic function of traditional family structures. Many Chinese firms operate as family enterprises, where the manager is the “patron” who is responsible for the well-being of his employees, and the employees in turn have to sacrifice themselves completely to their jobs. The web of duties, obligations, and dependencies seems to be safest in a family clan. Clan obligations or family power, however, are not the only reasons. The main point is that loyalty and attitude toward work are of minor importance to employees who have no specific relationship to the entrepreneur. Personal relationships are an essential factor in the strategy of an enterprise that has to adapt to the market in an efficient and flexible way. Personal connections demand an unselfish and self-denying attitude in the interest of the “family enterprise” and the solidarity, an attitude Deutschmann called “a high degree of normative integration of the actions of all members,” in such an enterprise.17 The traditional feature about it is that the family has regained its function as “solidarity

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unit.” In cases in which families have nonagricultural jobs, they usually work on a family or neighborhood basis.18 Commencing industrialization and modernization does not necessarily imply overthrowing traditional structures, as such particularistic structures (preferring family and clan members) under market conditions become particularly profitable, and at the same time grant group members social security. It is no longer the traditional clan of the time prior to collectivism. On the one hand, the gentry that regulated clan matters for centuries has ceased to exist. On the other hand, individuals today are no longer totally dependent on conformism and the clan. They no longer merely exist as members of the collective, with all their actions determined by it. Social change and the division of labor have made the individual more independent and less dependent on the clan. Personal initiative and individuality have gained more ground. According to Durkheim, a process leading from mechanic to organic solidarity has taken place. Today the clan is more an institution of people who not only have obligations toward their relatives but are dependent on each other economically and socially.19 At the same time, the clan realizes and strengthens village autonomy vis-à-vis the government.20 Investigations in other developing countries show that in traditional communities the state, or that which is perceived as the state’s actions, is regarded as an alien and external power. The individual identifies himself with the local community, not with the state, which is more or less abstract to him. Thus, the new identification with one’s own clan is an expression of growing local self-confidence. The renewal of the traditional clan function proves the thesis that village communities create their own leadership structures (or, in the case of China, recreate them), which are understood as counterpoints to superior state echelons and as autonomous interest organizations.21 And that shows at the same time that the peasantry is not a monolithic social block, but increasingly reorganizes itself as interest groups with particularistic interests. This increased self-confidence is to be seen in the growing social mobility that in the absence of suitable instruments for solving social and political conflicts has no stabilizing effect but creates new conflicts, as we describe in the following section. Increasing Potential for Protest and Conflict Among the Peasants There are a number of factors contributing to an increasing potential for discontent and conflict on the part of the peasant population in relation to the state and the cities: • the stagnation of incomes, or a lower growth rate for rural incomes than for those in the cities, resulting in a rapidly increasing divergence between rural and urban income levels • an enormous rise in input costs, leading to a reduction in returns from agriculture • an increase in the burden of taxes and fees and in financial exploitation of the peasant community and rural enterprises • the high level of corruption among rural party cadres • the conversion of farming land to nonagricultural use

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• the “labor obligation” (yiwu gong)—compulsory labor by peasants for public works, without any financial reward. (In the towns we studied, this obligation amounted to between fifteen and twenty-seven days of work per year. The obligation could be avoided by making a payment: In Jinji [Ningxia], this payment was set at 4.8 yuan per head per year, whereas in Dongting it was 30 yuan.) • conflicts with the state about property rights • the decrease in social provisions for the peasants • conflicts over the enforcement of family-planning regulations • the high level of rural illiteracy • an increasing polarization between rich and poor Even official analyses concede that the income situation of the peasants has deteriorated compared with that of city dwellers. In fact, the degree of disparity is surely even greater than official figures suggest. When the nonmonetary income of the urban population and the rate of inflation are included in the calculation, the ratio of rural to urban incomes worsens substantially. There is a range of reasons for the failure of rural incomes to match urban levels: • a reduction of the level of state investment in agriculture. This has resulted in greater investment at the local level by the peasant community; • the broadening of the price scissors between industrial products required in agriculture, where costs have risen steeply, and agricultural products, for which the prices are fixed by the state and have stagnated or fallen, or at best risen very slightly; • the limited budgets that the villages and townships have available to meet pressures from above and from the local population, for both investment and modernization; • the squandering of increasing amounts of money by local cadres.22 The pressure on the peasant population has increased to the extent that more and more state and collective enterprises have gone into deficit, there has been a price explosion while the salaries of cadres have increased more slowly, and local authorities have been called on to contribute to the modernization of cities, counties, and townships, without receiving the necessary funds. The primary source of income for the towns derived from rural enterprises, since the taxes they collected had to be passed on to the higher authorities almost untouched. The growing need for funds at first could be met from local business, but where the local firms suffered a loss, the only alternative source of income was apparently a levy on the peasant community.23 Chinese studies and our own research have shown that these charges increased tenfold between the end of the 1970s and the beginning of the 1990s. Where in 1978 5 different taxes and levies were required in rural areas, the average number in 1985 was 27 (24.25 yuan per head) and in 1990 it was 97 (80.19 yuan). On average 17 percent of peasant income in 1990 was taken up by these charges.24 By 1993 this proportion had risen to 30 percent. A number of suicides and disturbances in rural areas, with attacks by peasants on party offices in the county towns, alarmed the party leadership. In that year the party

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leadership issued a document on the problem of the “burden on the peasants,” and 136 different types of fees and charges were forbidden. At the same time it was established that taxes and charges on peasants should not exceed 5 percent of the previous year’s income. However, local administrations were able to bypass this provision in a number of ways. They reported higher incomes to the authorities,25 or changed the names of the charges, increased the hours of unpaid work required of the peasants, made the provision of services dependent on “voluntary” payments, raised the price of goods needed by the peasants, or placed additional charges on peasant businesses. In addition, the 5 percent limit in many areas was simply not made public. A survey by the Ministry of Agriculture revealed that 59.8 percent of peasants interviewed knew nothing of it; 70 percent had heard that some kind of decree existed but they had no information on the content of the decision.26 Until 2001 there were only insignificant changes in this situation.27 Furthermore, county and town officials also attempt to finance their modernization plans by collecting funds from the peasant community or from peasant businesses. A particularly serious case occurred in the 1990s in Lukou Township, in Changsha county, Hunan Province. There the party secretary raised a charge of 100–150 yuan per person, which was collected from house to house by the police. Those who were unable, or unwilling, to pay either had their property confiscated or were imprisoned on the spot, and were only released in exchange for payment of the charges by friends or relatives.28 The tax system, which reduced the revenues of villages and townships to their receipts from local businesses, encouraged this sort of conduct by party officials. Village and town administrations had no direct income from agriculture, because although farm taxes had to be collected locally, they were then passed on entirely to the central authorities, with nothing remaining for local use. Since the mid-1980s, not only local charges, but also taxes levied on peasants, have multiplied. The state continues to raise the level of taxation, but the local cadres have lost out financially, not only in terms of their income, but also in their attempts to realize their notions of modernization. A large section of the rural population, in fact, has benefited financially from the policy of reform, though. The result has been a growth of corruption and a further increase in the charges with which the peasants are burdened.29 However, conflicts with the state are not restricted to problems of stagnating incomes and a heavy burden of charges. There is massive discontent among the rural population over the question of land use. One example of this is the differing attitudes to the question of ownership. The bureaucracy continually involves itself in land transactions between peasants, whereas the peasant community itself seems to consider the land more or less as its private property. A wide variety of transactions took place that are still illegal. These include the sale of land, either directly for money or under the cover of the buying and selling of buildings, and the disposal of village-owned land to industrial companies by village committees. Problems are also caused when higher authorities deprive people of land-use rights without compensation, for instance, for industrial estates or road building. Occupation of land by individual peasants or indeed whole clans is no longer a rarity.30 These types of conflicts go hand in hand with discontent over deteriorating social conditions for the peasants, such as the shortage of medical care and the rising cost of

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health care, which make it increasingly difficult for country dwellers to afford treatment, or the exorbitant school fees, which have led to a reduction in attendance levels, or the disappearance of cultural facilities, caused by cuts in state subsidies. Additional discontent has arisen over the hoped-for abolition of the obligation of peasants to provide unpaid labor for public projects, which was promised in 1978. The opportunity to buy exemption is of course available only to the better-off village households. A further source of conflict is the rigidity of the birth control regulations. This has been aggravated in recent years, not because of lower birthrate targets, but due to the fines for “births outside the plan,” which have drastically increased and have become a permanent component of local budgets. The interest of local administrations is entirely restricted to the levying of fines. In many locations they are no longer interested in reducing the birthrate, as this would mean a loss of income. This discontent among the peasant population manifests itself in a variety of expressions of protest: • the refusal to pay fees or taxes, or to sell cereal crops to the state • attacks on cadres or local officials, such as tax inspectors, and their property • the turn of peasants from farming to nonagricultural sectors, or migration to the cities, resulting in increasing areas of land lying fallow • the neglect of investment in the land and the agricultural infrastructure • corruption, extending as far as the sale of political positions • the takeover of rural enterprises and village administrations by clans • the collaborative theft of agricultural materials such as fertilizers, insecticides, and diesel oil • increasing rural criminality, particularly in the more-developed regions; in the Pearl River Delta in Guangdong Province the center of criminal activities has already moved from the cities to the villages • increasing urban criminality, mainly due to migrants from rural areas, but certainly encouraged by enormous differences in rural and urban living standards and attitudes, discrimination against migrants, and high-profile conspicuous consumption by the newly affluent strata. Another contributory factor is the countrywide production, particularly by village businesses, of counterfeit or forbidden goods, which are then distributed in the cities by peasants • the growth of religious secret societies and sects, which have a direct effect on the cities • the increase in drug dependency and gambling among young peasants31 Emergence of Interest Associations Significance of Associations The rise of associations and organized interest groups played an important part in the civic revolutions in Europe and North America. At the beginning, the European associations (such as associations of entrepreneurs, guilds, and other interest associations), too, were

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weak and merely advising the bureaucracy. Only with increasing power did they turn against the absolutistic state and became an instrument of democratization. Even such apolitical “hobby associations” such as sport and choral clubs played an important political part in German political life in the nineteenth century. Alexis de Tocqueville described the function of such associations in the process of democratization, and he expressed ideas that can also be applied to the changing China of today. The existence of a public life, business transactions, and cooperation foster the desire to regulate common actions and establish associations.32 Such associations operate in the “intermediary room between the individual and state power.”33 Social interest organizations, that is, associations organized for an articulated purpose but also for the enforcement of the social interests of individual social groups, are an important factor in the process of democratization. In the interest of their members they try to articulate common interests and thus attempt to influence society. This has to be understood as a political process, though, as in China it starts with professional associations. Theoreticians of democratization, such as Larry Diamond, pointed out that the organization of a broad spectrum of interests is an important basis for democratic competition. Functional organizations, for example, associations of entrepreneurs, producers, professional people, or peasants, are by all means able to articulate their interests. They contribute to a growing pluralism of ideas and attitudes and thus support the development of pluralistic thinking.34 Associations, regarded as a kind of menace by dictatorial and authoritarian regimes, by no means have only a destabilizing effect. Rather, they contribute to social order and to the regulation of conflicts between the government and various social groups. Concurrently they act as pressure groups, thus influencing the state. In that sense they are actors in group conflicts.35 Under the influence of the theory of totalitarianism, according to which—in socialist systems—the party in power has the power monopoly and in that way controls all other social groups, the importance of interest groups and of social associations was discovered relatively late. Moreover, for quite a while they were measured according to Western standards. As they did not seem to operate as autonomous actors, they were regarded as an irrelevant component in the analysis of political systems. As far as socialist states are concerned, Skilling, in 1966, was one of the first scholars who pointed out that there were divergent interests among various social groups and institutions as well as inside the party and state apparatus.36 The Western concept of pressure groups, he argued, could not simply be applied to the Soviet system. First of all, one had to take into consideration the typical features of a distinct political system and its political culture.37 How to Define Interests and Interest Groups? In defining interests we turn to Ferdinand and his careful formulation derived from La Palombara: “A conscious desire to have public policy, or the authoritative allocation of values, move in a particular general or specific direction.”38

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The organized enforcement of these interests is implemented by means of interest groups. Skilling defines interest groups as “an aggregate of individuals who possess certain common characteristics and share certain attitudes on public issues, and who adopt distinct positions on these issues and make definite claims on those in authority.”39 In fact, associations are instruments by which to enforce in an organized form social interests of individual groups of society. According to the public-choice approach, private interests determine the actions of individuals and groups. That also applies to pressure groups that attempt to exert political influence in order to secure the realization of the economic and social goals of their members.40 Such groups are considered political in cases in which their demands are directed toward state institutions.41 In a political context such interest groups have an open, formally influential effect on politics and the general public. As far as China is concerned, such a definition of the term is problematic, as it does not fit into either China’s political procedures or its political culture. If interest groups in China acted in the defined way (“definitely” presenting their demands to the political leadership), that is, if they operated as pressure groups vis-à-vis the state in order to enforce autonomous interests, they either would not be admitted or would be forbidden. Not pressure on the state, but consensus and consultation, where both sides have to compromise, are the frame inside which interest groups in China can currently act. Pressure and conflict are to be avoided; concerted behavior is demanded. There is no autonomy in China, though it is of great importance for pressure groups in the Western theoretical context. That is why Western scholars frequently conclude that if no autonomy from the state exists, no interest groups are possible.42 Stewart tried to adapt the term of interest groups to Soviet socialist conditions. According to him, political interest groups exist when the actions and ideas of a group influence the decision-making process of official decision makers.43 In this minimal sense we can talk of the existence of political interest groups, as the opinions of various actors in the form of dialogues between them and party leaders influence decisions. This explains why interest groups have political influence but no political power.44 However, there are a number of differences. Technical and hobby associations in general have less influence than professional or political associations. Nevertheless, we do not intend to introduce into our analysis a division between interest groups, which strive for political participation, and associations, which have no political intentions, as such a differentiation and limitation are difficult under the conditions of an authoritarian system, and as formal and informal forms of influence might merge in these groups. In the Chinese context, the term “interest group” means an organized association that introduces interests of specific social groups in political decision-making processes by formal or informal influence on political leaders and thus affects political output. Here, influence is meant in terms of discussion and consultation processes, public relations measures, and use or establishment of guanxi relationships, and extending all the way to nonviolent resistance, corruption, and bribery. As Waller argues, such a definition interprets the role of the group in politics not as something concrete but as a process.45 The degree of influence has to be seen in relation to the conflicts inside the dominant elites.

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The more serious the conflicts among factions inside the party leadership, the greater the influence of interest groups. In a society becoming increasingly differentiated, a single party is not able to discuss and solve all economic, technical, and sociopolitical issues alone. In its decisions it increasingly has to adapt to and rely on groups that represent particular aims and interests. But that does not yet mean that the party is under the pressure of pressure groups. As Löwenthal argued, the party listens to divergent opinions but is not directly put under pressure by these groups.46 An analysis of organized interests, in other words of interest groups, as intended in the following, permits us to delineate current and future potentials of systemic and social change. It leads to a better understanding of the interaction between state and society, and thus it informs us about the degree of autonomous social activities. Rise of New Interest Groups in China The rise of new strata and new social actors as well as an increasing division of labor and specialization have led to the development of new social groups. These began to organize themselves on the basis of similar interests. New group interests lead to the formation of functioning professional associations and organizations representing common interests. In the case of private entrepreneurs, this was revealed by sociological investigations. In the county of Baoding in the 1990s, 94 percent of rural entrepreneurs were organized in the Association of Peasant Entrepreneurs, the Association of Individual Laborers, the Federation of Industry and Commerce, or branch associations.47 It is typical for this development that the majority of such associations emerged in rural areas. A Chinese study of the city of Xiaoshan (Zhejiang Province) at the beginning of the 1990s revealed that 75 percent of the occupational associations were concentrated in rural areas.48 In 1994 alone, 8,208 rural trade associations are said to have existed, 620 of them in the prospering coastal province of Jiangsu.49 A major reason for this concentration in rural areas is to be found in the fact that for decades there were no organizational channels for peasants to articulate their interests and by that to streamline conflicts. By destroying traditional village organizations (clans, for example) and by forcing peasants to join collective structures (production groups, brigades, and people’s communes), the party attempted to reduce the influence of the interests of the peasantry on its own concept of development as well as on the interests of a more or less abstract “collective.” Where the organization of social interests is forbidden, and the needs and demands of groups cannot be articulated, it follows that contradictions and conflicts find other forms of expressing themselves: in a spontaneous explosion of discontent, criminality, vandalism, and the like. To mitigate social conflicts, in the long run the state is forced to allow autonomous interest associations. If it does not, discontentment will express itself in collective actions the costs of which will be high and which will prevent an efficient resolution of conflicts. Collective actions by peasants therefore have to be seen as the result of the lack of peasant-interest associations that represent the interests of the peasantry and act as interest organi-

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zations vis-à-vis the state. Traditional organizations, such as clans and religious secret societies, and informal structures such as rural markets, will function as centers of discontent and will become the basis for collective action.50 Where, as in China, guanxi and bribery solve many individual problems, it is still possible to compartmentalize for quite a while the demand for establishing interest associations and for collective action. If, however, for both sides the costs of corruption and guanxi become too high, the political system will be called into question. That is why acceptance of autonomous interest groups can also be regarded as a means to hold down corruption and probably as an appropriate way to bind important groups in a national dialogue.51 In the end, collective action is nothing but the pursuit of common interests and thus the surrogate for interest associations. Part of the peasantry has realized that social burdens are imposed on the least-organized social groups. That the initiative for organization comes from the peasantry is not only to be seen in the great number of entrepreneurial associations in the rural areas but also in the revitalization of traditional organizations.52 At the local level, independent or semi-independent organizations come into existence, such as clans, religious organizations (underground churches), secret societies, occupational associations, autonomous societies of artists, and so on. In cities, too, peasants with common interests organize themselves in traditional and unofficial organizations and interest groups, primarily in associations of fellow townsmen and gangs of beggars, right down to criminal organizations with mafia-like structures that run enterprises, demand protection fees and road charges, and sometimes control relatively large areas.53 A study of in-migrated peddlers in Beijing, associated as fellow townsmen, shows how far this phenonmenon can go. At the Tianwaitan market in Beijing at the beginning of the 1990s, 70 percent of all peddlers came from Yiwu in Zhejiang Province. They not only controlled almost the entire wholesale trade with small everyday goods, but were also organized as an interest group (tongxiangbang). Such associations of fellow townsmen usually live in the same residential areas and thus form relatively close communities of migrants.54 And in 1994, a Chinese sociologist found that about one-third of Beijing’s beggars were members of a rich and well-organized beggars’ organization.55 The informal organization comprises even the business sector; for example, organizations of private traders cropped up organizing collective migration from one market to another to escape worries and exploitation by local cadres. Peasant traders started that kind of procedure. Today there are even illegal trade unions of migrant workers that organize strikes and demonstrations.56 As in other developing countries, the dispersion of peasants in urban areas has led to the spontaneous formation of associations based on local, ethnic, or professional origin. Autonomous organizations of this kind prove that there is a growing need for the peasantry to organize themselves in independent groups. As these are occupational associations similar to those of the traders, they can be taken as a prototype for autonomous interest groups. As the state does not control them, they apparently are at least quasiautonomous. As they are illegal, they cannot influence the state in a direct form. The government, however, increasingly comes under pressure to permit such interest groups

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in order to be able to control them and to separate their activities from illegal acts. Otherwise, such underground activities might easily become part of criminal ventures. Pearson points out that such organizations have a dual character, as they contain elements of state dominance as well as of autonomy, that is, they are dependent on corporatism, the state granting them some kind of fundamental autonomy as long as they do not challenge it. That is why it is improbable that such organizations would establish autonomous free zones.57 One must not forget that it must be considered as an immense step forward that self-organized groups have the right to exist as long as they are apolitical and do not oppose or challenge the political system. As long as the PRC exists, only the CCP has the right to establish organizations, primarily “mass organizations” without any autonomy. Every attempt by these organizations to act independently from the party was attacked as “deviation.” Different interests, in accordance with the system and unorganized, were to be bound in the “united front policy” and had to be loyal toward the party. Already the presently used term of “social association” (shehui tuanti), in contrast to “mass organization” (qunzhong tuanti), points to these associations’ social-related, more independent status. For a couple of years the establishment of academic, professional, artistic, or hobby associations has been permitted by law. After numerous political interest groups, encouraged by the urban protest movement in 1989, came into existence and began to challenge the state, the party leadership realized the danger threatening its power engendered by these groups. In October 1989, therefore, the Regulations Concerning Registration and Administration of Social Associations were passed in order to control them more strictly. Registration was only possible with the help of a patron institution.58 For every registration, an official institution (office, state, or party institution, public enterprise) must apply for the admission of an association and concurrently takes over the formal patronage. Such a patron institution is called zhuguan danwei. As these patron institutions also function as control organs and as their leaders can be held responsible for the misbehavior of such associations, these institutions are only willing to take on this role due to material or immaterial profits or personal relationships. Aims, forms of establishing, and connections to a zhuguan danwei reveal that there are various links between such associations and the state (party). In the interest of political protection and social acknowledgment, associations as a rule attempt to gain renowned functionaries as honorable members or as “advisers.” Especially in rural areas, peasant associations try to take local functionaries as their chairmen, though that might have a negative effect on the independence of their interests. However, the intention is to form not a pressure group but a guanxi group that solves problems and conflicts in accordance with the principle of patronage. This tendency can also be seen in the search for protection by a mighty zhuguan danwei, particularly as the connection or relation to an office or public institution implies protection and status enhancement. Associations can make use of official organs in order to enforce their aims and interests without the interference of other actors. That, however, does not mean that associations primarily stand for the interests of the party or state. The extensions of the market, political liberalization, and social pressures

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caused by the growing autonomy of society have led to the acknowledgment of associations, some of them founded spontaneously from below. In a society where an independent existence of parallel structures is forbidden, the promotion of interests and participation in the process of bargaining between the state and interest groups are not possible without such a network. In its present form, the Chinese bargaining society59 needs such a network guaranteeing to some extent the participation of social groups (by participation we mean that interest associations take part in political discussion processes and thus at least indirectly have an influence on decisions). Furthermore, associations can influence policies with the help of superior state patron institutions. The sociology of organization described the influence of networks between state institutions and associations, so-called tangent relations, and pointed out that an interaction between them affected and changed the entire structure.60 In October 1993, there were 1,460 registered associations at the national level, 19,600 branch associations and local associations at the provincial level, and more than 160,000 at the county level.61 In the middle of 1995, there were 1,810 national-level associations and more than 200,000 county- and province-level associations.62 These figures are supplemented by the “blue book” on social development of 1994–1995. In 1994 1.46 million peasant associations existed, among them 120,000 agrotechnical research associations with 4.5 million members. In 1993 alone, 65,000 peasant associations are said to have come into existence.63 At the same time the blue book pointed out that in rural areas illegal associations, including mafia organizations, were spreading.64 The following is a list of the functions of different types of associations: • to exchange experiences and pursue common hobbies (scientific/hobby clubs); such associations are founded by people of similar interests • to pursue common economic or social interests (associations of enterprises, industry types, or of individuals with distinct social aims); such associations are founded by interest groups • to include social groups, such as associations of individual or private entrepreneurs (they are founded by state institutions, and membership is compulsory), religious societies, and the like • to represent state interests toward foreign institutions or individuals (Association of Overseas Chinese, Associations of Relatives of Taiwanese or Friendship Associations); founded by state institutions • to acquire extra financial means or perform rather independent activities (Associations for Science and Technology); founded by state institutions One has to differentiate among various organizations: guanban organizations’ leaders are appointed by party and state organs and obtain their financial means from the state; banguan organizations’ leaders come from institutions to which the banguan unit belongs, and their finances are provided by the state or are procured by themselves; minban organizations are founded by citizens, are officially registered, and operate independently as far as finances are concerned.65

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All these forms of organizations act under the control of the party and state and are not autonomous. Their aims and activities are subject to official supervision. That is why so far no genuine pressure groups exist. That does not, however, preclude these organizations’ functioning as intermediaries between party/state and their members (as the associations of individual or private entrepreneurs, or the associations of professionals, entrepreneurs, or branches of industry) or their being allowed a certain space in which to act. Organizing interests in associations reveals that the CCP no longer is the one and only representative of interests. At the same time this organizational form in terms of associations has the effect that an increasing number of peasants are engaged in activities that go beyond the range of the village. Furthermore, associations may become a collective organization for an opposition that attempts to build up a legal radius for its actions under a neutral name and noncommittal activities. In the early 1990s a conference on associations organized by the Ministry of Civil Affairs warned of the tendency of misusing or subverting associations.66 And reports have explored opposition groups’ use of the name “association” to organize themselves politically, acting under the guise of hobby, cultural, or specialized organizations.67 In terms of hobby clubs, we must differentiate between leisure associations and those that have an intention beyond merely organizing leisure activities. The manifold qigong clubs, for example, are deep-rooted in China’s political culture (between 60 and 200 million people in China are said to practice qigong).68 Qigong was and also is today a way to escape into a private world beyond state control. By common qigong activities, informal groups come into existence, the members of which regard themselves as connected by bonds of blood. There is a broad spectrum of qigong groups: associations founded and directed by the state; associations officially registered by private individuals; nonregistered, informal, and underground associations with chiliastic and messianic tendencies, led by charismatic masters. Throughout Chinese history, such associations always developed a political potential. As Chen points out, qigong never was merely some traditional form of health activity. At the same time, such activities led to the development of social networks and could become a latent danger to the ruling system. Such networks played an active part in peasant rebellions, for example, in the so-called Boxer Movement at the beginning of this century, the members of which practiced qigong to promote their ideas of a utopian society.69 This background explains why during the Cultural Revolution qigong activities were strictly forbidden. Even today such activities are subject to police observation or even strong political repression (cf. Falungong).70 In general, associations give vent to interests; in other words, there is a social input that has an immediate effect on the output, namely the political process of decision making. The growing gap between the public and private sphere, and the withdrawal of the state from numerous social sectors, primarily from the economy, increasingly give such associations room for their own activities, thus widening their social space and their degree of autonomy and creating an articulated social counterbalance against state projects.71 This thesis can be demonstrated by the change of function of the Association of Individual Laborers. Originally an institution to control the individual sector,72 it has

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in recent years turned into a service organ for its members.73 That does not mean that this organization became an autonomous institution independent of the state. The new definition, however, allows a stronger articulation of interests vis-à-vis the state than before. Falkenheim described a paradox of the Chinese political system according to which participation can be both “constrained and effective.”74 The example of the associations of private entrepreneurs demonstrates the abovedescribed development. Associations at the County and Zhen Levels At the local level, innumerable associations came into existence, the activities of which are scarcely controllable. The actual number might be much higher than the one mentioned above. According to our research findings, most associations are registered down to the county level only. According to the information of the responsible offices for civil administration at the county level, the associations in villages in particular are not registered, as they rise spontaneously, have only an imprecise organizational structure, and have unregistered members. To avoid conflicts with the village communities, such associations are tolerated or simply ignored by the local authorities. In this group we find economic associations of peasants from several villages, agrotechnical associations, and so on. Our investigations reveal that the number and differentiation of associations are correlated to the local level of development. While in 1993–1994 in the relatively welldeveloped counties of Wuxi and Guanghan 95 and 65 associations, respectively, were to be found, in less-developed areas such as Wuzhong and Jinzhou the number of associations was 35 and 34, respectively. In Wuxi and Guanghan a very differentiated range of occupational and economic associations, scientific-technical and hobby clubs, existed concurrently. In Jinzhou and Wuzhong, however, associations in the realm of art and literature, hobby, sports, and culture were dominant. In Acheng and Qionglai, two locations of average development, we found the fewest associations: 24 and 26, respectively. While in Acheng there was no predominant kind of organization, in Qionglai it was the professional branch, which in the less-developed county of Zunyi, with 71.4 percent of all associations, absolutely dominated. Economic development obviously is an important stimulus to establish interest associations in the economic professional sector rather than other sectors, though professional and entrepreneurial associations play an increasingly important part among them. The political attitude of the local bureaucracy can be traced in this process. While in Wuzhong we received the information that minban organizations were not permitted and that an association not supported by a zhuguan danwei could not be registered, in Wuxi, Guanghan, and Qionglai we were informed that the civil administration authorities would help associations without a zhuguan danwei find one. Village-level associations without such a guarantee institution might be permitted, too. As a rule, here, the VAC is the guarantor, quite willing to become so by some kind of “favor.” To explain the necessity of a zhuguan danwei, the director of the Bureau of Civil Affairs in Wuxi told us, “Our office is not informed about either the ideas of the association or its

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members. We are unable to control its activities, the latter being the job of the zhuguan danwei, as it is responsible for the activities of the association.”75 Another way to establish an association at the village or zhen level without a zhuguan danwei is to become a “branch association” (xiaozu) of an organization that already exists at the county level. This tendency is quite popular, as can be seen in Wuxi county. Here, 95 associations at the county level and 258 branch associations at the zhen level existed officially. Such an organizational dispersion diminishes the possibility of state control and enhances the autonomy of the associations. The example of Zunyi county, shown in Table 9.16, demonstrates the structure of associations. In all research areas, the branch of professionals and experts dominated over hobby/ sport, public affairs, and art/culture (see Table 9.17). The economic factor is preeminent, whereas the political and social-participative sectors in line with the present political situation are still weakly developed. Growing differentiation must, however, be noted. The regional standard of development plays a crucial role as far as the degrees of differentiation as well as the number of professional associations are concerned. Wuxi county was the leader in this regard, as it contained the greatest variety of associations; there we found associations of 13 different subjects. The less-developed Zunyi county (only 28 associations) had the highest number of professional associations, but the lowest variety (only 6 sectors). Hobby clubs played a dominant role only in the less-developed region of Wuzhong, where all associations were strictly administered. In Wuxi county the high percentage of art associations is of interest. In better-developed regions, for instance, Wuxi, the professional-economic element was predominant (39 out of 92 associations), followed by cultural and hobby clubs (15 each). Economic development obviously has an impact on spare-time activities and the cultural sector. In Qionglai and Zunyi, where the economy was of primary importance, the professional sector dominated; there was, however, only one (Qionglai) or no cultural-artist association (Zunyi) and only one and three hobby and sport clubs, respectively. In Wuxi in 1993 all associations combined had almost 90,000 members, that is, about 1,000 per association. The zhen associations, partly branches of county associations (zhen associations had been registered separately only in Wuxi), had more than 148,000 members (i.e., 13.6 percent of the total county population). Thirty-eight zhen associations had more than 1,000 members, the largest among them those of senior citizens, associations for birth planning, and peasant sport clubs (the largest sport club had 10,707 members). In the county town there were 8 associations with more than 1,000 members, the two largest among them the Association for Birth Planning with 26,259 members and the Association of Individual Laborers with 24,937 members. In Acheng the latter comprised 68.7 percent of all association members (about 8,000 out of 11,486), in Jinzhou more than 78 percent (15,396 of 19,722), and in Wuzhong 87.4 percent (7,600 of 8,696). In those three locations no other association with more than 1,000 members existed. Where the economy is still weak and the registration of associations strictly controlled, we found a small variety of associations, the minban associations being weakly developed and the banguan associations dominant.

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Table 9.16 Structure of Associations in Zunyi County I. Under the county government (zhuguan danwei) (1) Association for Friendship with Foreign Countries (2) Red Cross (3) Association for Family Planning II. Under the Bureau for Administration of Industry and Commerce (zhuguan danwei) (1) Consumers Association (2) Association of Private Enterprises (3) Association of Individual Laborers III. Under the Commission for Education (zhuguan danwei) (1) Retired Teachers Association (2) Research Association for Primary Schools IV. Under the Bureau for Administration of Old Cadres (zhuguan danwei) (1) Photo Association V. Under the Association for Economy and Technology (zhuguan danwei) (1) Electrical Engineers Association (2) Agricultural Machinery Engineers Association (3) Association for Hydraulic Engineering (4) Retired Scientists Association (5) Association for Forestry (6) Association for Auditing (7) Architects Association (8) Association for Chemistry Training at Middle Schools (9) Engineers Association (10) Abacus Association (11) Accountants Association (12) Association for Financial Issues (13) Association for Chinese Medicine (14) Association for Agronomy (15) Veterinarians Association (16) Qigong Research Association VI. Under the Post Office (zhuguan danwei) (1) Philatelists Association VII. Under the Commission for Sports (zhuguan danwei) (1) Anglers Association VIII. Under the Xiazi zhen government (zhuguan danwei) (1) Association for Xiangzhen Enterprises

Source: Bureau of Civil Affairs, Zunyi county.

The situation was different in Qionglai: 14.5 percent of the population (91,299 individuals) were members of an association, 5 organizations having more than 1,000 members. The largest organization was the Association for Birth Planning (55,002 members), most likely because of the important role birth planning policies play in this overpopulated province. Next were the Catholic Patriotic Union (17,000 members; the unregistered underground church in this county was said to have thousands of members) and the

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Table 9.17 Classification of the Associations in Seven Investigated Towns, by Sector Total

Percentage

1. Professional Professional Economic Entrepreneurs

134 109 9 16

44.1 35.8 3.0 5.3

2. Public affairs Public affairs Political affairs Social/welfare

44 25 6 13

14.4 8.2 2.0 4.2

3. Research

20

6.6

4. Hobby/Sports/Art/Culture Hobby/sports Art/culture

83 52 31

27.3 17.1 10.2

5. Other Further education Religion Overseas Chinese/Taiwan Ethnic minorities Women

23 9 8 3 2 1

7.6 3.0 2.6 1.0 0.7 0.3

304

100.0

Total

Source: Authors’ findings.

Association of Individual Laborers (14,385 members). In Wuxi, 62 out of 95 associations had been established prior to the passing of the law regulating associations, most of them in 1984–1985. A larger number of professional associations had come into existence during these years. More than 50 percent of the zhen associations in Wuxi were registered only after the law concerning associations came into force, mostly in the years 1989–1990. At the county level, associations were established at a relatively early stage, indicating spontaneous development at a time without any legal regulations. In zhen, however, this development reached its peak with the passage of a legal registration regulation. In other places this development was less dramatic. In Wuzhong, Zunyi, Qionglai, and Acheng, from the beginning of the 1980s up to 1993–1994, each year between one and four associations were registered. In Jinzhou registration was rather rigid; it did not start until 1991. This shows once again the special development in the economically booming Wuxi, where the necessity of organization and exchange of experiences obviously were greater than in other places; the establishment of associations was better supported and registration less bureaucratic. In terms of political, social, and economic impact, there are considerable differences among associations as well as among regions. These differences are the result not only of diverse goals but also of guanxi networks, the economic and social position as well as the prestige of association leadership, professional ability, and the attitude of the local bureaucracy toward associations in general.

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The name of an organization does not reveal much about its influence. The Association for Research on the Work of the People’s Congress in Wuxi, for instance, advised the county government how to enhance the functionality of this institution in order to reach a greater division of labor and a broader consensus by means of including the delegates in the local program of development. This strengthened the role of the people’s congress vis-à-vis the party and the government and thus had to be considered an important political task. The Association for National Minorities tried to represent the interests of the local members of ethnic minorities and thus served as an interest organization having a wider scope than the state’s nationalities commissions. It addressed conflicts, negotiated with offices, and brought serious cases to the press. The Association for the Education of Ethnic Minorities in Wuzhong acted similarly. The dual character of Chinese associations can well be seen in the latter. On the one hand, this organization was to reduce the influence of Islamic religious education in favor of government educational programs; on the other hand, it was to realize ethnic components in the state’s educational system, and it was to popularize school attendance for girls. The Research Association for Party Building in Jinzhou was not only engaged in attracting new party members and in elaborating new programs in order to extend local party organizations, but also presented new ideas on how to include new social strata in the party and how to economize the operation of the party. The Study Association for Discipline Control in Guanghan intended to reduce corruption in urban party organizations and made proposals on how to activate the general public and to develop a certain independence of the media. The Association for Environment Science (Wuxi) developed ecological programs and informed local offices on the sources of pollution. As we know from East Asia and Eastern Europe, such associations may become the foundation for future autonomous ecological movements. Due to their activities and experiences in ecology, its members feel especially responsible and work as an ecological interest group. Moreover, in Guanghan there existed entrepreneurial associations such as the Association of Entrepreneurs and the Association of Enterprises Run by the People (Minban qiye xiehui), and in Acheng the Association of Enterprises with Foreign Investments. We also encountered some exclusive clubs for entrepreneurs, such as the Club of Entrepreneurs of the Golden Triangle (by which was meant the booming triangle of Changzhou– Suzhou–Wuxi in southern Jiangsu), where not only successful and self-conscious businessmen met, but strategies on how to develop economic and political networks were discussed. Professional associations as well as associations for further education play an important role. The former put forward economic and professional proposals to the local bureaucracy and attempt to improve the social position of occupational groups and public relations policies. The latter organize meetings in order to advance professional and sociopolitical education. The Association for the Auditing of Accounts in Zunyi and the Study Association of Rural Finances in Qionglai made recommendations on how to reduce prodigality and corruption as well as how to execute social control over local finances. The Consumers Association, in the meantime, represented all over China, checks complaints of private consumers and uses the media to spread criticism. The great number

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of associations for people in art and culture as well as artistic or cultural spare-time clubs prove that the official (guanban) artists associations have lost attraction and that alternative organizations have not only become necessary but also are tolerated by the authorities in order to prevent underground activities and consequently a complete loss of control. In the social sphere, welfare organizations emerged that supported people in need and offered advisory services, for instance, the Association of Birth Planning and Welfare of Children in Jinzhou, the Association for Health Protection in Rural Areas in Qionglai, and the Association for Health Prevention in Schools Belonging to Factories and Mines in Guanghan. Undoubtedly, socially active associations are an alternative to state institutions; they act without considering their own profit and they support the establishment of government welfare programs. Associations must be seen as organizations representing interests, executing social control, and offering education and spare-time activities. They represent particular interests vis-à-vis the state or at least possess partial social autonomy. Furthermore, associations can be more democratic than society as such and thus might function as a kind of a school for participation. Durkheim has pointed out that there was no better field for shaping social perceptions and feelings than such associations.76 To categorize such associations in the scheme of guanban—banguan—minban alone, as done by Gordon White, is not sufficient, as in many cases distinctions are difficult to make. Neither the zhuguan danwei nor financial sources or aims can be taken as markers of differentiation, as even branches of national associations act differently in different localities, as official financial sources are confronted with unofficial ones, and as zhuguan danwei interfere in subordinate associations either actively, passively, or not at all. With regard to the relationships among counties, zhen, and villages, associations at the county level are of greater importance than those at the zhen and village levels. At the county level, they also have the chance of a greater political impact. At the zhen level there are normally only relatively small branches. Associations active on a cross-county level might have the greatest influence, as they might be able to mobilize superior echelons and thus have an impact on county and zhen authorities. In turn, village associations are striving for contacts with other villages or with the county. In zhen, associations of entrepreneurs were of special importance on the chance that these entrepreneurs were members of associations embracing several counties and represented encompassing interests. In this case they also had a greater influence in zhen; for instance, the private owner and operator of Qunle distillery in Pingle was vice president of the Association of Private Enterprises in Qionglai,77 chairman of the Association of People’s Enterprises in the city of Chengdu, as well as chairman of the Marketing Association in Sichuan Province. That is why he was of social significance in the county as well as in the zhen. At the zhen level, personal connections to zhen leaders are even more decisive than personal connections at the county level because in zhen individuals live in such close proximity. That explains why in zhen usually no independent associations exist. If a zhen is located close to a county town, interested zhen inhabitants may join associations there;

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otherwise branches are established, not independent associations, particularly as branches do not need a zhuguan danwei, but are subordinate to the county association. Summary New group interests push forward the establishment of functioning professional associations or interest organizations increasingly pressing for participation. Formal groups can be found side by side informal ones. Furthermore, socioeconomic changes and the rise of new social associations and group interests exert pressure on existing guanban organizations as well as on mass organizations, on political institutions such as people’s congresses, political consultative conferences, and the non-Communist parties, and all of them gradually try—though still very carefully and at first in minor matters—to distance themselves from the party and attempt to focus on the fundamental interests of their members in order to avoid isolation. Such endeavors also comprise organizational and personal alterations, subtle new definitions of organizational aims, and delimitation toward party and state administration. Under conditions of growing social autonomy, such institutions develop a relatively independent existence. This fact can well be seen in the greater independence of local or regional people’s congresses, or even in the National People’s Congress, the delegates of which more and more become representatives of regional interests or vote against proposals of the party center,78 or the careful attempts of the trade unions to become more autonomous of the party.79 With reform development, the degree of inclusion has increased; that is, the degree of incorporating a larger number of individuals, groups, and organizations outside the party in the process of advising and decision making has increased. In line with Parsons’ theory of sociocultural evolution,80 Kenneth Jowitt called the respective policy of the Leninist party elites “inclusion,” that is, including nonparty structures in discussion processes to prevent the isolation of the leading party from society, and to block the aspiration for plurality or even opposition.81 Social differentiation and growing heterogeneity lead to the rise of new interest groups that cannot be integrated in existing institutions and that can only be controlled and bound by inclusion, as long as the leading elite takes the acceptance of a dominant CCP for granted. Such inclusion enhances the status of nonparty and state institutions, as can be seen in China by the example of the National People’s Congress,82 the Political Consultative Conference, the so-called democratic parties, and other organizations, as well as the inclusion of critical intellectuals and religious leaders. Inclusion does not mean a direct political change. However, it shows that party ideology is becoming less important than the idea of melding together the majority of society, the slow transfer from traditional party ideology to the ideology of nationalism/patriotism. In China there are traditional models of inclusion, so that it is not a particular policy of a Leninist party but also part of a revival of traditional concepts. All this demonstrates that with growing economic liberalization the government is no longer in the position to control all social activities. Furthermore, it does not necessarily interfere, as long as such structures will not become parallel. The emergence of autonomous horizontal associations represents the rise of new social groups and group interests

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that the government with its traditional institutional structure is unable to bind, and that go beyond that structure and finally develop their own systematic dynamism. This phenomenon, described by Anita Chan as “societal corporatism” and by Philippe Schmitter as “neo-corporatism” (in contrast to state corporatism), refers to sectional organization from below as well as to the formation of interests at the grass roots and their incorporation.83 While in democratic societies corporatism is connected with the participation and incorporation of autonomous social associations in official policies, it has a totally different meaning in socialist states, dictatorships, and authoritarian developmental societies. Here, corporatism means that the state or the party decides everything. State and party integrate the existing associations into bargaining and discussion processes, though strictly controlling them, and that kind of corporatism bans the rise of parallel associations striving to act autonomously from the government. The latter is also called state or authoritarian corporatism. A kind of goal-oriented harmony is sought,84 concentrating on a national scheme of development and national interests. In East Asia, such cooperative structures, which are part of the political culture, are established and consolidated during the development processes (Japan, South and North Korea, Taiwan, PRC). In the PRC we find a synthesis between the traditionally authoritarian and Leninist state corporatism. Parris rightly points out that this corporatism manifests the power of the state as well as the dynamism of society.85 We agree with Ding Xueliang that via associations and interest groups, be they minban, banguan, or guanban, society infiltrates state and party and thus initiates processes of change, a factor that was of great importance in the process of the East European transformation. This Janus-faced nature of associations, which Ding called “institutional amphibiousness,” can be seen in the fact that, on the one hand, through countless threads they are closely connected to party and state structures even to the point of “institutional parasitism,” (i.e., their interests and financial means are bound to the state/party), while, on the other hand, party and state institutions can be infiltrated and changed by these organizations (“institutional manipulation and conversion”). That party members are based in all social institutions finally leads to mutual interweaving and penetration. Ding is right in arguing that the concept of civil society does not meet this dual character, as it is based on a state–society antagonism and thus is unable to reveal the interconnection between the two.86 The events of June 1989, however, have shown how the state (or the CCP) reacts when such structures begin to form themselves politically and parallel to the power system. Especially during the urban protest movements in spring 1989, one of the central questions was whether the CCP was willing to tolerate autonomous organizations of intellectuals, students, and workers, demonstrating the confrontation between the mass movement and the party.87 Various interest organizations came into existence and even official associations, such as the Chinese Writers Association, attempted to become autonomous from the party.88 The party leaders recognized the danger resulting from the rise of parallel power structures and consequently suppressed the newly formed organizations after June 4, 1989. That proves that the urban protest movement stood for the conflict between

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an authoritarian state and a society with a growing autonomous movement. As it is still not possible to establish parallel political structures, the alternative can only be to develop independent social activities that do not provoke the state politically, called “ad hoc zones of autonomy or second society.”89 A less important economic role of the state in the future and the social change combined with it will enhance the power of autonomous groups. When we say that bottom-up organizational structures are constituting themselves not only economically but also politically, we are not referring to political activities directed at implementing a political program or political aims. Politics are normally understood as human action aiming at the establishment of general rules, especially regulations and decisions in and among groups of people that are obligatory for everybody. Politics stand for the relationship between the state and social groups, for the interaction of social groups, as well as for the decisions and regulation of a balanced community life in a given state. That explains why the transfer of demands (also of an economic and social nature) by interest associations is political per se. The enforcement of group interests concurrently has an influence on the community as such, as further interest groups strive to realize their ideas and try to participate in social decision making. In authoritarian societies, such as in China, there is still no other way of expressing and achieving group interests than via the above-mentioned channels. Development in the former USSR and in other former socialist countries has revealed that in phases of political change, alternative structures may rapidly be formed by means of interest associations. They may develop into parties or proto-parties, or as ad-hoc groups they may gain local influence in realms no longer dominated by the party. Even party organizations may eventually turn against the party to offer themselves as an alternative to these interest associations and to regain confidence among the population.90

10

Summary and Evaluation The Role of Zhen in the Economic Process of Development The concluding remarks are based on the results described in the chapters dealing with the economic, demographic, and structural development of the zhen, as well as their role as an accelerator of socioeconomic change in the countryside. In the last thirty years, the number of official zhen in China has increased very quickly. While in the 1970s there were still fewer than 3,000 zhen, in 2002 there were already more than 19,800. At the same time, their economic power and the quality of their infrastructure and administration have expanded to a remarkable extent—at least until the middle of the 1990s. Their growth and the change in their economic capacity, in their public institution and supply functions, and in their administrative system, however, have developed very differently from region to region. Stage and Chances for Zhen Development The development of rural enterprises and the rapid increase in the number of newly designated zhen were closely connected to the demographic and economic growth of the existing zhen. A direct correlation, however, cannot be established, because numerous zhen had already functioned as centers of former people’s communes and their status had only been changed administratively. It is most likely that in many cases the strengthened economic basis was the main condition for an administrative reclassification.1 Without any doubt, the assumed advantages of an official zhen status—for example, the possibility of extra public incomes or expenditures, or the establishment of further economic institutions—have led to an inflation of the administrative “promotion.” This situation is elucidated by the fact that at the beginning of the 1990s just 60 percent of the officially designated zhen did not fulfill the official criteria for such a designation, criteria that had already been reduced in 1984. From the spatial point of view a double disparity in development is found: • on the one hand, the well-known macro-space disparities still exist today between the coastal region and wide parts of inner China • on the other hand, we can observe remarkable micro-spatial disparities The chances for the development of zhen depend to a high degree on their location and their transportation connections to larger urban centers. For zhen remote from such 281

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centers, the chances for development are usually limited, that is, the regional conditions for their development vary to a great extent. Coincidences often play a certain role even for the development of zhen near metropolises. If they are chosen as the location for state enterprises or especially for state institutions, they have often grown with remarkable speed, while neighboring places with a similar development potential had a limited chance to grow. The same applies to the consideration of whether a zhen was selected for special development programs of the regional and central government, for example, because the political leaders of the province were interested in the place. In those cases the zhen’s power is greater, but the level of market development is lower in many cases. In other words, the different share of township and village enterprises as one of the decisive economic powers among the zhen can be explained by the central, county, and local governments’ influence and power. Too frequently the development of zhen was directed from outside. In addition to the spillover effects of big centers or foreign direct investments, financial support by superior institutions or the establishment of transferred urban enterprises were of decisive influence. In many positive examples, the exogenous character of local economic success had to be regarded as the main element. However there are still further problems, since, for instance, one of privatization’s side effects is the decrease in the rural enterprises’ transfer of profits to the local governments. The same is true for collective enterprises and in fact private firms that are still registered as collective firms. Also, to some extent our analyzed zhen are examples for the sweeping transformation of collective to private enterprises. The tax reform in 1994 in many cases further reduced budget receipts, and this economic situation prevented the extension of the infrastructure or an increase in trained staff—teachers, for example. With regard to the limited local potential, the future selection of zhen for preferential development should be handled with more care from macro-spatial perspectives and less from random personal or political relationships. Territorial planning should set certain standards for counties and towns that are to be realized according to their individual development opportunities. The selection criteria for such rural growth should be of a high standard, that is, normally not more than two or three zhen per county or town at the county level should fulfill the conditions. It is difficult to set a limit for the number of inhabitants, as this is very dependent on basic regional conditions; in any case, however, the size of the place should allow for the establishment of important public institutions and facilities. Disregarding regional disparities, it is generally true that successful zhen have left their traditional function as markets far behind and have become hubs for the collection and distribution of goods. The economic change often went hand in hand with an improvement in the infrastructure (schools, clinics, cinemas, libraries, agrotechnical centers) and the zhen function as a mediator of new technologies and innovations for the rural population. As a result of this process of rural urbanization, rural inhabitants encounter elements of modernization, such as employment in nonagrarian sectors, access to educational and

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cultural institutions, modern consumer goods, and housing standards, as well as the rise of new forms of organization. All this generates a breakup of the traditional village community and the rise of new symbols of status. On the other hand, deficiencies, often to be found at the local level, are the one-sided or lacking leisure-time amenities for young people. In our cases the existing supply offers only casinos with video machines, karaoke with partly dubious contents, and the sale of dubious books by street hawkers. Most zhen do not offer any leisure-time entertainment of educational value. Zhen as Local Labor Markets In many cases it is quite difficult to assess the importance of the zhen as a collection place for workers who have left agriculture and found employment in nearby rural enterprises, or who as peasant workers combine agricultural with nonagrarian activities. Regarding the often inexact figures of migrant workers for the whole country, it seems to be nearly impossible to estimate the percentage of employees engaged in local rural firms who stay in their hometowns or in the region, and therefore do not migrate to larger urban centers. As we have documented, there is no doubt that the economic situation of collectively owned or state-owned enterprises has worsened significantly during the last decades, while, on the other hand, the privatization of collective enterprises in many cases could compensate for this downhill trend. The process of privatization could be observed in all of our analyzed zhen. For example, the number of collective industrial enterprises in Pingle went down from 89 in 1993 to 6 in 1999, while the number of their employees was reduced in the same period from 1,806 to 332. This reduction could be observed in the other zhen also. Since the number of collective enterprises decreased more rapidly than the number of employees, there is a limited process of enlargement per collective enterprise. This process of concentration can also be verified by a similar development in private enterprises. For example, in Pingle again the number of private industrial enterprises decreased slightly in the second half of the 1990s (1993: 879; 1999: 730), while the average number of employees per enterprise increased from 2.7 to 4.8. However, in most of the other privatized sectors, for example, trade and catering, the number of enterprises increased rapidly in many zhen but mostly without the process of expansion per enterprise. When we look at the whole of China the development of the number of employees in rural enterprises seems to stagnate or to shrink: For example, the total number of rural employees decreased by 3.6 percent between 1996 and 2000 (1996: 132.9 million; 2000: 128.2 million). During the same period the ownership structures changed drastically. The share of employees in collective enterprises decreased by 11.5 percentage points (1996: 47.7 percent; 2000: 29.9 percent). This development, verified by the example of Pingle, could be observed in all the analyzed zhen. When we compare the catchment areas of the enterprises in the examined zhen, only Dongting zhen—analyzed in 1993—clearly demonstrated that it had such a high demand for workers that a considerable percentage of employees had to be recruited from

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outside (26 percent from other provinces). The firms in all the other zhen mainly employed local people both in 1993–1994 and 2000–2001. In most cases, more than fourfifths of the workforce in the local rural enterprises came from the administrative area of the zhen, that is, the zhen proper and the villages under the zhen administration. Most zhen predominantly functioned as reception places for the local peasant surplus workforce. Whether the local supply of nonagrarian jobs met the demand could not be answered by our study in 1993–1994. Compared with the results in 2000–2001, some changes have occurred. Those zhen where the privatization of collective enterprises was more or less successful were able to expand the catchment area of their workers. For example, in Jinji (Ningxia) the share of employees who came from other villages and towns in the same county or other counties in the same province increased from 22.5 to 33.2 percent; a similar increase could be observed in Yuquan (Heilongjiang), Xiangyang (Sichuan), and Pingle (Sichuan). When we add the data for all the zhen that we analyzed both in 1993– 1994 and in 2000–2001, the relevant percentage figures are 14.6 and 21.3, respectively. Zhen and Rural Enterprises As already described, the development of zhen has to be seen in close connection with the progress in rural industry and trade. According to our observations, there are remarkable successes but also negative phenomena. In less-developed regions the profits of collective enterprises on average were low; often the township governments relied on one or two larger firms with sufficient profits, while the existence of the majority of the rural enterprises, in a purely economic respect, was threatened.2 A considerable number of zhen-owned enterprises suffered from debt overload. New credits frequently served only to repay old debts. Often the enterprises were indebted to one another, because they were unable to pay, for instance, for their raw materials or energy. Bank credits often served as hidden subsidies. In many cases collective enterprises were kept alive only because of their great local significance, though in fact they should have been closed down long before. The share of collective enterprises with losses increased significantly, from about 4 to 6 percent of all township and village enterprises in 1992 to up to 20 percent in 1999. As the remaining zhen- and village-owned enterprises are still under the control of the local administration, they often are not very interested in improving their efficiency and production. The managers in many cases just nominally fulfill the terms of their contracts (output, value of production, profit) to obtain high bonuses for themselves. Environmental concerns and safe labor conditions are of minor importance. Another problem is the permanent financial levies demanded by local offices, driving many firms to near ruin. The economically precarious situation of many collective rural enterprises often also results from competition among the zhen to attract industrial firms, often leading to a multiplication of primarily successful production branches and a drastic reduction in their marketing opportunities. Also, the privatization process only partly changed the economic situation of many rural enterprises for the time being, because the new private owners in many cases had

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to pay off the debts or to modernize the manufacturing facilities that in many cases were totally out of date. Frequently former managers of collective enterprises who bought the firms did not have the necessary economic experience to make profits for the now private enterprise. The industrialization at a low technological level has in some regions led to catastrophic consequences for the environment. The lack of coordination among the zhen and insufficient planning regulations have in many cases resulted in an arbitrary dispersion of industrial plants, mainly at the cost of agricultural land. Because of the one-sided preference for rural industry, a modernization of agriculture has often been prevented. Tan calls this a “peripherization of agriculture.”3 Because of the poor income situation, many peasants have left the land—“social fallow land” is quite common in coastal regions—or often have left agricultural activities to the older and weak members or the children of their household. During the last several years the formerly high rates of increase in agricultural production have in fact gone down. In general, both xiangzhen and private enterprises in less-developed places need better advice and support. A policy to develop zhen by innovations should be supported by public consulting and transfer agencies. The task of such centers should be to establish contacts among different partners (e.g., research institutes and rural enterprises), to help with product development and the establishment of cooperatives, and to organize the further education of rural managers. As heads of rural firms are mainly recruited from the group of former rural cadres, party functionaries, or demobilized soldiers, their economic and marketing knowledge is—as already mentioned—often insufficient. In some areas collective rural enterprises still dominate the local economy, while the private and individual economy sometimes is further developed in peripheral and economically weaker regions. The private economic sector lately has been developed considerably, although official statistics do not always reflect the actual state of affairs. The private sector has three main functions: • creating jobs • offering services • serving the market according to supply and demand Furthermore, this sector should become more and more important for tax revenues, though there is still a significant difference between the amount of tax owed and the amount of tax actually paid. However, the desolate state of many state enterprises, the growing pressure on the labor market, the need for more capital by local governments, and mostly the reorganization of the Chinese economy in a market-oriented direction make the private sector increasingly important and indispensable. It was and still is confronted with a number of difficulties that seriously affect its development and growth, among them fees, penalties, forced charges by local offices, and numerous barriers preventing free access to suitable land for enterprises, the procurement of raw materials, the sale of produced goods, and the issue of certificates of quality. In private as well as in collective rural firms the

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employees mostly work without legal protection; the working conditions sometimes are terrible. In small zhen the structure of production and the services offered by private entrepreneurs are often one-sided. The assortment of goods still is frequently reduced to similar products. The future function of the private sector in rural areas should be to establish a net of supply and production enterprises. As in the long run the state sector and especially the collective sector will be more and more privatized, some perspective on the private economy is necessary, that takes this sector no longer just as a mere “supplement” to the state economy, but as the most important future element of the modern economic structure in rural areas. Local Administrative Structures Local cadres are the relevant agents for local development. Well-trained functionaries with special knowledge are an essential precondition for successful growth, especially under conditions that so far have prevented the development of an independently working elite. There are, however, still a number of structural deficiencies. The party, the local government, and the administration are still closely connected; so far a separation has not taken place. There are too many interlaced units whose competencies overlap and, because of that, cause stagnation. Local cadres are not controlled, and that leads to a tremendous waste of resources and often to an extreme personal enrichment of functionaries. The way of thinking of local cadres is dominated by an economic “ton ideology,” which is concerned only with growth rates and productivity at the expense of other considerations. There is almost no awareness of other social problems, such as the standard of living, education, medical care, environment, culture, and so on. There is no question that in rural areas administrative cadres need a better education, which should be acquired in special institutes for administrative training and not in party institutes. Besides economic training, this education should comprise a program for subjects such as environment, education, health service, culture, city development, the improvement of living conditions, youth, social problems, and so forth. The administration should be simplified and the overlapping administrative structure dissolved. There should be a strict separation between party and government; for example, party institutions should not be paid out of the state budget, but should either finance themselves or be paid by party means. Zhen offices should primarily concern themselves with macro control of the economy; direct interference in enterprise affairs and the permanent exchange of persons among party, government, and enterprises are not very efficient. Municipal Development and Land Use In connection with the development of rural industry and the building activities in zhen, two issues should be taken more seriously in the future.

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At the level of zhen and xiang, industrial plants should be more strictly concentrated in compact industrial parks, which should be used for enterprises from several places. At this point, industrial enterprises—mainly at the village level—are quite dispersed and are of insufficient technical standards. Stricter land-use development as well as improvements in the technical infrastructure will represent progress. In this context, the environment should be better protected than it has been so far. If strict and controlled regulations are not introduced soon, in some rural regions it might become almost impossible to cope with the environmental damage, despite many new regulations. Transfer and consulting offices, which should be established, could be of great help with technical advice. It is typical of the structural development even of advanced zhen that unnecessary high status buildings often enjoy priority over much more important projects, for instance, improvements in the infrastructure. It should be possible in better-developed regions to build simple, mechanic-biological sewage plants in order to prevent the dumping of unfiltered household and mainly industrial sewage into rivers and groundwater. It is quite common for rural inhabitants to have no environmental awareness. For instance, rivers and their banks, very suitable for recreational purposes, are frequently used as uncontrolled public dumps. Architectural design should be closer to local and regional building traditions than it has been so far. Unfortunately, the Chinese architecture of today is dominated by some totally incorrect ideas about modernization that unreflectingly appropriate some of the worst examples of so-called modern and postmodern architecture. There is the danger that the urban renewal and extension of zhen might lead to building uniformity in rural areas. Whenever new buildings in rural towns are erected, they are all of one style and bare of any local or regional identity. However, some examples of modern buildings prove that even today it is not difficult to incorporate traditional elements. In general, county offices design land-use development plans, but in many cases they only copy poor examples. If development continues in this way, even the most remote zhen will be spoiled by uniformity and urban monotony and in that way will reach a very undesirable “effect of urbanization.” Even today it is still difficult to project whether the present essential role of rural industry and of zhen is just one step in the development of Chinese industrialization and urbanization, or whether it will lead to a further independent development “from below.” Processes of Social and Political Change The findings of our investigation concerning social change at the zhen and village levels can be summarized as follows. Development of Ownership State ownership to a large extent no longer exists in rural areas. The private sector is more or less dominant. The process of privatization is developing in three stages: as bottom-up privatization, that is, adopting self-employment; as top-down privatization,

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that is, sale or leasing of state or collective enterprises or their transformation into shareholders companies; and as crypto-privatization, that is, collective enterprises that are in fact private, or peasants who treat the land as private property. Consequently, in rural areas the role of the state is diminishing. At the same time, economic irregularities have arisen, bringing a return to usury, child labor, and economic exploitation of workers in the private sector. Economic Transformation of the Bureaucracy Transformation of the economy by the market and competition is leading to changes in society and politics. The party and the bureaucracy focus on economic interests and the pursuit of economic aims. The working style and the forms of institutions are changing. Administrative institutions were turned into economically oriented enterprises or companies; cadres became entrepreneurs and shareholders. The advancement and income of officials increasingly depend on successful economic activities. From that follows a weakening of the superior party and state echelons, as higher incomes and resources are no longer primarily provided by these institutions but rather by local enterprises and entrepreneurs. Concurrently, the power of the local political elite is declining, as it no longer controls all economic and social activities. Economic penetration, however, has led to a severe neglect of social security, the educational and health sectors, as well as cultural life, as these costly sectors do not produce any income. New Stratification, Change of Elites The changes in the system of ownership and the economic penetration of society have created a new order of stratification, new elites, and rising economic and social inequalities. Though social inequality has existed in China since 1949, as a matter of fact the reasons for inequality have changed, moving from political to economic factors. The successful entrepreneur more and more has become a model for society. Among these entrepreneurs there is to be found a great number of functionaries, as they have the best preconditions to become entrepreneurs due to their social and functional backgrounds, their guanxi, and their embedding in local networks, as well as possessing the necessary authority. However, such “cadre capitalism” must not be regarded as a negative factor, as with no fixed entrepreneurship and middle class, functionaries are predestined for such a leap in development and its regulation. Therefore, they possess transformation potential. On the other hand, the economic activities of the cadres undermine the organizational structure of the party. Where the existing elites are unable to legitimize themselves by development, they are replaced by others. Retraditionalism and an Increasing Potential for Conflicts in Rural Areas The withdrawal of the state and party from the village has generated a renaissance of traditional structures (clans, hometown associations, folk religious traditions, and the

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like). This must not be perceived only as a revival of prerevolutionary structures; in this sphere, a process of economic transformation has begun: clans, families, and hometown associations have increasingly gained importance in economic relationships of cooperation and enterprise structures; from the religious point of view, economically oriented gods are now dominant—the god of wealth, for instance, or the god of land. The larger autonomy of the peasantry, the return to traditional forms of community (clan, secret societies), along with social contacts transcending single villages (via rural market places and enterprises), favor protest as a kind of collective action against official arbitrariness and exploitation. Change of Values The above-described process is accompanied by a change in attitudes and values leading to a greater importance of family ties and individualization. Concurrently, official party ideology increasingly is eroding. Obviously, local functionaries are interested in keeping ideological elements apart from economic and political decisions. Interest Associations Associations represent the need of new social groups to establish institutions that articulate their interests and demands. On the one hand, this development supports an atomization of society; on the other hand, it is the way by which proto-forms of political participation arise, influencing politics and society and demonstrating how social groups become active social players. Communalism The financial means for development in counties, townships, and villages are provided not by the state but rather by the local economy. Accordingly, the former develop communalist interests and loyalty toward the provinces, and the state as such diminishes. Wank regards this as a specific form of “community capitalism,” a cooperation between local cadres and private entrepreneurs.4 As far as the main players at the zhen level are concerned, the party in the form of a local political elite remains dominant, as there are no alternative structures. If the local political elite has initiated local development, it can strengthen its position as far as the organizational sector is concerned. In principle, it controls the local community. The party does not just disappear; on the contrary, in many places its organizations and functionaries are the primary actors in economic life, guiding economic activities. This selfassertion of the economy is a stabilizing factor for party dominance. Economically, the managers of prosperous enterprises and successful private entrepreneurs become increasingly important, though in local decision processes they play only an informal role. They are, however, at the highest level with regard to living standards. In prosperous villages, as in Wuxi county, economic and political functions were intermingled. The political

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elite is of extraordinary importance for economic development. The better, more qualified, and younger the political leaders, the stronger their determination for local development, particularly as this interest goes hand in hand with material profits. That explains why in most zhen the party is the institutional power for orderly processes of development. The party attempts to integrate capable and educated people in its organization. Due to the general economic trends, fewer younger and talented people join the party. The Communist Youth League in particular is becoming less and less important as an institution from which to recruit party cadres. Economic activities are more profitable and socially more attractive than a career in the party. Concurrently, income disparities between the economic and political elite as well as within these two groups are growing. In rapidly developing rural areas (southern Jiangsu), village cadres, followed by zhen cadres, earn top incomes, and the gap in relation to the county cadres and workers in state enterprises is increasing. Usually, high local incomes are to be found among managers of efficient enterprises in counties and townships, among entrepreneurs in the private large-scale sector, and among leading functionaries in prosperous zhen with parallel economic functions. Summarizing the entire development from the perspective of political change of the system, the reform process has brought about an alteration from general to inclusive hegemony. According to Gramsci and Dahl, hegemony refers to the dominance of power, in our case that of the party, which not only enforces its power but in the interest of legitimization of its power, has to reach and maintain consent,5 whereas inclusive hegemony means to incorporate a larger number of social actors and institutions in social and political processes dominated by the party. This could also be described by the terms “authoritarian” or “corporatist,” that is, “directed pluralism.” The authoritarian one-partysystem attempts to integrate the variety of differentiating social actions into the existing structures. In total, society differentiates itself in the sense of the above-described social change. Bottom-up privatization, including the establishment of small enterprises, facilitates the process of change and thereby the “quiet revolution from below.”6 This process does not automatically lead to a breakdown of the political system but it erodes the political system in its present form. In this context, the decisive question is whether a new (middle) class will develop out of this new economic elite that might direct economic and political changes and thus lead the process of democratization. Barrington Moore’s slogan “no bourgeoisie, no democracy,”7 having apparently been proved by the developments in Taiwan and South Korea, today is also applied to China. There is hope that in the long run market development, private economy, more autonomy of society in terms of the state, the change of elites, the rise of independent interest associations, and the formation of a “middle class” will generate a process of democratization. The term “middle class” refers to a new middle stratum—in particular, groups such as private entrepreneurs, employees in higher- or medium-level positions, civil servants, a great part of the intelligentsia, as well as independent professionals, who are developing in increasing numbers. In China, the greatest hopes are focused on entrepreneurs, the stratum that is growing most quickly and is the wealthiest and most influential. There are a number of factors both supporting and undermining this supposition. A

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group has in fact come into existence whose protagonists, larger-scale private entrepreneurs and managers of big firms, pursue common economic interests and goals. This group has particular ideas in terms of social development as well as an interest in participating in politics, though the policies of restriction and control by the bureaucracy might remind one of a “blocked middle strata,” that is, a mobility-oriented group hindered by structural barriers that are part of the traditional system of power.8 From the opposite point of view, this part of the middle stratum seems to be a heterogeneous group without common interests.9 Therefore, some commentators argue that private entrepreneurs are primarily persons with a low level of education and little social prestige who are merely interested in an “economic democracy,” allowing them to establish and run enterprises, but not interested in a political democracy.10 As a stratum they are said to be too weak vis-à-vis the party to be able to initiate political processes of change.11 Certainly, the middle stratum consists of heterogeneous groups, such as persons with and without property, freelance and employed persons, party officials and non-party members, intellectuals and persons with a lower level of education. The common features, however, are that this stratum consists primarily of people with a higher degree of education, training, or occupational experience who intend to develop their activities freely, who are interested in social advancement, and who, due to their work, have developed self-confidence, permitting them to strive for more participation. That does not mean, however, that this group in each case acts in concert. On the basis of an interest coalition, though, it tends toward common action. In our opinion, we doubt that entrepreneurs in the large-scale private sector in general have a low educational standard. That applies more to people engaged in the smallbusiness sector. Furthermore, private entrepreneurs possess entrepreneurial abilities and experience that also have to be regarded as a factor of education. This applies to managers of nonprivate enterprises as well. The argument that private entrepreneurs are merely interested in economic democratization is based on a static attitude. Due to their business operations, the latter should be their primary concern. Yet, for a stable business environment it is necessary to achieve equal opportunities (for instance as far as the state-collective sector is concerned), a certainty about their legal position, and reliable business conditions. Overt political activities, however, such as being nominated as a candidate in elections, or being opposed to the general political direction, not only might negatively influence business but might also have adverse personal consequences for the respective actors. On the other hand, being organized in interest associations and being active in parliaments and other institutions are clear signs of political activities. Critics of political abstinence often wrongly compare political activities with those in democratic societies. As far as the social prestige of larger-scale private entrepreneurs is concerned, in rural areas it is already rather high and in urban areas it is increasing. Counterarguments are based on a conception of a static class. That is why we prefer to use the term “middle stratum,” not middle class. Chinese entrepreneurship is still in an early stage of development. The characteristics of traditional middle strata, for example, being embedded in the social structure of power, prestige, and income, are not yet fixed. As we have shown, entrepreneurs develop a great variety of interests and activities that go

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beyond purely economic matters, for example, the emergence of a distinctive lifestyle or symbolic consumption, which are already prevalent among a majority of entrepreneurs and must be considered as a manifestation of inequality between different social groups. That does not mean, however, that they are the only group to change the political system. For that, a broader coalition of interests might be necessary. They contribute, though, to a fundamental change from below. At first glance, economic democratization seems to be compatible with a one-party-leadership, though the synergy effect for political change must not be underestimated. That is why one should not talk of a blocked middle stratum; as the entrepreneurs contribute to the breakup of the traditional system and its limitations, the state as well as the bureaucracy will be less and less able to block this stratum. However, one must always keep in mind that private ownership is not sufficient to turn the middle stratum into a strong power force. It is concurrently necessary to establish a legal system that protects and promotes entrepreneurship. Interest associations contribute to legally securing their business conditions. And economic legal security is at the same time a step toward political legal security. Successful major entrepreneurs develop a distinct group consciousness, which clearly separates them from others. They are aware of their economic clout and are not afraid to voice their interest in codetermining matters affecting economic policy, especially through the medium of entrepreneurs’ associations, whose political influence is currently concentrated on the formulation of proposals and draft bills relating to economic policy. Although entrepreneurs do not yet constitute a class, they nevertheless are already that which we call a strategic group. They perform an important function in political development and change, project themselves as an organized group with political bargaining power, and are able to enforce their intentions. The organizations representing their interests possess strategic knowledge, strategic planning capacity, and the ability to implement the plans at their disposal. The appearance and behavior of the members of the group may create social values and initiate social change. The activities of the entrepreneurs are not yet being guided by strategies aimed at changing the system, but at attaining political influence and forming group structures. Hence, it is possible to speak of strategic action. In China, the entrepreneurs as an entity are striving to achieve a higher degree of codetermination and capacity for shaping their affairs. The word “strategic,” however, does not only refer to their activities, but also to their significance for political developments in a society.12 As can be seen above, rural areas experienced the most significant alterations in the political sphere, due to the diminished ability of the party and state to act freely, which was because of their withdrawal from the villages, the functional change of local bureaucracies, and the beginning of a change of elites, as well as greater autonomy of counties and provinces toward superior echelons and toward the central power. The party’s legitimization is rather affected by an economy having become more important than politics, and by the erosion of ideology and the decay of the party’s organizational structure due to economic conditions and spreading corruption. That is why it has become increasingly important for the party to elaborate a new view of the world and a new foundation of legitimization.

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However, without a doubt the above-described process of change undermines the political structures and by that the monopoly power of the party. Whether the party will tolerate this development in the long run is difficult to predict but it might not be impossible. The weakening of ideology and the change of elites might lead to political processes of change as well as to cooperation between the power elite and the knowledge elite. In the process of economic and social change and new circumstances resulting from it, a rigid clinging to the present form of political power will necessarily generate political alterations by force, perhaps even to a military dictatorship, at least if economic difficulties (particularly in agriculture) begin to impair the present economic success of the reform. Then, not only the protest potential of the urban population, but also the growing potential power among the peasantry, might lead to a political avalanche, the direction of which is just a matter of speculation. Such a conflict might also be inflamed by the question of land ownership. As already mentioned, such a conflict is brewing in rural regions, if we view it in terms of collective property and the demand of peasants for private ownership of land. Political reforms, in the sense of establishing a multiparty system, parliamentarian democracy, and the separation of power, cannot be introduced either all at once or by imitating Western institutions. They have to be installed very carefully and in a pragmatic way to avoid an economic breakdown, paralysis of the state, and social and political chaos. In a developing country with such great centrifugal tendencies, a Western democratic system cannot be adopted in a short time. China does not need a new ideology; such a transition would only be a hasty acceptance of Western political conventions.13

Notes

Notes to Chapter 1 1. Migdal, Strong Societies and Weak States, p. xvi. 2. Beck, Die Erfindung des Politischen, p. 156. 3. Scott, “Everyday Forms of Resistance,” pp. 3–33. 4. Havel, Versuch in der Wahrheit zu leben, p. 56. 5. Similarly, see Zhou, How the Farmers Changed China. 6. See Linder, “Demokratie und Marktwirtschaft—ein Kuppelprodukt?” p. 115. 7. Luhmann (Die Wirtschaft der Gesellschaft) regards the market as an “object” being formed by differentiations of specifically economic processes. We are of the same opinion. A market economy cannot be simply “introduced” but comes into existence as a result of specific necessities. 8. Cf. Sachs, “Eastern Europe’s Economies”; Friedman, “Using the Market.” 9. Herrmann-Pillath, China: Paradoxe Transformation oder Modell? p. 51. 10. Die Zeit, 23 April 1993. 11. Cf. Stark, “Path Dependence and Privatization Strategies in East Central Europe,” pp. 63ff. 12. When we talk of “party leadership,” we do not mean a monolithic bloc. We know that in politically quiet times a group is executing power on the basis of general agreement. 13. See Berger, Berger, and Kellner, Das Unbehagen in der Modernität, p. 110. 14. Gehlen, Die Seele im technischen Zeitalter, p. 71. 15. Deutsch, “Soziale Mobilisierung und politische Entwicklung,” pp. 329–50. 16. Parsons, “An Outline of the Social System,” pp. 70ff. 17. Parsons, “Das Problem des Strukturwandels,” pp. 36ff. 18. Parish and Whyte, Village and Family in Contemporary China, p. 14. 19. Rostow, Stadien wirtschaftlichen Wachstums, pp. 33ff. 20. Zimmermann, Sozialer Wandel und ökonomische Entwicklung, p. 107. 21. See also Hagen, “Traditionalismus, Statusverlust, Innovation,” p. 352 and the literature cited there. 22. They emphasize that all policies have to be in conformity with (1) the socialist road, (2) the leadership of the Communist Party, (3) the democratic dictatorship of the people, that is, the dictatorship of the proletariat, and (4) Marxism/Leninism and Mao Zedong thought. 23. See Huntington, Political Order in Changing Societies, pp. 49–50, with whom we agree in this aspect; see also Eisenstadt, Modernization, pp. 11ff. Cf. the study by Li and Sun, “Dui ‘xianfuzhe’ zishen kungan yu shehui guannian pianjian de lilun fenxi,” on the development of prejudices toward richer households. 24. It would be worthwhile to examine whether traditional Chinese individuation, that is, a solidarity only with the family and a disregard of the community as a whole as far as the family is not concerned, in situations of social change and disorder does not lead to an “extremely egocentric behavior,” paying no heed to persons outside the family circle and to the society; see also Hauser, “Some Cultural and Personal Characteristics of the Less Developed Areas,” pp. 58–59; Zimmermann, Sozialer Wandel und ökonomische Entwicklung, p. 89. 25. Sztompka, “Civilizational Incompetence,” p. 93, states that the external aspect was responsible for the breakdown of the socialist systems in Eastern Europe.

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Notes to Chapter 2 1. See also Zweig, Freeing China’s Farmers, p. 224. 2. See also Rozman, Urban Networks in Ch’ing China and Tokugawa Japan; Skinner (ed.), The City in Late Imperial China. 3. See also Skinner, “Marketing and Social Structure in China, Part 1,” and Skinner, The Fertility Transition in Hierarchical Regional Space, p. 7. 4. In the following we have specially used the documents published in the “Handbook for the Administrative Structure in the People’s Republic of China” (Zhonghua Renmin Gongheguo xingzheng quhua shouce). See also Taubmann, “Das Städtesystem der Volksrepublik China”; Kirkby, “Dilemmas of Urbanization”; and Chan, Cities with Invisible Walls. 5. “Town” and zhen are used interchangeably. 6. The terms “agrarian” and “nonagrarian” do not refer to the actual job but to the status of the household registration (hukou). 7. Regulations of the Central Committee and the State Council concerning the criteria to set up shi and zhen and to curtail urban outer districts (December 7, 1963). 8. Report of the Ministry of Civil Affairs concerning the norms to designate zhen (October 9, 1984). 9. Decree of the State Council concerning the designation of shi and zhen (June 6, 1955). 10. It is interesting to note that the “nonagrarian population” was not only defined according to its hukou; “peasant contract workers” (nongmin hetonggong), “temporary workers engaged for several years” (changnian linshigong), and employees in collective and private enterprises belonging to the secondary and tertiary sector were explicitly included. 11. One can be of the opinion that zhen belonging to city districts are part of shi. That applies to the number of inhabitants from the point of settlement; however, such zhen are an entity of their own. The 1990 census distinguished among (1) zhen as part of suburbs (jiaoqu) in such cities that were subdivided into districts, (2) zhen belonging to cities not subdivided into districts, and (3) zhen belonging to counties. It was necessary to differentiate among these three groups, as the inhabitants of the first group of zhen were part of the shi population. See also Kirkby, Urbanisation in China: Town and Country in a Developing Economy; and Chan, Cities with Invisible Walls. 12. There are always questions left. For instance, in a report published by the Ministry of Civil Affairs for the year 1984, 5,698 officially designated zhen (jianzhi zhen) are mentioned, and in the first comprehensive statistics by the Ministry of Public Security for the same year their number is 6,211. Most authors, however, neglected to note the information that there were also reported an additional 612 zhen in city districts and 497 in counties for which no population data existed. See also Zhongguo xianzhen nianjian 1949–1988. 13. Compare the decree by the Central Committee and the State Council concerning the norms by which to designate shi and zhen and to reduce urban periphery districts (December 7, 1963). 14. See also Ma and Fan, “Urbanisation from Below,” pp. 1627–28; or Lin and Ma, “The Role of Small Towns in Chinese Regional Development,” p. 79. 15. The people’s communes have quite a number of so-called Five Small Industries (production of agricultural machines, fertilizer, cement, iron, and coal mining). Compare Ma and Fan, “Urbanisation from Below.” See also Wu, “Economic Reform and Small Town Development in Post-Mao China.” 16. Zhongguo xianzhen nianjian 1949–1988, pp. 73–75. 17. Middelhoek, “Recent Development of Small Towns in China,” pp. 246–47. 18. We tried to use the most relevant sources because the applicable sources contain very often different data. Is valid for EGC15 to EGC20. 19. Renkou Yanjiu (Population Research), no. 3 (1986) (Chinese), Beijing. 20. Compare also Kirkby, “Dilemmas of Urbanization,” pp. 128ff.; Chan, Cities with Invisible Walls, pp. 20–21. The decree is based on the “Recommendation by the Central Committee and the State Council Concerning the Norms for the Designation of Shi and Zhen and the Curtailing of Peripheral Districts” from December 7, 1963. 21. See also Zhongguo tongji nianjian (1986). 22. The counties could themselves again be administered by a city government. 23. Compare, for example, Zhongguo tongji nianjian (1981), p. 89, and (1983), p. 103.

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24. See also Zhou, “On the Statistical Index System for Towns,” p. 56. 25. Compare also the detailed report by Cheng and Selden, “The Origins and Social Consequences of China’s Hukou System,” pp. 644–68. 26. Compare Xu, Wu, Liang, et al., Die Entwicklung der Kleinstädte in China, pp. 17ff. 27. Fang, “The Development of Small Towns in China,” p. 93. 28. Lin, “Small Town Development in Socialist China,” p. 329; Courtney, “Prosperity and Sustainability of China’s Towns,” p. 80, contains very similar material. 29. Compare Zhongguo tongji nianjian (1994) and (1996). 30. Wang, “The Development of China’s Small Towns,” pp. 159–60, is rather pessimistic as far as the future role of rural enterprises and zhen is concerned. 31. Compare Mathur, The Role of Small Cities in Regional Development, p. 21. 32. Middelhoek, “Recent Development of Small Towns in China,” p. 252. 33. See also Chang and Kwok, “The Urbanization of Rural China,” p. 149. 34. Tan, “China’s Small Town Urbanization Program,” p. 158. 35. Southall, “Introduction: Small Towns and Urbanization,” p. 150.

Notes to Chapter 3 1. At the national level we visited the following offices and ministries: National Bureau of Statistics (regarding questions of definition); Ministry of Construction (for data and information on zhen development); State Administration for Industry and Commerce (for data and information on the individual and private sector as well as on markets); Ministry of Public Security (for data and information on the migration and hukou system); Research Center of the State Council; Department for Agricultural Research, Ministry of Agriculture (for data and information on rural industry); Academy of Social Sciences: Institute of Rural Development and Institute of Sociology; Academia Sinica: Geographical Institute. The latter two departments supported our methodological approach. 2. In 1993–1994 and 2000–2001 we included in our research work the following places and their institutions: Yinchuan, capital of the so-called Autonomous Region of Ningxia, the city of Wuzhong, and the zhen Jinji; Shijiazhuang, capital of the province of Hebei, the county city of Jinzhou, and the zhen Zongshizhuang; Harbin, capital of the province of Heilongjiang, the county city of Acheng, and the zhen Yuquan; Chengdu, capital of the province of Sichuan (in which were located province and city offices), the county city of Guanghan, and the zhen Xiangyang, and also in Sichuan the county city of Qionglai and the zhen Pingle; Guiyang, capital of the province of Guizhou, Nanbei administrative seat of the county of Zunyi, and the zhen Xinzhou. Nanjing, the capital of the province of Jiangsu, the county of Wuxi, and the zhen Dongting were surveyed only in 1993–1994. 3. Our Chinese colleagues and coworkers were especially of the greatest help, as they could often go with the civil servants to their offices and borrow material for copying. As nowadays there are copy machines in almost all zhen, we were able to avoid spending our time copying unpublished data by hand. 4. Almost an equal number of traders in vegetables, clothing, and goods for every day life were interviewed. To handle the interviews in an organized fashion, we hired pupils from the upper middle schools, students, and trainees of trade administrations who had been schooled beforehand by Zhu Hongxing. 5. Social gatherings with functionaries belonging to the local institutions helpful to us were useful, especially when the meetings were not too formal, more on the humorous side, and respected local drinking habits. 6. Quanguo gesheng zizhiqu zhixiashi lishi ziliao huibian 1949–1989; Zhongguo tongji nianjian, various years; China Statistical Abstract 2001. 7. Thirteen city districts were not included. 8. Krieg, Müller, Schädler, Göcke, and Liu, “Die Provinz Jiangsu,” pp. 1072ff. 9. Hill, “People, Land and an Equilibrium Trap,” pp. 1ff. 10. Krieg, Liu, Müller, and Schädler, “Die Provinz Sichuan,” p. 998. 11. At the beginning of 1995 the county was designated as shi and given the name Xishan. 12. See He, “Cong xiaokang dao xiandaihua,” pp. 85ff. 13. Zhu, “Das System der ländlichen Märkte in der VR China,” p. 150. 14. Guanghan is subordinate to the city of Deyang. 15. Zhu, “Das System der ländlichen Märkte in der VR China,” p. 85.

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Notes to Chapter 4 1. We received detailed statistics from the Ministry of Construction only for 1992. 2. Compare various statistical yearbooks of the PRC. 3. Ma, “The Development of Small Towns,” pp. 123–24. 4. The zhen of our research area had settlement areas with numbers of inhabitants as follows: Pingle, 150 hectares with 9,400 inhabitants; Xinzhou, 40 hectares with 7,800 inhabitants; Xiangyang, 60 hectares with just 3,000 inhabitants; Yuquan, 440 hectares with 34,000 inhabitants; Jinji, 150 hectares with about 8,000 inhabitants. 5. Li, “Economic Restructuring in the Process of Economic Growth—on China’s Towns,” p. 45. 6. Hu, “Prosperity, Policy Reform and Town Development in China,” p. 92. 7. In the very quickly growing zhen in the Pearl River Delta or other coastal regions, the loss of farmland can increase dramatically. Meng, “Prosperity Development and Sustainability,” pp. 84–85, reports that in nineteen zhen studied in the special economic zone (SEZ) of Shenzhen between 1980 and 1994, farmland decreased by 15 percent. The building commissioner of the province of Sichuan, however, told us that through thoughtful land use it had so far been possible to save about 300,000 mu (20,000 ha) of farmland that otherwise would have been used as building land. Interview on August 27, 1994. 8. As the land for the most part is collective property, only the right of use can be sold. 9. See also Yu, “Analysis of Land Market Development in Towns in the Southern Jiangsu Province,” pp. 48–49. 10. Frequently the specialists in local building offices lack sufficient education; for example, in 1994 the provincial government of Sichuan encouraged about 40,000 to 50,000 cadres who were supposed to work in local building offices to get additional education, but only about 6,000 worked in local building offices. The rest in the meantime had changed over to different administrative units or taken jobs in rural enterprises, where they were better paid. (Information from August 27, 1994. See note 7 for sources.) 11. Compare also Yeh and Wu, “The New Land Development Process and Urban Development in Chinese Cities,” pp. 350–51. 12. Due to this law, since 1988–1989 offices for land administration have been established at the county level. See also information from the Office for Land Administration in the county of Zunyi, August 1994. 13. That at least was the case in the province of Guizhou. The prefecture must be asked concerning an area of 3–10 mu (0.2–0.7 ha), and the province office when more than 10 mu are involved. 14. In Qionglai the charge for the change in land use was 5–7 yuan per square meter. Another 7.5 yuan had to be paid to compensate for the loss in grain crops. 15. In Sichuan, for instance, one hundred experimental locations were selected for special treatment. Throughout the country, the one hundred leading zhen enjoy special programs. 16. Li, “Economic Restructuring in the Process of Economic Growth—on China’s Towns,” p. 45. 17. The data were acquired through discussions with building administrations, or they were taken from municipal development plans. 18. The ideas seem to be rather exaggerated when viewed against a background of the facts. The building commissioner of the province of Sichuan, for instance, discovered that when all the target numbers of shi and zhen in the province were summed, the number of inhabitants was higher than that of the present total population in Sichuan. (Information from August 27, 1994. See also note 7.) 19. Compare the report on the complete plan for Yuquan from September 12, 1993. 20. Compare the report on the development plan of Pingle in Qionglai from September 1994. The report was created by the Academy for Urban and Regional Planning of the province of Sichuan between June and September 1994. 21. For instance, for the zhen Pingle a population of 40,000 is projected for the year 2050; for the whole administrative area the projected population for the same year is just 54,266. Compare the development plan for Pingle, unpublished internal plan, duplicated 1995, pp. 7–8. 22. See also Zhou, “Urbanization of Rural China and Related Issues,” p. 25. 23. Unless otherwise specified, the data and information are taken from the analysis by Zhu Hongxing, who took part in the research project. See Zhu, “Das System der ländlichen Märkte in der VR China.” 24. Fei, “Small Towns, Great Significance,” pp. 26–27. 25. Compare China-Buchreihe Wirtschaft, pp. 304–5. 26. Taubmann and Widmer, “Supply and Marketing in Chinese Cities,” pp. 331–32.

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27. Zhu, “Das System der ländlichen Märkte in der VR China,” shows that the seemingly severe decrease in the number of markets in the middle of the 1960s could probably be explained mainly by the lack of official data for all the provinces. 28. Zhongguo tongji nianjian (1996), p. 563. 29. Ibid., p. 550. 30. In 1995, 42 percent of all wholesale enterprises at the county level and 54 percent at the township and village levels were privately owned. At the county level, however, 62 percent of all employees worked in state wholesale enterprises, as did 32 percent of all employees at the township and village levels; 24 percent of employees at the county level and 35 percent of employees at the township and village levels worked in collective enterprises. 31. Discussion with the director of the Supply and Marketing Cooperative in Jinji on August 11, 1993, and unpublished material. 32. Because in 1993 the peasants held shares worth 600,000 yuan and they had a guarantee for a yield of 12 percent, financial means had to be taken from funds for repair and construction or for welfare. 33. In Pingle and Yuquan corruption seemed to have played an important role (information in Yuquan from August 18, 1994). All SMCs during previous years had suffered from tremendous losses. In Xinzhou, for instance, the accumulated losses in 1994 came to 2.5 million yuan. 34. An interview with the local head of the cooperative on September 2, 1993; the net profit in 1992 was 21,000 yuan. 35. Two factors are responsible for the decreasing retail turnover in rural areas as a percentage of total Chinese retail turnover. First, the number of shi at the county level increased, and consequently numerous rural markets became urban ones. Over the past few years, the number of rural markets has decreased, while the number of urban markets has grown. Second, since the middle of the 1980s the purchasing power of the urban population has increased more quickly than that of the rural population. 36. Central markets correspond to Skinner’s “central market towns,” intermediate markets to “intermediate market towns,” and standard markets to “standard market towns.” Skinner, “Marketing and Social Structure in China.” 37. Zhu, “Das System der ländlichen Märkte in der VR China,” pp. 159–60. 38. The old Chinese calendar corresponded with the moon phases and comprised twelve months, each with 29 or 30 days. As the year consequently had only 354 days, after a certain period of years a thirteenth month had to be added. 39. In 1994, 225 traders were interviewed. 40. In October 1994, the market in Xinzhou had 1,012 stalls and traders. 41. Fan, “Economic Opportunities and Internal Migration,” pp. 42–43. 42. Compare Chang, “The Floating Population,” pp. 197ff. 43. Ibid. 44. See Taubmann, “Socio-Economic Development and Rural-Urban Migration in China,” pp. 165–66. 45. Tabulation of the 1990 Population Census. Guowuyuan renkou pucha bangongshi/Guojia tongjiju renkou tongjisi, Zhongguo 1990 nian renkou pucha ziliao, p. 152. 46. The 1990 census defines migrants somewhat differently from the 1987 survey. In addition to the migrants who had also changed their hukou, the census includes only those who had left the place where they had been registered more than one year before the date of the census, while the 1987 survey includes those who either had migrated in connection with a hukou change or had left the place of their permanent registration at least six months before the survey. 47. Liu, Wo guo yanhai diqu xiao chengzhen jingji fazhan he renkou qianyi, p. 133. 48. Research Group on Annual Analysis of Rural Economy, Green Report, p. 110. The survey was of 14,343 households in 600 counties belonging to twenty-six provinces. Strangely enough, a publication that also refers to this survey mentions only 12,673 households in 442 counties belonging to twenty-six provinces. See Li and Han, “Waichu laodongli de nianling jiegou he jiaoyu shuiping,” pp. 10–14. 49. Nongcun shengyu laodongli liudong he laodongli shichang xiangmu yanjiuzu, “28 ge shi xian nongcun laodongli de diqu liudong,” pp. 19–28. This survey was initiated by the Economic Commission of the Chinese People’s Political Consultative Conference, the Development Research Center under the State Council, and the Chinese Society for Research and Opening Up of Rural Labor Resources. The sample was carried out in twenty-eight counties/towns. No exact information exists on the range of this sample survey.

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50. These samples were gathered by the Chinese Academy for Social Sciences (CASS) between 1978 and 1986. The data published by Gu are almost identical to the data on Table 2 in Shi, Nongcun shengyu laodongli de liudong wenti. Shi refers to a survey by CASS in 222 villages, 84 townships, and 59 counties in 11 provinces. Gu and Jian (eds.), Dangdai Zhongguo de renkou liudong he chengshihua. 51. Gongren ribao, July 25, 2001. 52. Ministry of Public Security, National Statistical Data on Temporary Population, pp. 2–3. 53. In 1993 161.9 million people (among them only about 33 million nonagrarian inhabitants) in zhen subordinate to shi and 326.5 million people (among them 66.83 million nonagrarian) subordinate to counties. Source: Unpublished data by the Ministry of Construction. 54. Zhongguo renkou tongji nianjian (1999), pp. 353ff. 55. The county towns were compiled from a total of 6,211 places for which data existed for 1984. The same data for 1992 were taken from unpublished material from the Ministry of Public Security. 56. According to unpublished data from the Ministry of Public Security, the increase due to natural population growth and net migration came to 4.11 million in 1992, 31 percent of that because of net migration. 57. The population figure of 134.47 million inhabitants for 1984 comprised 6,211 zhen. As there were no data for 497 zhen, the number of inhabitants for a total of 6,708 zhen was proportionally extrapolated. The result was an estimated 145 million people, which served as the basis for the following calculation. 58. In 1992 only 0.4 percent of the inhabitants in county-owned zhen did not have a permanent hukou. Ministry of Public Security, unpublished data. 59. Taubmann, “Räumliche Mobilitaet und sozio-ökonomische Entwicklung in der VR China seit Beginn der 80er Jahre,” pp. 161ff. 60. Dongting had approximately 32,900 inhabitants in 1978, and approximately 39,700 in 1992. 61. The population of Jinji increased from 25,200 in 1985 to 30,540 in 1992; Xinzhou had a population increase from about 41,800 people in 1970 to 64,770 in 1993. All data are from local police stations. 62. After extensive discussions, the police were willing to give us the original documents for inspection and evaluation. However, many registration forms were incompletely filled in. We are very grateful to Mr. Fan Gongzheng for all the trouble he took to analyze the migration data. 63. Mallee, “Rural Mobility in Seven Chinese Provinces.” 64. Ministry of Public Security, National Statistical Data on Temporary Population, pp. 6ff. 65. See also Chang and Kwok, “The Urbanization of Rural China,” p. 147. 66. Preliminary Regulation for the Administration of Temporary Inhabitants in Towns. Ministry of Public Security, July 13, 1985. 67. Office for Public Security, Dongting, interview with head of local office on September 4, 1993. 68. Dongting police station, September 1993. 69. Mallee’s data are more representative for the average and more-developed rural regions in China. See Mallee, “Rural Mobility in Seven Chinese Provinces,” p. 9. 70. Chang, “The Floating Population,” p. 198. 71. Ministry of Public Security, National Statistical Data on Temporary Population, pp. 2ff. 72. See Wuxi Xianbao, September 6, 1993. 73. Information from the government of the county of Zunyi, September 28, 1994. 74. In 1992 peasants from surrounding villages within the administrative area of the zhen had to pay 2,500 yuan for this hukou transfer, peasants from other regions 5,000 yuan, managers of collective enterprises, however, only 2,000 yuan. The sale of a nonagrarian hukou had been allowed by the superior city of Guanghan within a quota of 2,000 permitted transfers of household registrations for 1992. This permission was outlined in a document by the provincial government, allowing such exceptions for certain sample groups. 75. Office for Public Security in Xiangyang, interview with the head of the local office on September 6, 1994. The superior city of Guanghan then started an advertising campaign for Xiangyang in an official document from July 20, 1994, by pointing out the good infrastructure and that peasants, if fulfilling the conditions, “can receive the same treatment as urban residents regarding medical care, education and services.” The peasants even had the chance to transfer their hukou to other townships. 76. Compare, for example, State Council Circular for the Strict Control of Excessive Increase in the Transformation of Agricultural Population into Non-Agricultural Population, October 31, 1989. In the appendix a planned quota for the whole of China is mentioned: 3.5 million for 1989; 2.3 million for 1990. 77. Information from the Ministry of Public Security, Beijing, July 21, 1993.

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78. All the following data are based on information we received from the offices in charge during our fieldwork in 1993 and 1994. 79. More cases are listed in Document 21 of the city of Wuzhong in 1993. 80. See, for example, Zunyi Wanbao, October 7, 1994.

Notes to Chapter 5 1. See Abramowitz, “The Privatization of the Welfare State,” p. 257; Vickers and Yarrow, “Economic Perspectives on Privatization,” p. 114; Betz, “Die Privatisierung von Staatsbetrieben in Entwicklungsländern”; Lütkenhorst and Reinhardt, “The Increasing Role of the Private Sector in Asian Industrial Development,” pp. 221ff. 2. See, for example, Lundqvist, “Privatization,” pp. 4ff. 3. Pei, “When Reform Becomes Revolution,” pp. 101–2. On the chengbao system and the issue of ownership, cf. Chen, Chinese Firms between Hierarchy and Market. 4. On this development, see Jamann and Menkhoff, “Make Big Profits with a Small Capital”; Heberer, “Die Rolle des Individualsektors für Arbeitsmarkt und Stadtwirtschaft in der Volksrepublik China”; Kraus, Private Unternehmerwirtschaft in der Volksrepublik China. 5. The reason is to be found in the decrease of cultivated land per head since the 1950s. The collective economy for some time had hidden the inefficient employment of a surplus of agrarian labor; de-collectivization, however, brought this problem to the fore. In the 1920s, the Russian economist A.V. Chayanov pointed out that there exists a direct correlation between a decrease in cultivated land and an increase in private handicraft and trading activities. See Chayanov, The Theory of Peasant Economy, p. 40. 6. See Pei, “When Reform Becomes Revolution,” pp. 155–56. 7. For this development see Heberer, “Die Rolle des Individualsektors für Arbeitsmarkt und Stadtwirtschaft in der Volksrepublik China.” See Renmin Ribao, June 29, 1988, for the private enterprise law. 8. Zhongguo Gongshang Bao, April 19, 2002. 9. When we refer in the following discussion to the private sector, we include all private businesses. The official Chinese data differentiate between “individual laborers” and “private enterprises.” As both forms of business are part of the private sector, such a definition only veils the facts. But it makes sense to differentiate in the following between a private small-business sector and a private large-business sector. Because official Chinese statistics draw a line between firms with more than or less than eight employees, we have to adjust to be able to characterize small and large businesses, while remaining aware of this division’s scientific dubiousness. 10. See Vickers and Yarrow, “Economic Perspectives on Privatization,” pp. 111ff. 11. Jiang, Xin chao yi zu, p. 128. 12. Yuan, Zhongguo siying jingji, p. 31. 13. See Jiang, Xin chao yi zu, pp. 137ff. 14. See, for example, Ho, Rural China in Transition, pp. 196–97. 15. A tabular survey on unequal treatment can be found in Yuan, Zhongguo siying jingji, pp. 81ff. 16. For a detailed study on the private sector and private entrepreneurship, see Heberer, Unternehmer als Strategische Gruppen. 17. Cf. Zhongguo Gongshang Bao, October 7, 1993; Gongren Ribao, April 14, 1995. 18. The party secretary of Wuxi suggested renting out or selling inefficient enterprises; see Wuxi Ribao, September 12, 1993. 19. Gongren Ribao, April 14, 1995. 20. Cf. Zhongguo Gongshang Bao, August 4, 1993, and August 25, 1995. 21. Zhongguo Gongshang Bao, July 7, 1995. 22. For a detailed case study, see Yang, “Reshaping Peasant Culture and Community.” 23. Cf. Zweig, Freeing China’s Farmers, pp. 203ff. 24. Li and Bao, Zhongguo siying jingji nianjian 2000, pp. 370ff. 25. Lu, “Xin zibenjia de zhengzhi yaoqiu,” pp. 4–5. 26. Tyson and Tyson, Chinese Awakenings, p. 54. 27. Compare Heberer, “The Impact of Ethnic Entrepreneurship on Social Change and Ethnicity.” 28. In 1994 the income tax for state- and collective-owned enterprises came to 33 percent, but for private enterprises, 35–40 percent.

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29. According to information provided by the Institute of Sociology, Sichuan Academy of Social Sciences, August 30, 1994. 30. Kornai, Economics of Shortage. 31. Zhongguo tongji nianjian (1995), pp. 333, 365. All figures are in current prices. Even if the price gap between agricultural and industrial products has widened further, the growing divergence is nevertheless remarkable. 32. See Park, “Trade Integration and the Prospects for Rural Enterprise Development in China,” pp. 2ff. 33. China’s Emerging Private Enterprises: Prospects for the New Century. 34. The introduction of the shareholding cooperative system (gufen hezuo zhi) is still connected with many open questions. In any case, these shares are different from those in the Western world. See Vermeer, “Between Capitalism and Collectivism,” p. 5. 35. We assume that this process of privatization is limited to the TVEs, since the number of TVEs in the Zhongguo tongji nianjian is nearly identical with the total number of collective and private enterprises since 1984 (published in Nongyebu, xiangzhen qiye si, Xiangzhen qiye tongji ziliao). 36. Zhongguo xiangzhen qiye nianjian (2000). 37. A distinction was made between family business (jiating fuye) and collective ancillary business (jiti fuye).See Nongyebu, xiangzhen qiye si, Xiangzhen qiye tongji ziliao, p. 2, and Schädler, Provinzporträts der VR China, pp. 412–13. 38. A 1960 central government regulation was responsible for the setback of rural industry. It prescribed that rural enterprises had to concentrate only on agricultural products. See Nongyebu, xiangzhen qiye si, Xiangzhen qiye tongji ziliao, p. 3. 39. Ibid., p. 4. The number is rather small. There is no reliable yearbook that gives data for the period before 1978. In 1978 the number of people’s commune and brigade enterprises had already increased to 1.52 million. 40. Initiative of the State Council during the North Chinese Agricultural Conference, 1970. See also Islam, “Growth of Rural Industries in Post-Reform China,” pp. 4–5. 41. Krug, “Zurück zur Allmeind,” p. 85. 42. Ibid. 43. See also Zhang, “The Recent Reform in Chinese Rural Collective Enterprises,” pp. 2–3. 44. Schädler, Provinzporträts der VR China, p. 159; Islam, “Growth of Rural Industries in Post-Reform China.” 45. Islam, “Growth of Rural Industries in Post-Reform China,” p. 7. 46. See Li, “Die zentral-regionalen Beziehungen und die regionale Wirtschaftsentwicklung in der Volksrepublik China.“ 47. Schädler, “Rural Non-Agricultural Activities in the Period of Stagnation and Prospects for Future Development,” p. 160; Li, “Die zentral-regionalen Beziehungen und die regionale Wirtschaftsentwicklung in der Volksrepublik China.” 48. In Jiangsu province in 1989 alone about 700,000–800,000 rural workers (among them 500,000 construction workers) returned to agriculture. Conversation with Professor Zou Nongjian, Academy of Social Sciences of the Province of Jiangsu, August 23, 1993. 49. Islam, “Growth of Rural Industries in Post-Reform China,” p. 15. 50. Data from the Ministry of Agriculture. 51. See Park, “Trade Integration and the Prospects for Rural Enterprise Development in China,” pp. 5ff. 52. Li and Rozelle, “Privatization Rural China: The Role of Screening, Learning, and Contractual Innovation on the Evolution of Township Enterprises.” 53. Park, “Trade Integration and the Prospects for Rural Enterprises”; Zhongguo xiangzhen qiye nianjian. 54. In China, as elsewhere, GNP is defined as the sum of the gross output of all sectors (material as well as nonmaterial production) minus intermediate input. 55. The rural social value of production is defined as the sum of the gross output of agriculture, industry, transport, building industry, and trade, minus intermediate input. 56. The correlations are significant at the level of 0.001. The calculation is based on the value per head (GNP) per employee in rural areas (rural national product) and per employee in rural industry (gross output of rural industry). The values of the provinces were correlated. 57. The following data are taken from Zhongguo tongji nianjian (1994), pp. 85, 362; Zhongguo nongcun tongji nianjian (1994), pp. 333–34; Zhongguo tongji nianjian (2001), p. 364; and statistical material for

NOTES TO CHAPTER 5

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rural enterprises from the Ministry of Agriculture, various years. The figures for the employees in rural collective and private enterprises between 1995 and 2000 published by the Ministry of Agriculture are very similar to the figures for the rural labor force outside agriculture, published in the Statistical Yearbooks of China (Zhongguo tongji nianjian). In 1994 and prior years the figures for the employees in private enterprises were very similar to the figures for employees in village enterprises. 58. World Bank, “Rural China,” p. 88. 59. Zhongguo tongji nianjian (2002). 60. Zhongguo nongcun tongji nianjian (Rural Statistical Yearbook of China) has been available for only a few years, its arrangement of data changing each year. Zhongguo nongcun gongye nianjian (Yearbook of the Rural Industry in China) does not cover the entire period either. Xiangzhen qiye tongji ziliao (Statistical Data on Rural Enterprises), published by the Ministry of Agriculture, is meant for internal use only and therefore not continuously available. The same is true for Zhongguo xiangzhen qiye nianjian. 61. Watson and Wu, “Regional Disparities in Rural Enterprise Growth,” p. 76. 62. Compare Taubmann, “Das Städtesystem der Volksrepublik China.” 63. Research Centre for the Development of Rural Economy in the Province of Jiangsu. Interview with local leaders on August 20, 1993. It is reported, for instance, that township governments especially impede private enterprises by cutting off their energy supply or by other measures. 64. China’s Emerging Private Enterprises. 65. The correlation coefficients for the relationship between enterprise size and gross output, taxes, and fixed assets per employee are as follows: township enterprise, 0.86, 0.68, 0.66; village enterprise, 0.83, 0.83, 0.58*; enterprises below the village level, 0.60, 0.49*, 0.32+. Note: * = significance on the level of 0.01; + = no significant connection. 66. Watson and Wu, “Regional Disparities in Rural Enterprise Growth,” p. 85. 67. Nyberg and Rozelle, Accelerating China’s Rural Transformation. 68. The others are the Industry and Trade Bank, the Construction Bank, and the Bank of Communications. 69. Zhang and Ronnås, “The Capital Structure of Township Enterprises,” pp. 11–12. 70. Zhongguo tongji nianjian (1995), p. 575; see also Ronnås and Sjöberg, “Township Enterprises.” 71. During our field research in 1993–1994 we came across such facts. See also Zhang and Ronnås, “The Capital Structure of Township Enterprises,” pp. 18–19. 72. See Tang and Xu, “Jianli daikuan fengxian jijin, ruohua xiangzhen qiye xindai fengxian,” pp. 44–45. 73. The balance was distributed as follows: 40.5 percent into housing construction, 24.4 percent into public buildings, and 10 percent into the infrastructure. See Study Group, Research Department under the State Council, Xiao changzhen de fazhan zhengce yu shijian. 74. Zhang and Ronnås, “The Capital Structure of Township Enterprises,” p. 34. 75. Ronnås, “Township Enterprises in Sichuan and Zhejiang,” Table 10. 76. This at least is the argument given by Edlund, “Market Fragmentation and Rural Industrialisation in the People’s Republic of China,” p. 6. She seems to simplify the situation; however, we could make similar observations in more advanced regions. 77. This statement is only supported by data from 1992. The credit load (credits at the end of the year as a percentage of the net fixed assets plus current assets) was 46.5 percent for township-owned enterprises and 30.4 percent for village firms. Zhongguo xiangzhen qiye tongji nianjian (1993) and (2000). 78. During our field studies we sometimes came across data different from those published by Chinese offices. 79. Independent of the falsifications by the enterprises themselves, it is doubtful whether the published data, though just for internal use, are correct. According to the information provided by the Administrative Office for Rural Enterprises in the province of Jiangsu, the percentage of enterprises operating in the red among the TVEs for the province in 1992 was 8.1 percent, and in 1991, 17.3 percent. Representative from the Administrative Office for Rural Enterprises, Jiangsu, interview with the authors, August 23, 1993. 80. Sichuan sheng gongyeting, Gongye xiaoyi de pingjia, May 1994; Zhang and Ronnås, “The Capital Structure of Township Enterprises.” 81. Sichuan sheng gongyeting, Gongye xiaoyi de pingjia, Heilongjiang sheng tongjiju, Heilongjiang tongji nianjian (1994), Ningxia huizu zizhiqu tongjiju, Ningxia tongji nianjian (1993), and Jiangsu tongji nianjian (1993). 82. See also Oi, “Local State Corporatism.”

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83. Ibid., p. 2. 84. See ibid.; Liu Jianghong, Economic Research Centre of the Province of Ningxia, interview with the authors, July 28, 1993. Discussions with enterprises in Xiangyang in September 1994 led to similar findings. 85. Sjöberg and Zhang, “Soft Budget Constraints,” p. 26. 86. Islam and Jin, “Rural Industrialisation,” p. 17. 87. Representative from the Society for Industry (gongye gongsi), Jinji, interview with the authors, August 9, 1993. The village-owned enterprises only pay the fees for administration; part of the profit is transferred to the village committees. 88. In Dongting, Jinji, Zongshizhuang, Pingle, and Xiangyang these three taxes made up between 83 and 91 percent of the industry and commerce tax. Only in Xinzhou did they amount to 75 percent, as there the private economy plays an important role. In Yuquan these taxes reached just 64 percent, among other reasons, because of the relatively high percentage of the tax for city construction and support, which is also paid by state enterprises and more or less remains in the zhen. In Jinji and Yuquan the percentage of industry and commerce tax paid by rural enterprises fell to between 17 and 23 percent, as in both townships there were quite a number of state enterprises. Only part of the tax for city construction and support, paid by state enterprises, remained in the zhen; the other taxes had to be transferred to superior offices. 89. See also Zhang, Liu bai sanshi jia, p. 14. 90. As, for example, in a management contract from August 20, 1994, between the Society for Industry in the zhen of Yuquan and the brewery belonging to the zhen. This contract has already been renewed for the third period of time. 91. Compare Bureau for Township Enterprises in the City of Qionglai, September 14, 1994. 92. In a contract from February 24, 1993, between an enterprise producing shoes out of textiles and the township government of the zhen of Xinzhou, it was established that 60 percent of the post-tax profits were to remain in the enterprise and 40 percent had to be distributed among the workers. 93. Information provided by the local party secretary, August 8, 1993. 94. As a rule, the amount for final distribution is rather low, as beforehand there might still be a number of deductions taken off the surplus profit. 95. Obviously, these companies have nothing in common with those in the Western world. It would be better to use the term “cooperatives.” 96. Office for Rural Enterprises in the city of Acheng (Harbin), interview with the authors, August 12, 1994. Of the total of 15,994 enterprises, 120 were changed into stock corporations. When an enterprise is transferred into a stock corporation, the fixed assets, equipment, raw materials, and merchandise inventory are valued and divided among the partners, that is, the enterprises themselves, the township governments, and the workers. Usually the former manager is appointed chairman of the supervisory board. 97. Clegg, “Changing Patterns of Ownership and Management in China’s Rural Enterprises,” p. 5. 98. Xu Kanglian, an employee of the Administrative Office for Rural Enterprises in the province of Jiangsu, interview with the authors, August 21, 1993. 99. For some enterprises there were no data available. 100. These results correspond with those of other surveys. Compare, for example, Zhang, Liu bai sanshi jia, pp. 55ff. 101. Pang, “An Analysis of the Role of Cooperation between Urban and Rural Industries,” pp. 8ff 102. Xu Kanglian, an employee of the Administrative Office for Rural Enterprises in the province of Jiangsu, interview with the authors, August 21, 1993. 103. Sun Yuting, Office for Rural Enterprises of the city of Harbin, interview with the authors, August 8, 1994. 104. Xu Yuanmin, Institute for Economics, Academy for Social Sciences of the province of Jiangsu, interview with the authors, August 23, 1993. 105. Information provided by the Office for Rural Enterprises of the city of Acheng, August 11, 1994. 106. Information provided by Mr. Yuanfeng, Economic Research Centre of the province of Jiangsu, August 23, 1993. 107. Ronnås and Sjöberg, “Township Enterprises,” p. 11. 108. Ibid., Table 5.

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109. Probably township- and zhen-owned enterprises primarily have the chance for cooperation with state enterprises and institutions. 110. Most rural enterprises that worked on the basis of cooperation in 1992 and 1999 were located in the six provinces of Guangdong, Shandong, Hebei, Jiangsu, and Zhejiang, and Shanghai. That shows the superior situation of enterprises in the eastern, more-developed provinces. See, for example, Xiangzhen qiye tongji ziliao (1993), pp. 443ff. 111. Often the data for the same subject varied when they came from different offices. As a rule, we decided to use the most plausible data available. For example, in his introductory lecture on the zhen, the party secretary of Jinji mentioned seventeen zhen-owned enterprises with 1,409 employees (August 2, 1993). According to an internal list of the society for industry, however, there existed only fifteen enterprises with 796 employees. 112. This figure has to be taken with a grain of salt, for officially only one enterprise had negative results. 113. Hüssen, Ländliche Industrialisierung in der Volksrepublik China seit 1978, pp. 11ff. 114. He Miangyou, Research Centre for the Development of the Rural Economy, province of Jiangsu, interview with the authors, August 20, 1993. 115. Ronnås, “Township Enterprises in Sichuan and Zhejiang,” Table 3. 116. Guan Xing, Office for Rural Enterprises in the province of Heilongjiang, interview with the authors, August 25, 1994. 117. Presentation at the Planning Commission of the city Guanghan (Sichuan), September 2, 1994. 118. According to additional internal documents of the society for industry, only 662,000 yuan (studied by the authors on August 9 and 10, 1993). The difference could not be explained by the local employees. 119. The following discussion is based on very intensive research work and the analysis of internal enterprise data in August 1993. 120. The production facilities were to be imported from Finland and Italy. To realize this plan, the central government had asked the North Europe Bank for a credit of US$4.7 million; the Agricultural Bank promised a total credit of 14.5 million yuan. During our stay in August 1993 the Agricultural Bank gave approval for a further 6 million yuan out of the granted credit volume, though there was no plan to start production. 121. Management of the Ningxia Xiajin Food Trade & Processing Co. Ltd., interview with the authors, August 7, 1993. 122. The credit volume was 3.93 million yuan. In 1992, 80,000 yuan had to be paid just as interest on defaulted payments. All information provided by the management or by the authors’ analysis of internal balance sheets, August 12, 1993. 123. Besides the main product of Furfural (C4H3OCHO), there were also sideline products, such as Na, NaHO, and H4SO4. 124. The enterprise exported its entire production with the help of the Export-Import Society for Chemicals of Ningxia Autonomous Region. Due to the lower prices on the world market in 1992–1993 there were considerable marketing difficulties, and this rural enterprise had no chance to export directly. 125. When comparing the internal and officially available data of the society for industry in Xiangyang we have found only slight deviations. 126. There are still some state enterprises that have, however, no financial connection with the local townships. Sometimes donations are requested. 127. Compare, for the following, Jiang, “Rural Industrialization and the Environment in China,” pp. 34–35. 128. See also Li, “Rural Enterprise Development,” pp. 6–7. 129. Jiang, “Rural Industrialization and the Environment in China,” pp. 34–35. 130. Ibid. 131. See also Pei, “Institutions, Rural Industry and China’s Economic Transformation,” p. 19. 132. China Labor Statistical Yearbook (2002). 133. Chen and Hu, “China’s Rural Industrial Development,” gives a comprehensive and critical survey of the diverse estimations concerning this question. 134. See also Saith, “From Collective to Markets,” pp. 225–26. 135. Indirectly also by Islam and Jin, “Rural Industrialisation,” p. 18.

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136. Ibid., p. 229. 137. Field research in Zongshizhuang (Hebei), 1993. 138. Odgaard, “Labour Conditions in Rural Private Enterprises,” p. 174. We ourselves could not verify this observation by Odgaard. 139. Compare Asian Regional Team for Employment Promotion (ARTEP) and ILO et al., “Re-absorption of Surplus Agricultural Labour into the Non-agricultural Sector,” or Ronnås, “Township Enterprises in Sichuan and Zhejiang.” 140. For details, see Chapter 3, “The 1993–1994 and 2000–2001 Case Studies: Zhen Regional Conditions of Development.” 141. Other partners were the Asian Employment Programme of the International Labour Organization (ILO) and the Asian Regional Team for Employment Promotion (ARTEP). See Ronnås, “Township Enterprises in Sichuan and Zhejiang”; and Edlund, “Market Fragmentation and Rural Industrialisation in the People’s Republic of China.” 142. As the data come from management, they might be unreliable. 143. See Wu, “Rural Enterprise Contributions to Growth and Structural Change,” pp. 93–147. The study includes thirty rural enterprises in each of the three counties. The Rural Development Institute (RDI) of the Chinese Academy of Social Sciences follows similar questions. 144. Wu, “The Rural Industrial Enterprise Workforce,” Table 6.2. 145. Ibid. 146. See Islam, “Rural Non-farm Activities and Employment.” Unfortunately the survey year (probably 1988 or 1989) is not mentioned. 147. For a number of the surveyed zhen, census data did not exist. Of course, one has to take into consideration that the average age of the employees was below that of the whole population. 148. Refer to a sample contract in an enterprise for basic chemical materials in Dongting, 1993. 149. Refer to a sample labor contract in a textile factory in Dongting for contract and temporary workers, 1993. 150. Refer to a sample labor contract in a dye enterprise and a weaving mill in Zongshizhuang, 1993. 151. Wu, “The Rural Industrial Enterprise Workforce,” p. 123. 152. Ibid. 153. Manager of a crankshaft factory in Zongshizhuang, interview with the authors, October 2, 1993. 154. As the wages for the first three months are considered a deposit and the wages in general are only paid at the end of three months, in the worst case an employee will receive his first payment for three months after half a year. Information provided by the management of a textile dye factory in Zongshizhuang, October 3, 1993. 155. Mallee, “Rural Mobility in Seven Chinese Provinces,” p. 23. 156. Wu, “The Rural Industrial Enterprise Workforce,” p. 124. 157. See also Pei, “Institutions, Rural Industry and China’s Economic Transformation,” p. 19. 158. See Asian Regional Team for Employment Promotion (ARTEP) and ILO et al., “Re-absorption of Surplus Agricultural Labour into the Non-agricultural Sector,” pp. 19–20. 159. Ibid. 160. Islam, “Rural Non-farm Activities and Employment,” p. 10.

Notes to Chapter 6 1. Tsang and Cheng, “China’s Tax Reform of 1994,” pp. 769–70, and Tseng et al., Economic Reform in China, pp. 21ff. 2. Tsang and Cheng, “China’s Tax Reform of 1994,” p. 778. 3. Wong, “Fiscal Reform and Local Industrialisation,” p. 197. 4. Jia and Wu, Xiandai xiangzhen guanlixue. 5. See, for example, Xu, Cunzhen jianshe guanli wenda, pp. 155 ff. The urban maintenance and construction tax (chengshi weihu jianshe shui) in the city proper (shiqu) was as high as 7 percent of the three different kinds of taxes mentioned, compared to 1 percent in the rural areas (townships, villages). In addition, these differences induced many township administrations to apply for the status of an officially recognized town (zhen). After the tax reform of 1994, this tax became an independent form of tax; in other words,

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307

it is now taken from gross income or turnover income. In the future the new tax will account for up to 0.5 percent in cities proper, 0.4 percent in county-level cities and towns, and 0.3 percent in townships and villages. The tax’s name was changed to “urban and rural maintenance and construction tax” (chengxiang weihu jianshe shui). See also Wen et al., Jiushi niandai Zhongguo shuishou zhidu zhuanhuan yaodian. 6. See “Expenditures and Revenue of the State Budget,” 1993. Internal paper (Beijing, 1992). 7. The agricultural taxes consist of the three so-called local taxes (agriculture and cattle-rearing tax, special agricultural and forest products tax, contract tax) and the agricultural utility tax, 30 percent of which is paid to the central government and 70 percent to the local administration. The local level consists of townships, counties, cities, prefectures, and provinces, whereas the central level includes only the central government. See also “Expenditures and Revenue of the State Budget” (Beijing, 1992). 8. Tseng, et al., Economic Reform in China, appendix 5. 9. In Dongting, for instance, the rural collective enterprises pay 76 percent of the budget revenue, in Yuquan more than 90 percent. 10. In Jinji, Xiangyang, and Yuquan, for instance, the transferred profits to the local gongye gongsi cannot be found in the town government’s budget. One reason may be that these fees will be used for regional economic development, for example, the support of enterprises with low profits or the establishment of new firms. 11. Unfortunately, we were unable to gather any data in Xiangyang. 12. Hsu, “Central-local Relations in the PRC under the Tax Assignment System.” 13. Agricultural taxes are usually paid with grain (at set prices), not with cash. In Sichuan Province in the summer of 1994 significant problems arose; because of the bad harvest, the peasants were not willing to deliver their quota of grain at the fixed low price. 14. The analysis of unpublished papers of the townships has shown that a great number of villages are heavily taxed. In the budget of Yuquan, for instance, only 92,000 yuan of agricultural taxes were to be found; however, peasant households, villagers’ groups, and village enterprises had paid almost 700,000 yuan in taxes. 15. See www.cbw.com/business/chinatex/. 16. Research Centre for China’s Rural Development in Central China Normal University, several interviews with colleagues in Beijing, 1994. 17. Official documents provided by the county and zhen governments. The so-called above-target revenue redistribution key is relevant only for such townships/zhen whose yearly industrial and commercial tax is above 500,000 yuan. In all other cases, the above-target amount is divided between the county (60 percent) and township (40 percent). The above-target revenue of taxes for special products and for cattle rearing is divided 50-50. In case the latter taxes do not reach the set quota, the missing amount is taken from the above-target revenue of the industrial and commercial tax. 18. Interview with representatives from the tax office in Xiangyang, September 6, 1994. 19. Information provided by the finance office in Pingle, September 19, 1994. 20. Tseng et al., Economic Reform in China, p. 34. 21. Kojima, “The Growing Fiscal Authority of Provincial-Level Governments in China,” p. 345.

Notes to Chapter 7 1. Such a comparison was made by Tsao and Worthley, “Chinese Public Administration,” pp. 169ff. 2. Cf. Renmin Ribao, August 19, 1993. 3. Cf. Caiden, Administrative Reform Comes of Age, p. 83. 4. Lan, Zhongguo zhengfu da caiyuan, p. 27; Zhang and Chen, Zhongguo rencai da liudong, p. 141. For comparison: The Qing court in 1819 needed only one official per 250,000 inhabitants, in other words, merely 20,000 officials for the administration of the entire country. Cf. Whyte, Small Groups and Political Rituals in China, p. 19. 5. Lan, Zhongguo zhengfu da caiyuan, p. 17; Hu, “Wo guo zhengfu guimo de xitong fenxi.” 6. Su and Sai, Kanke 14 nian, p. 70. 7. Lan, Zhongguo zhengfu da caiyuan, pp. 20–21. 8. Information provided by a leading member of the Communist Youth League of Yanyuan county, August 29, 2000. 9. Cf. Far Eastern Economic Review, April 1, 1993, p. 13.

308

NOTES TO CHAPTER 7

10. Renmin Ribao, April 11, 1993. 11. Li and Zi, Rong, rong, rong, pp. 195ff. 12. See Lo, “Urban Government and Administrative Reform in Deng’s China,” p. 13. 13. Parkinson, Parkinsons neues Gesetz, pp. 11–38; See also Tsao and Worthley, “Chinese Public Administration,” p. 171. 14. Lan, Zhongguo zhengfu da caiyuan, p. 38. 15. Cf. Nee, “Institutional Change and Regional Growth,” pp. 6ff. 16. By pressure groups we mean groups that without being political parties in the interest of political change place pressure onto the government. Compare Castles, Pressure Groups and Political Culture, pp. 1ff. 17. Compare Walder, “The County Government as an Industrial Corporation.” 18. Renmin Ribao, July 20, 1993, stated that in Wuxi county those cadres accounted for 90 percent. See also Ruf, Cadres and Kin, pp. 122ff. 19. China Daily, August 18, 1993. 20. Cf. Baokan Wenzhai, August 30, 1993. 21. Cf. Heberer, Korruption in China. 22. Gongren Ribao, January 12, 1992; Liu, “Wo guo de fei gongyouzhi qiyejia qunti jiben xianzhuang fenxi,” p. 15. 23. The newspaper in Wuxi county reported in September 1993 that hundreds of private entrepreneurs had been appointed directors of collectively owned enterprises or zhen and village cadres. Wuxi Xian Bao, September 13, 1993. 24. Diaz and Potter, “Introduction: The Social Life of Peasants,” p. 164. 25. Cf. Madsen, Morality and Power in a Chinese Village; Shue, The Reach of the State; Oi, State and Peasant in Contemporary China; Esherick and Rankin, Chinese Local Elites and Patterns of Dominance; Liu, “Reform from Below”; Oi, Rural China Takes Off. 26. Cf. Burns, “Civil Service Reform in China,” p. 45. 27. In Renmin Ribao, August 19, 1993; see also Zhou, Guojia gongwuyuan zhidu tonglun, pp. 57–58; Tong, Guojia gongwuyuan guanli, pp. 164ff. 28. The secretary-general of the CCP and the members of the Standing Committee of the Politburo belong to grade 1; members and alternate members of the Politburo and of the Central Committee’s Secretariat and of the Secretariat of the Central Discipline Inspection Commission belong to levels 2 and 3; party secretaries of provinces belong to grades 3 and 4; party secretaries of towns and townships belong to grades 9–12; and so forth. Cf. Burns, “Civil Service Reform in China,” p. 45. 29. State cadres are endowed with an urban hukou, are appointed by the organizational departments of the respective levels, and receive salaries, bonuses, and social welfare allowances from the state. These allowances are part of the regular budgets of the zhen, whereas the salaries and bonuses of cadres with rural hukou have to be paid by extra-budgetary means. 30. A significant example for such differences even in small matters was the case of office chairs in the 1980s: high cadres were entitled to a leather revolving chair, cadres at a middle level to a soft cushioned seat with springs, lower cadres to a wooden chair with a pad, and the lowest grade to only simple wooden chairs. 31. Cf. Navarra, China und die Chinesen, pp. 53ff.; Marsh, The Mandarins, pp. 206ff.; Bodde and Morris, Law in Imperial China, p. 114. 32. Zhongguo Xinxi Bao, August 16, 1993. 33. Yin, Jigou gaige qi shi lu, pp. 193–94. 34. Shirk, “The Chinese Political System and the Political Strategy of Economic Reform,” pp. 60ff. 35. Zhu, “Xianji dangzheng fenkai xuyao renzhen yanjiu he jiejue de jige wenti,” pp. 2–3. 36. Renmin Ribao, September 3, 1993; and Zuzhi Renshi Bao, August 26, 1993. 37. Guanliqu cadres were appointed by the zhen leadership and administered four to five villages. 38. Research findings of Chinese social scientists come to different conclusions: 73 cadres at the xiang and zhen levels. See Jiang, Lu, and Dan, Shehui lanpishu, p. 313. The actual numbers of cadres might be significantly higher than the official statistical data. 39. Such matters were confirmed by Zhang, Bai, and Wu, Zhongguo xiangzhen zhengquan jianshe, pp. 63–64. 40. See, similarly, Whiting, Power and Wealth in Rural China, pp. 100ff. and 115ff. 41. Cf. Schurmann, Ideology and Organization in Communist China, pp. 404ff.

NOTES TO CHAPTERS 7 AND 8

309

42. Qiushi, the theoretical journal of the party, mentioned particularly the connection to traditional patterns. See Ran, “Liyong chuantong, zouchu chuantong”; see also Kelliher, “The Chinese Debate Over Village Self-Government”; Bai, “Cunmin zizhi.” 43. This issue is described in O’Brien, “Villagers Committees, Implementing Political Reform in China’s Villages,” pp. 36–40. Compare also Shi, Rural Democracy in China. 44. Cf. An, “Democratic Experimentation under Party Dictatorship,” pp. 33–34. 45. China Daily, August 4, 1998. 46. Cf. Jian, “Selbstverwaltung der Dorfbewohner in China,” pp. 14–17. 47. Renmin Ribao, June 25, 1998, p. 4. 48. Renmin Ribao, June 25, 1998. 49. Cf. Qu, “Cunweihui zhixuan toushi,” pp. 30–34. 50. See Li, Zhongguo jiceng minzhu fazhan baogao 2000–2001, pp. 225ff. Among the large number of publications on village elections, Li’s report presents one of the best overviews. See also Shi, Rural Democracy in China. 51. Discussion in Dongtai Village with the village administration committee, October 4, 1993. 52. Ran, “Liyong chuantong, zouchu chuantong,” pp. 34ff.; An, “Democratic Experimentation under Party Dictatorship,” pp. 149ff. 53. Zhonghua Renmin Gongheguo minzhengbu, Minzheng zhuliyuan shouce, pp. 25ff. 54. Zhang, Bai, and Wu, Zhongguo xiangzhen zhengquan jianshe, pp. 185ff. 55. Schurmann, Ideology and Organization in Communist China, pp. 410ff. 56. Cf. Nee, “Social Inequalities in Reforming State Socialism,” p. 268. 57. Renmin Ribao, October 10, 1994. 58. Renmin Ribao, May 11, 1993; Wang, “Chengzhi de cun ganbu weihe xiang ‘liao danzi’?” 59. See Lu, “Chongxin renshi Zhongguo nongmin wenti,” pp. 192ff. 60. Li and Chen, “Xiangcun zhengzhi fazhan: xianzhuang yu qianjing,” p. 12. 61. Lan, Zhongguo zhengfu da caiyuan, p. 9. 62. Renmin Ribao, November 22, 1994; Cf. the report of the Organization Department of the Central Committee of April 1995 in Yue, “Zhongguo fazhan dangyuan gongzuo lashou.” 63. Jing Bao, February 1995, p. 44. 64. Renmin Ribao, May 9, 2002, complained that fewer and fewer young people join the party. 65. Ibid. 66. Ibid. 67. Shehuixue Yu Shehui Diaocha (June 1991), p. 22. 68. Renmin Ribao, August 7, 1993. 69. Cf. Far Eastern Economic Review (May 12, 1994), p. 45. 70. See Sichuan Ribao, September 1, 1994. 71. Liaoning Ribao, August 9, 1994. 72. Zhongguo Gongshang Bao, June 30, 1995. 73. Zhongguo Gongshang Bao, May 24, 1996. 74. Unfortunately we acquired such data for one zhen only. 75. “Zhejiang gongchandangyuan” (Zhejiang Party Members), May 1993, Baokan Wenzhai, August 30, 1993. 76. Cf. Yang, Gifts, Favors, and Banquets.

Notes to Chapter 8 1. Giddens, Sociology, p. 212. 2. Cf. Zhou, Tuma, and Moen, “Stratification Dynamics under State Socialism,” p. 765. 3. Stewart, Prandy, and Blackburn, Social Stratification and Occupations, p. 19; Coxon and Jones, The Images of Occupational Prestige, p. ix. 4. Cf. Holthus and Shams, “Anpassungspolitik und Interessengruppen in Entwicklungsländern,“ p. 283. 5. Bourdieu, Sozialer Raum und ‘Klassen,’ p. 12. 6. Pareto, The Mind and Society. 7. Kaminski and Kurczewska, “Strategies of Post-Communist Transformation,” pp. 137–38. 8. Cf. Keller, Beyond the Ruling Class, pp. 4, 20; similarly Nadel, “The Concept of Social Elites,” pp. 417ff.

310

NOTES TO CHAPTERS 8 AND 9

9. See, for example, Shils, “The Intellectuals in the Political Development of the New States.” 10. Yan, “The Impact of Rural Reform on Economic and Social Stratification in a Chinese Village,” pp. 19ff., also points to this phenomenon, which is observed by poorer peasants and many older cadres with suspicion. 11. Szelenyi, Socialist Entrepreneur, observed a similar development in socialist Hungary. 12. Cf. Zhonggong Baoji shiwei diaochazu, “Nongcun yuan di fu jiating xianzhuang diaocha.” 13. Unger, “‘Rich Man, Poor Man,’” p. 59. 14. Pi, “Nongcun jiceng ganbu dui shichang jingji cunzai wu zhong danxin,” pp. 52–53. 15. Cf. Tan, “Nongcun xiedou heshi le”; Wang, “Nongcun shanghai anjian weihe shangsheng?”; Far Eastern Economic Review (March 4, 1993). 16. Yan, “The Impact of Rural Reform on Economic and Social Stratification in a Chinese Village,” pp. 19–20. 17. Tian, “Xin shiqi xianji renda gongzuo de zhuyao renwu,” p. 105. 18. Cf. Kornai, “The Hungarian Reform Process,” p. 48, and Kornai, Highway and Byways, pp. 14–15. 19. Kornai has pointed out that managers not appointed by the administrative bureaucracy behave in a more market-oriented fashion than other managers. Cf. Lin, He, and Du, “Rural Industrial Enterprises and the Role of Local Governments,” p. 249. 20. Discussion with the general manager of Minzu maoyi zong gongsi (General Company of Nationalities Trade), Jinji, August 14, 1993. 21. Lu, Zhang, and Zhang, “Zhuanxing shiqi nongmin de jieceng fenhua,” p. 22. 22. Scott, The Moral Economy of the Peasants. 23. Cf. Yan, “The Impact of Rural Reform on Economic and Social Stratification in a Chinese Village,” pp. 4ff. 24. In 1995 about 1 million millionaires were said to exist in China; Xiandai Xinxi Guangchang (Modern Information Market), September 16, 1995. 25. Ji, “Chinas grosses Experiment,” p. 17. 26. Li, “Xin shiji jieji jieceng jiegou he liyi geju de bianhua,” p. 56. 27. Sievert, “Probleme des Übergangs von einer sozialistischen zur marktwirtschaftlichen Ordnung,” p. 237. 28. Shen, “A Policy-Driven Elite Transformation and Its Outcomes,” pp. 1ff., 20. 29. Cf. Guttsmann, “Social Stratification and Political Elite,” pp. 137ff. 30. Renmin Ribao, October 5, 1994. 31. Li and White, “China’s Technocratic Movement and the World Economic Herald,” pp. 369–70. 32. Zhu, Xu, Zhao, and He, Gongwuyuan zhidu, p. 5. 33. Schüller, “Probleme des Übergangs von der Staatswirtschaft zur Marktwirtschaft,” p. 5. 34. Qin, “Zhongguo de baiwan fuweng.” It is not surprising that parents in south China are said to ask their children to improve their behavior by arguing that “if you are not diligent you will end up as a cadre.”

Notes to Chapter 9 1. Fuchs et al., Lexikon zur Soziologie, p. 179; Vasudeva, Social Change, p. 21. 2. Kluckhohn, “Values and Value-Orientations in the Theory of Action,” p. 395. 3. See Parsons and Shils, Toward a General Theory of Action; Cecora, Changing Values and Attitudes in Family Households with Rural Peer Groups, Social Networks, and Action Spaces, pp. 16ff. 4. Cf. Wilson, “Metanoia,” p. 5. 5. Cf. Heberer, “Volksrepublik China,” pp. 287–88; Chu and Ju, The Great Wall in Ruins; Zheng, Institutional Change, Local Developmentalism, and Economic Growth, pp. 94ff. 6. Jingji Ribao, September 23, 1992. 7. Compare Li, “Qingnian geti gongshanghu xinli quxiang de liangzhong xing.” 8. See Morel, “Werte als soziokulturelle Produkte,” p. 217. 9. Among others: Henze, “Die wirtschaftlich-technische Modernisierung in der VR China und die Folgen für das Bildungswesen,” p. 213. 10. Guthrie, “The Shuttle Box of Subsistence Attitudes,” p. 202. 11. Cf. Zhang, 1991 Zhongguo zhigong duiwu sixiang zhuangkuang diaocha; Bao, “Dushi ren, ni zui guanzhao shenme?”; An, “Wo guo zhigong sixiang quxiang he jiazhi guannian de xianzhuang fenxi.”

NOTES TO CHAPTER 9

311

12. Pei, “When Reform Becomes Revolution,” pp. 158ff. 13. Rogers, Modernization among Peasants, pp. 19ff. 14. Chen and Li, “Zongzu shili,” p. 35. 15. Jingji Cankao Bao, November 9, 1991. 16. Yin, “Nongcun gongzuo zhong bu rongyi hushi de jiazu wenti,” p. 21. 17. Deutschmann, “Der ‘Clan’ als Unternehmensmodell der Zukunft?” p. 88. 18. Cf. Levy, The Family Revolution in Modern China, pp. 164ff., 208ff.; Ruf, Cadres and Kin, pp. 30ff. 19. Durkheim, Über soziale Arbeitsteilung, pp. 118ff. 20. Ouchi, “Markets, Bureaucracies and Clans,” pp. 135–36. 21. See Gutkind, The Passing of Tribal Man in Africa. 22. Chen and Hu, China’s Rural Industrial Development and Surplus Labour Transfer, p. 185. 23. Cf., for instance, Chad, Selden, and Zhou, “The Power of the Strong”; Perry, Challenging the Mandate of Heaven, pp. 290ff. 24. Chen and Hu, “China’s Rural Industrial Development and Surplus Labour Transfer,” p. 184. 25. Renmin Ribao, August 24, 1993. 26. Renmin Ribao, August 25, 1994. 27. Cf. Lu, “Zhongguo nongcun zhuangkuang ji cunzai wenti de yuanyin.” 28. Report of Central Chinese Television, August 22, 1993. 29. Cf. Scott, The Moral Economy of the Peasants, pp. 91f; and Perry, Challenging the Mandate of Heaven, pp. 47–75. 30. Hu, “Dangqian Guangdong nongcun zhi’an wenti chengyin ji duice,” pp. 1–2. 31. Ibid.; cf. also Chad, Selden, and Zhou, “The Power of the Strong”; Zeng, “Ying zhongshi nongcun qunzhong fanying de wenti”; Perry, Challenging the Mandate of Heaven. 32. Tocqueville, Über die Demokratie in Amerika, pp. 132–33. 33. Kaiser, Die Repräsentation organisierter Interessen, p. 29. 34. Diamond, The Democratic Revolution, pp. 8f., 97. 35. Dahrendorf, Class and Class Conflict in Industrial Society, p. 180. 36. Skilling, “Interest Groups and Soviet Politics.” 37. Cf. Skilling, “Groups in Soviet Politics,” pp. 20ff. 38. Ferdinand, “Interest Groups and Chinese Politics,” p. 18. 39. Skilling, “Groups in Soviet Politics,” p. 24. 40. Cf. Becker, “A Theory of Competition Among Pressure Groups for Political Influence,” pp. 371ff.; Holthus and Shams, “Anpassungspolitik und Interessengruppen in Entwicklungsländern,” pp. 278ff. 41. Truman, The Governmental Process, p. 37. 42. Cf. Brown, “Pluralism, Power and the Soviet Political System,” pp. 65ff. 43. Stewart, “Soviet Interest Groups and the Policy Process,” p. 42. 44. Ibid., p. 48; Brzezinski and Huntington, Political Power, p. 196. 45. Waller, “Communist Politics and the Group Process,” p. 199. 46. Löwenthal, “The Ruling Party in a Mature Society,” p. 91. 47. Liu, “Wo guo de fei gongyouzhi qiyejia qunti jiben xianzhuang fenxi,” p. 17. 48. Wang, She, and Sun, Shehui zhongjianceng, p. 120; Sun, “Xiangzhen shetuan yu Zhongguo jiceng shehui.” 49. Guowuyuan fazhan yanjiu zhongxin ketizu, “Nongmin zi zuzhi de chengzhang yu yueshu,” p. 170. 50. Scott, “Hegemony and Peasantry.” 51. In terms of collective action cf. Tilly, From Mobilization to Revolution; Hirschman, Shifting Involvements, pp. 77ff.; Tarrow, Struggle, Politics and Reform; Zhou, “Unorganized Interests and Collective Action in Communist China.” 52. Compare also Foster, “Embedded within State Agencies” and Ruf, Cadres and Kin, pp. 30ff. 53. Hu, “Dangqian Guangdong nongcun zhi’an wenti chengyin ji duice,” p. 2. 54. Shi, “Beijing shi getihu de fazhan licheng ji leibie fenhua,” p. 37. 55. Kaye, “Conflicts of Interest,” p. 26. 56. Hu, “Dangqian Guangdong nongcun zhi’an wenti chengyin ji duice,” p. 1. 57. Cf. “Trouble at Zhejiang Village.” 58. According to local cadres in Wuxi county and Wuxi Ribao, August 31, 1993. 59. Cf. Kornai, “The Hungarian Reform Process,” p. 49; Lampton, “A Plum for a Peach: Bargaining, Interest, and Bureaucratic Politics in China.”

312

NOTES TO CHAPTERS 9 AND 10

60. Compare Truman, The Governmental Process, pp. 39ff., 45ff. 61. Howell, “Interest Groups in Post-Mao China,” p. 9; China Daily, May 7, 1993. 62. Renmin Ribao, September 16, 1995. 63. Jiang, Lu, and Dan, Shehui lanpishu, p. 316. 64. Ibid., p. 317. 65. Wang, She, and Sun, Shehui zhongjianceng, pp. 72ff.; White, “Prospects for Civil Society in China,” p. 82. 66. Wang, She, and Sun, Shehui zhongjianceng, p. 105. 67. Cf. Dongxiang (Trends) (April 1995), pp. 15–16. 68. Cf. Chi, “The Chinese Authorities Take Action to Purge the ‘Qigong Party’,” p. 215; Unschuld, Medizin in China, pp. 61ff.; Ots, “The Silenced Body.” 69. Chen, “Urban Spaces and Experiences of Qigong,” pp. 353ff.; Ots, “The Silenced Body,” pp. 131ff.; Amos, “The Re-Emergence of Voluntary Associations in Canton, China.” 70. Chi, “The Chinese Authorities Take Action to Purge the ‘Qigong Party’”; Ots, “The Silenced Body,” and Amos, “The Re-Emergence of Voluntary Associations in Canton, China,” show the interrelationship between Qigong activities and politics after 1978. On Falungong, compare Heberer, “Falungong—Religion, Sekte oder Kult?” 71. Nolan and White, “Urban Bias or State Bias?” p. 66. 72. Heberer, “Die Rolle des Individualsektors für Arbeitsmarkt und Stadtwirtschaft in der Volksrepublik China,” pp. 248ff. 73. See Heberer and Taubmann, Chinas Ländliche Gesellschaft im Umbruch, pp. 379–407. 74. Falkenheim, Citizens and Groups in Contemporary China, p. 5. 75. Director, Bureau of Civil Affairs, Wuxi, interview with the authors, August 26, 1993. 76. Durkheim, Der Selbstmord, p. 449. 77. The president was the director of the Bureau for Administration of Industry and Commerce of the county. 78. Cf. Kaye, “Vital Signs.” 79. Gongren Ribao, July 14, 1995. 80. In Parsons, Gesellschaften, it is argued that inclusion is one element of development (p. 40). 81. Jowitt, “Inclusion and Mobilization in European Leninist Regimes.” 82. O’Brien, Reform Without Liberalization. 83. Cf. Chan, “Revolution or Corporatism?”; Schmitter, “Still a Century of Corporatism?”; and Ost, “Towards a Corporatist Solution in Eastern Europe.” 84. Unger and Chan, “China, Corporatism, and the East Asian Model,” p. 32. 85. Parris, “Local Initiative and National Reform,” p. 260. 86. Ding, “Institutional Amphibiousness and the Transition from Communism,” pp. 298ff. 87. Compare Walder and Gong, “Workers in the Tiananmen Protests,” pp. 1ff. 88. Østergaard, “Citizens, Group and a Nascent Civil Society in China,” pp. 29–30; Perry, “Labor’s Battle for Political Space”; Sidel, “Dissident and Liberal Legal Scholars and Organizations in Beijing and the Chinese State in the 1980s”; Wasserstrom and Liu, “Student Associations and Mass Movements.” 89. McCormick, Su, and Xiao, “The 1989 Democracy Movement,” p. 192. 90. Patzelt, Einführung in die Politikwissenschaft, p. 14.

Notes to Chapter 10 1. Chen et al., “Rural Enterprises Growth in a Partially Reformed Chinese Economy,” p. 13. 2. Park, “Trade Integration and the Prospects for Rural Enterprise Development in China.” 3. Tan, “China’s Small Town Urbanization Program,” p. 158. 4. Wank, “From State Socialism to Community Capitalism,” p. 252. 5. Gramsci, Zu Politik, Geschichte und Kultur, pp. 277ff.; Femia, Gramsci’s Political Thought, pp. 23ff.; Dahl, Polyarchy, pp. 7ff. 6. Szelenyi, Socialist Entrepreneurs, p. 5. 7. Moore, Soziale Ursprünge von Diktatur und Demokratie, p. 481. 8. Senghaas, Wohin driftet die Welt? p. 71. 9. Hsiao, “Discovering East Asian Middle Classes,” p. 9; Wank, “From State Socialism to Community Capitalism,” pp. 295–300; MacDonald, The Sociology of the Professions, p. 56.

NOTES TO CHAPTER 10

313

10. Bruun, Business and Bureaucracy in a Chinese City, pp. 3–4. 11. An, “Democratic Experimentation under Party Dictatorship,” pp. 363–64; Zheng, “Development and Democracy,” p. 258. 12. See Heberer, Private Entrepreneurs in China and Vietnam. 13. Gao, “Democracy, What Democracy?” p. 25.

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Index Administration; see also Village administration committees (VACs) cadre system and, 179–181 county level, 181–184 county-zhen relationship, 208–211 dual party-state structure, 184 finance system and village administration, 211 land administration law, 37 local hierarchy problems, 208–213 seats of township administrations (xiangzhengfu suozaidi), 11 village level, 194–200 zhen level, 184–194 zhen-village relationship, 211–213 Administration fees, 79, 86–87, 107 Administrative structures of cadres, 179–181 dual party-state structure, 184 financing, capital, and branch structure, 100–103, 122 local administrative structures, 286 party structures, 182, 200–208, 222 problems and changes in, 200–208 transformation into gongsi, 175–176 Agricultural Bank of China (ABC), 101, 103 Agricultural collectivism, 14 Agricultural Development Bank of China (ADBC), 101 Agricultural reform, 4, 6, 115 Agricultural sector peripherization of, 285 surplus labor force, 95, 140 Agricultural taxes, 166–167 Associations, 289; see also Interest associations banguan associations, 272, 276, 278 branch association (xiaozu), 272 on county and zhen levels, 271–277 guaban associations, 276, 278 influence of, 275 minban associations, 271–272, 276, 278

345

Associations (continued) professional associations, 275–276 types of, 269 Attitudes, values and ideology changes, 239–240; see also Values Banguan associations, 272, 276, 278 Bank credits, 70, 90, 101–102, 169, 209 Black-market, 40 Bottom-up privatization, 287, 290 Bourdieu, P., 219 Branch association (xiaozu), 272 Bribery, 216, 267 Budgetary revenue, 163 Bureau for the Administration of Industry and Commerce, 79, 85 Bureaucracy, 3 county level subgroups, 181–183 dual role of, 178 economic transformation of, 175–179, 288 inflation at local level, 173–174 Business tax, 163 Cadre capitalism, 177–178, 288 Cadres, 110–113 administrative structure of, 179–181 contract cadres, 185 as enterprise managers, 177–178 grades of, 180 meaning of term, 179 organization of, at zhen level, 185 quota of, 186, 190 reduction of, 174–175 relationship with public, 202 salaries of, 201 state cadres, 180, 185 systems of responsibility for, 193–194 transfer of, 179 TVWs and, 85, 106 Capital resources, 100–103, 122

346

INDEX

Chan, A., 278 Chan, K. W., 14 Chengbao, 228–230 Chinese Communist Party (CCP), 6, 84 committee organization, 182 Communist Youth League (CYL), 201, 205, 253, 290 development of membership, 204 local cadres and TVEs, 85, 106 loss of importance of membership, 215 membership statistics, 205, 207 party structures, 222 people’s communes and brigade enterprises, 115 problems and changes in, 200–208 Cities (shi), 11–12, 17 migration streams into, 49–51 Civil service, 173–173 reduction of workers, 174 Clan and clan leaders, 257–259 ”clanization” of enterprises, 259 Class enemies, 220–221 Collective enterprises, 76, 78, 87 contract responsibility (chengbao) system, 107–110 financial transfers, 107 former people’s communes and brigade enterprises, 115 investment in, 131–132 loss of dominant position, 91–92 managers and, 110–112, 122 private/individual enterprises and, 87–93 status of employees in, 218 technical and organizational modernization, 99 to stock corporations, 72, 130–131 workforce in, 117–118 Collective trade, 39 Commercial institutions, 33, 39–48 Communalism, 5, 210, 289 Communist Youth League (CYL), 201, 205, 253, 290 Community capitalism, 289 Contract cadres, 185 Contract responsibility (chengbao) system, 107–110 Corporatism, 278 Corruption, 24, 86, 110 County-level elites, 222–224 County-zhen relationship, 208–211 Credit load and operating results, 103–105 Credits, 70, 90, 101–102, 169, 209

Crypto-privatization, 288 Cultural Revolution, 7, 14, 40, 110, 144, 222 Dahl, R. A., 290 Dahrendorf, R., 8 Decentralization, 7, 93, 100 Decollectivization, 66 Democratization, 3, 197, 290 democracy movement (1978–1979), 5 interest groups, 264 market economy and, 5, 176 socialist market economy, 3, 8 Deutsch, K. W., 8 Deutschmann, C., 259 Diamond, L., 264 Diaz, M. N., 178 Ding, X., 278 Dongting zhen case study, 126–127 Durkheim, E., 260, 276 Economic development administrative reform and, 173 bureaucracy transformation, 175–179, 288 GNP vs. rural social value of production, 93–94 local budget and taxes, 162 political elites and, 290 Economic elites, 219, 228 Economic power, 215 Economic reforms, 5, 88, 115 characteristics of, 6–7 hybrid market economy, 176 interdependence of, 9 ownership changes in, 65 planned to market economy, 5–6 political change and, 8 political power and, 6 shock therapy, 6 social change and, 7–10 Educational costs, 169 Elites, 3–4, 219–220, 288; see also Zhen level elites economic elites, 219, 228 knowledge elites, 218–220 local elites at county level, 222–224 new local elites, 219–220 political elites, 219, 222, 230 political elites and economic development, 290 rise of new elites, 5 strategic elites, 219 stratification of new local elites, 219–220 village level elites, 230–236

INDEX

Employment, development of, 141–145 Enterprise directors, 111 Enterprise institutions, 185 Entrepreneurs; see Private entrepreneurs Environmental pollution, 101, 122, 129, 131, 137–138 Etzioni, A., 216 Export activities, 93 product shift in, 93 Export turnover, 92 Extra-budgetary taxes, 165 Family-based economy, 66 Family enterprise, 259 clan and clan leaders, 257–259 Family values, 240–242 Ferdinand, P., 264 Fifteen Small Enterprises, 101, 122 Finance system, 161–162 budgetary revenue, 163 financing, capital, and branch structure, 100–103, 122 local budget and taxes, 162–164 off-budget revenue, 165–166, 168 structural problems of public budgets, 168–170 tax agreements, 170–171 township- and town-level revenues/expenditures, 164–168 types of revenue, 163 village administration, 211 “Five necessities” (wu ding), 194 Folk religion, 257 Foreign investment, 10, 101 Foreign private enterprises, 70 Four Cardinal Principles, 8 Four Modernizations, 8, 14 Free market trade, 40, 43, 66, 115 Friedman, M., 6 Galbraith, J. K., 6 Gehlen, A., 7 Globalization, 10 Gongsi (independent companies), 175–176, 200 functions of, 176 Gramsci, A., 290 Green Report, 49 Gross national product (GNP), rural social value of production vs., 93–94 Guaban associations, 276, 278

347

Guanxi (social connections), 70, 86, 112, 173, 213, 216, 234, 240, 243, 250–251, 253–254, 257, 265, 267, 274, 288 Habermas, J., 3 Havel, V., 4 Hayek, F., 5 Household-registration system, 17 Housing construction spending, 33–34 Hukou, agrarian-nonagrarian status, 60–63 Ideology, 239 Illegal trade, 40 Individual enterprises, 30 growth rate on, 66–67 number of, 67 rural collective and, 87–93 Individualization, 5, 240, 253 Industrial and commercial taxes, 167–168 Informal sector, 66 statistics on, 67 Infrastructure, 33–35, 85 Interest associations, 263–279, 289 defined, 265 new interest groups, 266–271 significance of, 263–264 social interest organizations, 264 Interests, defined, 264 Jie, F., 5, 23 Jinji zhen case study, 117–126 Joint enterprises (lianban), 80, 87–88 Joint-stock companies, 78 Joint ventures, 70, 78, 112–114 urban and rural enterprises, 113 Jowitt, K., 277 Keller, S., 219 Kinship structure, 258 Kirby, R., 14 Kluckhohn, C., 239 Knowledge elites, 218–220 Kojima, R., 14 Kornai, J., 86, 229 Kremlinology, 3 Land-use rights black market in, 37 land administration law, 37

348

INDEX

Land-use rights (continued) leasing land fees/charges, 37 local governments as developers, 36 Land utilization, 33, 35–36, 38, 286–287 Law Regulating the Organization of Village Administration Committees, 195 Leasing (chengbao) enterprises, 72 Lei Feng model, 257 Local elites (county level), 222–224 Local prestige, 216 Local state corporatism, 106 Localism, 7 Lu, Xueyi, 236 Mallee, H., 57, 156 Managers, collective and private enterprises, 110–112, 122 Mannheim, K., 219 Market economy; see also Rural markets democracy and, 5 hierarchy of markets, 44 socialist market economy, 3, 8 Market towns (jizhen), 13 Middle “stratum,” 290–291 Migdal, J., 3 Migration, 17–18, 139–140; see also Population growth and migration governments policies/attitudes, 58–60 in-migration, 52–53 individuals, structures and motives of, 53–55 migrant workers, 218, 283 migration streams into cities, 49–51 rural-urban migration, 49–52 temporary migrants, 55–58 zhen settlements, in-migration policies/strategies, 58–60 Minban associations, 271–272, 276, 278 Mobility of population, 8, 85 Modernization, 3, 6, 8, 114, 178 Four Modernizations, 8, 14 process of, 8 retail trade/market tradition and, 47 rural modernization and, 127, 138 technical and organizational modernization, 99 Moore, B., 290 Multiparty system, 5 Municipal development, 286–287 Neo-corporatism, 278 New local elites, 219–220

Nonagricultural sectors growth of workforce in, 94, 97 job growth in, 140, 147 rural modernization and, 127, 138 Odgaard, O., 141 Off-budget revenue, 165–166, 168 Ownership categories of, 87–88 development of, 287–288 employed persons per enterprise, 80 enterprise profits and, 65 gross value of production, by ownership form, 95, 100 rural enterprises, 79, 91 structure in rural areas (mid-1990s), 78–83 Pareto, V., 219 Parish, W. L., 8 Parson’s theory of sociocultural evolution, 277 Partnerships, 87 Party members and structures; see Chinese Communist Party (CCP) Pearson, M. M., 268 Peasants burdens on, 262 compulsory labor, 261 expressions of protest, 263 peasant-rural subculture, 256–257 political effects of, 3 protest and conflict factors, 260–263 resistance activities of, 3–4 retraditionalism, of, 289 status of, 218 Pei, M., 65 People’s communes and brigade enterprises, 115 People’s Congress, 223 organization of, 183 Planned economy, 5 Soviet model of, 6 Political capital, 215 Political change process, 9, 287–293 Political Consultative Conference (PCC), 183 Political elites, 219, 222, 230 Political instability, 83, 86 Political power, 215 Population growth and migration, 48–63 factors for zhen growth, 51–52 governments attitudes/policies, 58–63 hukou, agrarian-nonagrarian status, 60–62

INDEX

Population growth and migration (continued) in-migration in population growth, 52–53 migration streams into zhen and shi, 49–51 mobility of population, 85 permanent in-migration, 52–53 structure and motives of individuals, 53–55 temporary migrants, 55–58 Potter, J. N., 178 Poverty, private sector development and, 66 Pretial power, 216 Private enterprises, 66, 87, 134 ”clanization” of, 259 growth rate of, 68 hidden private sector, 68 locations of businesses, 70 managers and, 110–112 number of, 68 ownership structure of, 78 rural collective and, 87–93, 134 status of employees in, 218 terminology for, 78–79 Private entrepreneurs, 70, 83, 112, 234–235 as neocapitalists, 86, 217 party membership of, 84 political activity of, 84 as strategic group, 292 as village leaders, 203 Private property, 70 Private sector, 70–78 closing of private firms, 76 constraints and obstacles of, 85–86 contributions for development, 85 factors for development of, 85 family-based economy, 66 financing of, 70, 102 functions of, 285 investment, production value, turnover, and trade volume, 72–74 in lesser developed areas, 72 local planning and, 78 paid labor in, 66 poverty and, 66 private enterprises and employed persons, 82–83 rural collective and, 86–139 rural-urban ratio of enterprises, 74 share of tertiary sector, 75–77, 81 statistics on, 66–78 taxes and, 76, 85, 139 urban-rural distribution, 69 zhen level, 75

349

Privatization, 4–6, 283 bottom-up privatization, 287, 290 defined, 65 development of ownership, 287–288 dual process of, 65 land issues, 70 on national scale, 65 nationwide development, 65–70 ownership structure in rural areas (mid-1990s), 78–83 private sector (1993-1994), 70–78 process of, 65–86 in rural areas, 65, 83 rural collectives and private enterprises, 86–105 to increase competitiveness, 123 total vs. partial, 65 Product tax, 163 Production-responsibility system, 139 Professional associations, 275–276 “Provisory Regulations for Private Enterprises in the People’s Republic of China” (1988), 66 Public budgets, 168–170 Public institutions, 33, 49–48 Qigong clubs, 270 “Red hat firms,” 87–88 Regionalism, 4–5, 7 Regulations Concerning Registration and Administration of Social Associations, 268 Revenue-sharing agreements, 162 Rogers, E., 256 Ronnås, P., 103 Rostow, W. W., 8 Rural collectives; see Collective enterprises Rural credit cooperatives (RCCs), 101–102 Rural enterprises, 284–286 categories of ownership, 87–88 development and regional structure of, 86–93 economy and labor market, 93–97, 135 employment growth in, 94, 98 financing, capital, and branch structure, 100–103 loss of competitiveness of, 125 losses and credit load, 104–105 managers of, 111–112 ownership forms, 79, 91 profit and loss of, 120, 125 retraditionalism and potential for conflicts, 288–289 structural characteristics, 97–100 urban/state enterprises and cooperation, 112–114

350

INDEX

Rural joint ventures, 78, 113 Rural labor market, agriculture to nonagrarian sectors, 139–141 Rural market towns (jizhen/nongcun jizhen), 11, 13 Rural markets, 40–41 characteristics of, 46 free market trade/retail turnover, 43 hierarchy of, 44 rural supply system, organizational structure, 42 space-time connections among, 45 supply and marketing cooperative (SMC), 39–41 Rural per capita income, 25–27 Rural settlement system, classification system, 11–12 Rural-urban ratio of enterprises, 74 Rural urbanization, 4, 33 building spending, 33–34 Sachs, J., 6 Schmitter, P., 278 Schurmann, F., 198 Seats of city government at county level (xian [shi] zhengfu suozaidi), 11 Seats of county governments (xian zhengfu suozaidi), 11 Seats of township administrations (xiangzhengfu suozaidi), 11 Self-employed people, 65–66 Settlements, 33 Share-enterprises, 228 Shareholding cooperative system, 88 Shares (gufen), 79 Shock therapy, 6 Skilling, G. H., 264–265 Skinner, G. W., 11–12 Small market towns (xiao jizhen), 13 Small towns (jianzhi zhen), 11 Social block, 215 Social change, 4, 7–10 change mechanisms, 8 features of, 5–7 interdependence of, 9 process of, 287–293 values and attitudes, 239 Social connections (guanxi), 70, 86, 112, 173, 213, 216, 234, 240, 243, 250–251, 253–254, 257, 265, 267, 274, 288 Social differentiation; see Stratification Social interest organizations, 264

Social prestige, 216 Social stratification; see Stratification Societal corporatism, 278 Spark program, 31 State cadres, 180, 185 State-owned enterprises, 65, 94, 130 Stewart, P. D., 265 Stock cooperatives, 130 Stock corporations, 72, 88, 109, 131, 228 Strategic elites, 219 Stratification, 4, 215, 255, 277, 288 ideal-typical model of, 216 new local elites, 219–220 in zhen, 217 Subcontracting, 113–114 Sunan model or rural economy, 71–72, 74, 80, 90, 126 Sunday-engineers or technicians, 113 Supply and marketing cooperative (SMC), 39–43 responsibility system, 43 Tan, K. C., 285 Tax quota, 170 Tax reform, 161, 170–171, 282 local and “higher” taxes, 161 Taxes, 210 agricultural taxes, 166–167 burdens on peasants, 262 business tax, 163 extra-budgetary taxes, 165 industrial and commercial, 167–168 overview of taxation system, 161 product tax, 163 as source of local revenue, 162 types of, 163 value-added (VAT), 163 Technical advice, 113 Tiananmen Square incident, 5 Tocqueville, A. de, 264 Top-down privatization, 287 Tourism, 134 Towns (zhen); see Zhen settlements Towns under a county government (xianxiazhen), 11 Towns under a county-level city government (shixiazhen), 11 Township and village enterprises (TVEs), 78, 84–85, 87–88, 90, 126 basic indicators of, 119

INDEX

Township and village enterprises (TVEs) (continued) contract responsibility (chengbao) system, 107–110 credit load and operating results, 103–105 economic growth and development, 115, 117 enterprise capital, 101 labor force in, 94–98 local governments and, 106–107 tax-like fees and social costs, 107 Traditionalism, 257–260 Transition theory, 3 Urban development, 4, 33–34, 130 Urban population, 15–17 Urbanization process, 17–20 Value-added tax (VAT), 163 Values change of, 239–240, 289 defined, 239 economic investments, 243–244 family values, 240–242 income disparities and, 244–246 personal problems, 254–255 prestige factors, 216, 247–250 private and family interests, 243 professional status, 244 quality of life, 251–252 Village administration committees (VACs), 188, 195–201, 238 financial means of, 211 Village elections, 195–196 Village level elites, 230–236 donations and gifts of, 234 local prestige, 216 Village-owned enterprises; see Township and village enterprises (TVEs) Wages, 124 Waller, M., 265 Wank, D. L., 289 Watson, A., 98 White, G., 276 Whyte, M. K., 8 Workforce age, gender, and qualifications of, 145–151 education of, 150 former job of, 151 income and fringe benefits, 153–154, 157–158

Workforce (continued) living conditions, 151, 154 origin and engagement of, 141–145 paid labor, 66 period of employment, 149 rural labor market, 139–141 situation of employment, 151–153 social securities, 151, 156–157 surplus agricultural labor force, 95, 140 World Trade Organization (WTO), 10 Wu, H. X., 98 Xiangyang zhen case study, 128–130 Xiangzhen enterprises (XZEs), 79 Xiaomin, P., 113 Xiaotong, F., 39 Xu, X., 17 Yuquan zhen case study, 134–135 Zemin, Jiang, 174 Zhang, G., 103 Zhen level elites, 225–230 administration of, 184–186 contract cadres, 185 economic elites in, 228 elected leading cadres, 185 elites and, 225–230 enterprise management, 229 influential individuals in, 230 low-grade cadres, 185 monetary and nonmonetary income, 228 part-time cadres, 185 salaries of, 227–228 state cadres, 185 Zhen settlements, 4, 11–20 attitudes of staff and workers in, 240–257 conditions for status assignment, 12 development of number of, 13–15 economic development process and, 281 fieldwork procedures (case studies), 21–32 government strategies, in-migration policies/ strategies, 58–60 important industries in, 127 industrialization of (1950s), 14 infrastructure standards, 34 land utilization and infrastructure, 35–39 as local labor markets, 283–284 migration streams into, 49–51 order of stratification in, 217

351

352

INDEX

Zhen settlements (continued) political leaders and private enterprises, 121–122 population growth and migration, 48–63 preconditions for designation of, 12–15 private enterprises and, 85, 87, 121–122 problems of privatization, 124 public and commercial institutions, 39–48 rural enterprises and, 284–286 small towns (jianzhi zhen), 11 stage and changes of development, 281–283 structural changes in, 116 typical features of, 19 urban population definition/development of, 15–17 urbanization process and functions of, 17–20

Zhen settlements fieldwork studies, 21–32 economic/population data, 28 empirical problems (1993-1994), 23–24 regional conditions of development, 24–32 rural per capita income, 25–27 Zhen-village relationship, 211–213 Zhu, H., 45, 47 Zhuguan danwei (guarantee institution), 268, 271–272, 276 Zimmermann, G., 8 Zinzhou zhen case study, 136–137 Zongshizhuang zhen case study, 130–132