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1 Economic Transition and the Case of China

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1 Economic Transition and the Case of China Notes 1 Economic Transition and the Case of China 1. The differences between the two models including the four economic attitudes were highlighted in Roland 2000: 330–31. 2. This view is implicit in the writings of leading big bang advocates. Refer to Lipton and Sachs 1990, Sachs 1996, Wolf 1991. A few works (such as Kornai 1990) have been viewed by some (Roland 2000; Kornai 2003 ) as a mixture of calls for both incremental and radical reforms. 3. For an excellent discussion on the division between the two schools over irre- versibility of reform, partial reform, and the role of the state, refer to Roland 2000: 31–48, 329–32, 335, 341. 4. The center (zhongyang in Chinese) refers to the “State Council and its commis- sions, ministries, and leadership small groups in Beijing as well as the party Politburo, Secretariat, and the organs of the Central Committee.” This term can be used interchangeably with the central or national government/authority for the sake of simplicity. The term “province” or “provincial government” refers to provincial Party and administrative authorities. See Lieberthal and Oksenberg 1988: 138; Cheung, Chung and Lin 1998: 3. 5. The literature on the post-Mao central-local relations is rich. Other primary but nonexclusive examples include Wong 1986; 1997; Zweig 2002; Unger 1987; Li and Bachman 1989; Lieberthal and Oksenberg 1988; Tong 1989; White 1998a; 1998b; Lieberthal and Lampton 1992; Oksenberg and Tong 1991; Howell 1993; Jia and Lin 1994; Goodman and Segal 1994; Fan 1995; Wong, Heady, and Woo 1995; Goodman 1997; Hendrischke and Feng 1999; Wei 2000; Whiting 2001; Fitzgerald 2002. 6. One exception is Susan Shirk (1993; 1994: 27–33). She attributed the success of China’s reform to three factors, namely, gradualism, administrative decentralization, and particularistic contracting. However, her brief discussion can be strengthened by empirical analyses of the political tactics of managing elite conflict and promoting young leaders, as well as varying central fiscal contracts with provinces. 7. Treisman (1999) analyzes the differing effects of decentralization in Russia, Yugoslavia, and China. His innovative arguments can be strengthened by distin- guishing economic decentralization that can lead to economic gains, as practiced in China, from political decentralization which can threaten national unity. 254 Notes 8. In this book I define strategies broadly as conscious choices for managing reforms. A key point is that Chinese reformist leaders consciously managed reforms in a certain way and rejected other alternatives. Their choices could be made for political convenience and could vary according to phases or tasks of reforms, but have turned out to be fruitful over the years. But their choices were often made after weighing the high costs of alternative options. For example, Deng supported marketization but opposed democratization. He feared that the latter would generate chaos, weaken the state’s governing capacity, undermine the Party’s power, and derail China’s economic develop- ment. In addition, he opted for compromises with conservatives when his reforms met severe setbacks, instead of resorting to Mao’s all-out attack at his opponents during the Cultural Revolution, or Gorbachev’s style of democrati- zation in order to crush conservatives. Deng believed these two alternatives had undesirably large political costs and conscientiously refrained from doing so. Incremental reforms, which are not a focus in this book, can also be regarded as a conscientious, albeit not carefully planned reform strategy. The Chinese leaders intentionally favored experiments, constant adjustment, and incrementalism, and rejected shock therapies. 9. Roland (2000: 36–37) modeled gradualist reform as an outcome of strategic compromise by reformists and conservatives. Reformers are optimistic about the outcomes of reform, whereas conservatives are more pessimistic. Reformers prefer radical reforms (liberal measures in the Chinese case) and conservative status quo. Reformers may have the power to propose reforms, but conservatives may veto the proposal. At the end, reformers settle for grad- ual reforms in order to win the support from conservatives; conservatives also favor gradualism in order to reduce deviation from the status quo and instill pessimism among reformers. As Shirk suggested (1994: 29), this political divi- sion largely predetermines that China’s reforms would be incremental and that any shock therapy would be opposed and vetoed by conservatives. 10. Interviews with municipal and provincial officials in Guangdong on official per- formance evaluation in Deng’s era, December 2003. This study will only briefly refer to the making of political entrepreneurs as it has been extensively discussed in the literature. Samples of the literature include Gore 1998 and Whiting 2001. 11. Information supplied by a vice minister in charge of SOEs at a talk at East Asian Institute, National University of Singapore, May 7, 2004. Data for figure 1.1 are based on the author’s own computation using statistics in SSB 1997, table 13-3; SSB 2000: 409. 12. A recent study (Lai 2005c) suggests that the state sector and reform initiatives in the subnational units, entrenchment of central planning, the size of the defence industry, policy choice and the historical context help explain the dif- ferences in Soviet and Chinese reforms. In particular, a predominant state sector in the former Soviet republics had stifled local reform initiatives. Gorbachev resorted to democratization to generate popular support for marketization, yet resulting in the breakup of the nation and destabilization of the economy. In China, some provinces had sizable non-state sectors and were inclined toward marketization. Reform resulted in expanding non-state sectors, generating high growth. Notes 255 13. For discussion on case selection, refer to Collier and Mahoney 1996; Geddes 1990; King, Keohane, and Verba 1993: Chapter 4; Rogowski 1995. Chung (1995) notes similar methodological shortcomings in the studies of central- provincial relations in China in his review of the literature. 2 Non-State Sectors Policies, 1978 to Present 1. For a detailed account of policy measures, institutions, and agencies regarding private business as well as the growth of private business between the 1950s and the 1980s, refer to Solinger 1984, Young 1995, Kraus 1991, and Lai 2004a. 2. “Full Text of the Communique of the Third Plenum of the Sixteenth Central Committee of the Chinese Communist Party,” posted at http:// www. chinanews.com.cn/n/2003-10-14/26/356787.html on October 14, 2003. 3. Rural Enterprise Bureau of Ministry of Agriculture, “An Overview of Development of Rural Enterprises in 2001,” Zhongguo Xiangzhen Qiye Nianjian (China Rural Enterprise Yearbook) 2002, Beijing: Zhongguo Nongye Chubanshe, p. 4. 4. Chen Lisheng, “Mainland Economic and Trade Microwaves,” Zhangyang Daily, posted at http://www.cdn.com.tw/daily/2001/07/07/text/900707i7.htm. 5. For a historical analysis of the policies between 1949 and 1980, refer to Solinger 1984, 157–295; Kraus 1991: 49–59. 6. For a collection of the policies, refer to Zhang, Liu and Zhu 1985. 7. For a discussion on the relations between the state and private entrepreneurs, refer to LAI Hongyi, “Jiang Attempts to Revive Party Ideology,” EAI Bulletin, September 2001, vol. 3, no. 2: p. 4; Wibowo 2001; Dickson 2003. 8. “Congress Hails Constitutional Changes” and “Amendments to the Constitution,” China Daily (Hong Kong Edition), March 15, 2004: 1–2. See the PRC Constitution posted at http://english.peopledaily.com.cn/ constitution/constitution.html. 9. Charles Hutzler, “Equality Still Eludes China Private Property,” The Asian Wall Street Journal, December 24–28, 2003 A1, A4. 10. “A Decision concerning Several Issues Related to Perfecting Socialist Market Economic Structure,” posted and accessed at http://news.xinhuanet.com on October 21, 2003. 11. For a discussion of economic features of rural private enterprises and the effects of these enterprises on income distribution in the 1980s, refer to Odgaard 1992. For studies on the growth of private businesses in the 1980s, refer to Young 1995: 91–117; Kraus 1991: 62–141. 12. Zhongguo Jingji Nianjian (China Economic Yearbook) 1997, pp. 709–10; Stephen Green, “Two-thirds Privatisation: How It Happens,” Chatham House Briefing Note, London: Royal Institute of International Affairs, December 2003: 2. 13. Jefferson, Hu, Guan, and Yu, 2003: 94, 95, 97. 14. Green, “Two-thirds Privatisation: How It Happens,” p. 2; Sun Qian, “China’s Bourses Are Looking Up,” Business Times, February 3, 2004. 256 Notes 15. For a detailed analysis of the SEZs and the Open Policy between 1978 and 1985, refer to chapter 5. 16. “Devotion to Reform and Opening Up,” posted at http://big5.xinhuanet.com/ gate/ on August 19, 2003, accessed on November 1, 2003. For a detailed analysis of China’s laws and regulations on joint ventures from 1979 to 1988, refer to Kleinberg 1990: 167–217; Pearson 1991. 17. A few inland cities, such as Wuhan in June 1988, also announced to adopt some of the preferential policies enjoyed by the coastal open cities (Howell 1993: 87). 18. “External Opening,” posted at http://news.xinhuanet.com/ziliao/2003-01/ 23/content_704704.htm, accessed on August 13, 2005. 19. For an analysis of China’s WTO accession and its implications, refer to Lardy 2002. For a detailed study on the conclusion and the context of the agreement, refer to Lai 2001b. 20. “External Opening,” posted at http://news.xinhuanet.com/ziliao/2003-01/ 23/content_704704.htm, accessed on August 13, 2005. 21. The author’s own observation in Sichuan, Xinjiang, and Guangdong as well as conversations with national and local officials in charge of economic affairs and China economic experts, 2003–2005. 3 Managing Elite Conflict and Policy Cycles 1. For detailed discussion of the role of top leadership in initiating reforms, refer to Harding (1987), Baum (1996), and White (1993). For empirical documentation of the role of top leaders in reform, refer to Baum (1996) and Ruan (1994).
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