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UNIVERSITY OF CALIFORNIA, SAN DIEGO The Politics of Social Spending in China: The Role of Career Incentives A dissertation submitted in partial satisfaction of the requirements for the degree Doctor of Philosophy in Political Science by Tai-wei Liu Committee in charge: Professor Susan Shirk, Chair Professor Stephan Haggard, Co-Chair Professor Megumi Naoi Professor Barry Naughton Professor Langche Zeng 2011 Copyright Tai-wei Liu, 2011 All rights reserved. The Dissertation of Tai-wei Liu is approved, and it is acceptable in quality and form for publication on microfilm and electronically: __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Co-chair __________________________________________________________ Chair University of California, San Diego 2011 iii TABLE OF CONTENTS Signature Page……………………………………………………………………… iii Table of Contents…………………………………………………………………… iv List of Figures………………………………………………………………………. vii List of Tables……………………………………………………………………….. viii Acknowledgements………………………………………………………………… . ix Vita…………………………………………………………………...………...…… x Abstract…………………………………………………………………...………… xii Chapter 1: The Social Welfare Provision in China..……………………………....... 1 1.1 Introduction…...…………………………………………………………….. 1 1.2 Intergovernmental Fiscal Relations in China……………………………….. 5 1.3 Literature Review…………………………………………………………… 10 1.3.1 Economy………………………………………………………………. 10 1.3.2 Provincial Resources………………………………………………….. 12 1.3.3 Degree of Marketization………………………………………………. 13 1.3.4 Demography…………………………………………………………… 15 1.3.5 Limitation of the Literature……………………………………………. 17 1.4 Theory……………………………………………………………………….. 18 1.5 Implication…………………………………………………………………… 27 1.6 Bibliography……………………………………………………………......... 30 Chapter 2: The Development of China’s Social Welfare System..………………….. 39 2.1 Pre- and Post-Reform Transition…………………………………………….. 39 2.2 Social Welfare System before the Reform…………………………………... 45 2.3 Reform of Social Welfare System…………………………………………… 47 2.3.1 General Trend………………………………………………………….. 47 2.3.2 Three Reform Stages…………………………………………………… 49 2.4 The Provision of Basic Social Goods……………………………………….... 50 2.4.1 Health…………………………………………………………………… 51 2.4.2 Pensions………………………………………………………………… 55 2.4.3 Education……………………………………………………………….. 57 2.5 The Provision of Other Social Benefits………………………………………. 60 2.5.1 Unemployment Insurance and Benefits for Laid-Off Workers………… 60 2.6 Implications for Future Reforms……………………………………………… 63 2.7 Bibliography………………………………………………………………….. 65 Chapter 3: Quantitative Analysis…………………………………………………….. 69 iv 3.1 Introduction…………………………………………………………………... 69 3.2 Data and Measurement………………………………………………………. 71 3.2.1 Dependent Variable……………………………………………………. 72 3.2.2 Independent Variables…………………………………………………. 73 3.2.2.1 Testing H1……………………………………………………... 74 3.2.2.2 Testing H2: Dining and Entertaining………………………….. 75 3.2.2.3 Testing H2: Go-Getter…………………………………………. 81 3.2.3 Control Variables………………………………………………………. 84 3.2.3.1 Economic Development (GDPpc Per Capita)………………….. 84 3.2.3.2 Provincial Resources (Revenue)……………………………….. 84 3.2.3.3 Degree of Marketization (Marketization)…………………….... 85 3.2.3.4 Demography……………………………………………………. 85 3.2.3.5 Unemployment…………………………………………………. 87 3.3 Methods and Models…………………………………………………………. 88 3.4 Quantitative Findings………………………………………………………… 90 3.4.1 Results for Career Incentives…………………………………………... 91 3.4.2 Results for Other Explanatory Factors………………………………… 96 3.5 Conclusion…………………………………………………………………… 98 3.6 Bibliography…………………………………………………………………. 100 Chapter 4: Case of Guangdong………………………………………………………. 104 4.1 The Career Ambitions for Concurrentists……………………………………. 104 4.2 Case Selection………………………………………………………………... 106 4.3 Background of Guangdong…………………………………………………... 109 4.3.1 Guangdong’s Rapid Growth…………………………………………… 110 4.3.2 The Onset of Localism…………………………………………………. 112 4.4 The Rise of Li Changchun: The First Concurrentist…………………………. 114 4.4.1 Li Changchun: Put the House in Order……………………………….... 116 4.4.2 The Political Logic of Li’s Policy Action……………………………… 118 4.5 Zhang Dejiang: The Second Concurrentist…………………………………... 119 4.5.1 Zhang’s Controversial Reputation……………………………………... 119 4.5.2 Zhang’s Policy Contribution…………………………………………… 120 4.5.3 The Political Logic of Zhang’s Policy Action………………………….. 123 4.6 The Young and Promising Wang Yang………………………………………. 126 4.6.1 Wang Yang’s Endeavor on Social Policy……..……………………….. 126 4.6.2 The Political Logic of Wang Yang’s Policy Actions…....…………….. 129 4.7 Analysis of the Guangdong Case…………………………………………….. 131 4.8 Bibliography………………………………………………………………...... 134 Chapter 5: Case of Liaoning..……………………………………………...…………. 138 5.1 The Career Ambitions for Go-Getters………………………………………… 138 5.2 A Time-Series Analysis of the Province of Liaoning………………………… 141 5.2.1 Research Design………………………………………………………… 141 5.2.2 Case Selection…………………………………………………………... 144 5.3 Background of Liaoning……………………………………………………… 149 v 5.3.1 The Political Economy of Liaoning’s Sluggish Economy……………… 149 5.3.2 Wen Shizhen and Localism in Liaoning…..……………………………. 151 5.3.3 Leadership Competition in Liaoning…………………………………… 151 5.3.4 Hu Jintao’s Role in the Wen-Bo Clash…………………………………. 153 5.4 Li Keqiang and His Henan Legacy…………………………………………… 155 5.4.1 Li’s Contribution in Henan………....…………………………………… 156 5.4.2 Henan’s Health Issues…………………………………………………… 156 5.4.3 Li’s Actions against AIDS………………………………………………. 157 5.5 Liaoning’s Policy Development under Li Keqiang…………………………… 158 5.5.1 From County-Based to Province-Based Budgeting……………………... 159 5.5.2 Li’s Effort on Social Welfare Issues in Liaoning……………………….. 160 5.5.3 Liaoning’s Other Improvement………………………………………….. 161 5.6 The Aftermath of Liaoning’s “Ambition Treatment”…………………………. 162 5.6.1 The Post-Li Development……………………………………………….. 163 5.6.1 The Development of Liaoning’s Pension Budget……………………….. 164 5.7 Analysis of the Liaoning Case………………………………………………… 164 5.8 Bibliography……………………………………………………………………167 Chapter 6: The Political Lessons of China’s Social Spending..…………...…………. 171 6.1 Summary of Findings………………..…...…………………………………… 171 6.1.1 Conclusions from Quantitative Analysis.……………………………… 172 6.1.2 Lessons of Two Case Studies…………………………………………... 173 6.2 Theoretical Contributions...…………………………………………………… 174 6.3 Broader Implications…..….…………………………………………………… 176 6.4 Future Research Direction..…………………………………………………… 177 6.5 Bibliography……………...…………………………………………………… 180 vi LIST OF FIGURES Figure 1.1: Variation in Local Social Spending by Province (2005)…………………. 8 Figure 1.2: Relations between Local Social Spending and Unemployment Rate by Province (2005)…………………………………………………………… 9 Figure 2.1: Social Spending Trend of China………………………………………….. 41 Figure 2.2: Trend of Social Security Spending of China……………………………… 42 Figure 2.3: Trend of Education and Health Spending of China.……………………… 43 Figure 2.4: Trend of the Financing of Social Welfare………………………………… 45 Figure 3.1: Correlation between Age and Dining and Entertaining (D&E)…………... 79 Figure 5.1: Social Spending Patterns of Liaoning…………………………………….. 147 vii LIST OF TABLES Table 3.1: Variable Descriptions and Sources………………………………………… 86 Table 3.2: Descriptive Statistics………………………………………………………. 87 Table 3.3: Provincial Leaders’ Career Incentives and Their Social Goods Provision… 92 Table 3.4: Substantive Effects…………………………………………………………. 99 Table 4.1: Overview of Guangdong’s Politics and Social Policy...…………………… 109 Table 5.1: Overview of Liaoning’s Politics and Social Policy…...…………………… 148 viii ACKNOWLEDGEMENTS I would like to thank the National Science Foundation (NSF), Social Science Research Council (SSRC) with funds provided by the Andrew W. Mellon Foundation, and the Institute for International, Comparative, and Area Studies (IICAS) for generously supporting my research trips to China between 2007 and 2009. Most of the findings in the dissertation were based on my field research. I would also like to acknowledge Professor Susan Shirk for her support as the chair of my committee. Through multiple drafts and many revisions, her guidance has been proven to be invaluable. Additionally, I would like to acknowledge the co-chair of my committee, Professor Stephan Haggard, along with other committee members, including Professors Megumi Naoi, Langche Zeng, and Barry Naughton. Their comments and feedback have substantially improved my research. Moreover, I would like to thank my parents, Chih-Hsiung and Yu-Hsia Liu. I would not have been able to finish my dissertation had it not been their life-long support and their faith in me. Chapter 1 and 3, in full, is currently being prepared for submission for publication of the material; Chapter 4 and 5, in part, is also being prepared currently for submission for publication. The dissertation author was the primary investigator and only author of these materials. ix VITA 2011 Doctor of Philosophy, University of California, San Diego 2005 Master of Public Policy, University of Chicago 2001-2003 Principal Trumpet, Taiwan Ministry of National Defense Symphony Orchestra 2001 Bachelor of Arts, National Taiwan University GRANTS AND FELLOWSHIP 2011-2012 USC U.S.-China Institute Postdoctoral Fellowship 2011 UCSD Dean of Social Sciences Travel Grant 2010-2011 UCSD Political Science Departmental Fellowship 2010 UCSD Dean of Social Sciences Travel Grant 2009-2010 IU Foundation Global Leaders Scholarship 2009 UCSD International Center