Categorizing the

System through
Models
As a start, which of the following phrases or ideas best describes your view of the key aspects of the “Chinese
political and economic system”. (You may select up to 3 choices)

 Big population  Innovative

 Rapid growth  Going out into the world
 Assertive  Human rights
 Inequality  Mysterious
 Strong state  Great cuisine
 Impolite tourists  Complicated
 Corruption  Competitor to the US
 Rich cultural tradition  Contradictory
 Bureaucratic  Ending poverty
 Confucianism  Hungry for resources
 Communist Party  Emitter of green house gases
 World’s factory  Hierarchical
 Exporter to the world  Model for developing world
Categorizing the System

1. My model reflects two components:

• Where power lies in system
- Is power vested in society or Party/state?
• Key institutions that allocate resources (capital, people, land,
etc.)
- Markets or bureaucrats?

2. China as a moving target

• China changes quickly over time, courses must adapt!
• 1990s, sudden emergence of private sector, expanded markets—
is it now a market economy?
Defining the Nature of the
Chinese System

Resource Allocation Mechanism

Administrative Market
Commands Mechanisms
(Planning)

Totalitarianism
Party/ State (All powerful state)
Market Leninism
(Bureaucratic and Party-led Political
Economy)
Locus of
Heavily Regulated Civil Society
Power
Democracies Democratization
Society
(India) (Political Development)
From Totalitarianism to
“Market Leninism”

• Power of state and state agents very high, control exercised

through several components;
• totalist ideology, explaining past, present and future
• single party, led by one man
• centrally planned economy
• terroristic police
• communications monopoly
Bureaucratic Model
and Chinese Politics
Goals of Bureaucrats Dominate the System

• Bureaucratic goals vary by personality, sector, regional

location, historic period, career paths, etc.

• Do they want to consolidate their position, expand resources

under their control, avoid mistakes, amass wealth, move
upward in political hierarchy?

• Example: willingness of local officials to invest in “public goods”

explained in part by number of years in a post.
Goals of Bureaucrats Dominate the System

• If they think they will not move up, more willing to use public
monies for local development.

• Officials looking to move up spend funds on big projects that

enhance their reputation.
“Fragmented Authoritarianism”

• Widely used model in Political Science, based on

bureaucratic nature of the system

• Very different from “Totalitarianism” — power diffused

among bureaus, not centralized

• Bureaus pursue their own interests

• Policy conflict among bureaucracies

• Strong overlap over resources among bureaus

“Fragmented Authoritarianism”

Ministry Ministry Ministry Ministry

Department Department Department Department

Section Section Section Section

“Fragmented Authoritarianism”

• Bargaining system — decisions bumped up to higher levels

as competing bureaus cannot make concessions

• Upper level leaders act much like ice-breakers

• Information flow important for understanding power

within the system
Outcomes under “Market Leninism”

• Corruption major threat to regime

• “Rent-seeking:” bureaucrats create regulations to

decrease number of producers and thereby increase
prices

• Or charge fees for access to markets where large

profits can be earned

• Or block imports but charge fees for letting goods

come in

• High “transaction costs” of doing business

Outcomes under “Market Leninism”

• With sectors such as health care, pharmaceuticals,

food, poorly regulated, China left with too few good
regulations, not too many regulations
Bureaucrats Go Into Business

• Government-business very tight

• Laying off bureaucrats must include strategy to let them
make a living.
• Inflation of 1986-89 due to “briefcase companies” by retired
officials who transferred goods.
• Post-1998, bureaucrats “enter the sea of business”
• Today’s businessmen have long-standing ties to officials with
whom they worked.
Market Leninism NOT Political Development

• Westerners believe that economic growth, marketization,

privatization, rise of middle class, education  democracy.

• But CCP weakens society, incorporates it into Party

institutions

• CCP won’t create new political institutions to manage societal

demands

• Employs state power to control societal demands.

Avoiding Civil Society

• Deep CCP mistrust of “Civil Society” organizations and

NGOs.

• Convinced West wants to overthrow CCP.

• Emphasizes “good governance,” “rule of law,” and ”reform

of administrative review and approval system” to improve
governance without seeding power to society.
State vs. Society

• State power important for taxation, boundary control,

domestic and national security, resource extraction, economic
regulation, legal decisions.
• But in China, much conflict due to state efforts to penetrate
and dominate society which resists state agents through
protests.
• “Local State Corporatism”– local Party committee dominate
politics, courts, police, political participation and resources.
• Local state authority separate from central government— local
“predatory state,” more oppressive than centre.
The Structure of
the Political System
Chinese System’s Key Difference is
the Chinese Communist Party (CCP)

Military

Legislature CCP Executive

Judicial
The Structure of Political System

• Administrative hierarchy of government, legislatures, courts,

military and CCP.

• Running from Central government in Beijing, to provinces,

municipalities (district), county, township, administrative
village, natural villages.

• Every level of government, courts, military have CCP

committee monitoring their action.

• Party committees dominate local decisions—intervene in

economic decisions.
The Structure of Political System

Center

Province and Provincial Level Cities

(Beijing, Shanghai, Chongqing, Tianjin)

Municipality
Rural Urban
County

Township Urban District

Administrative Village
Residence
Committee
Natural Village
Deep State Penetration into Society

• In Qing Dynasty, county government lowest level of

state power (200,000 people).

• CCP penetrates villages through party committees

(1,000 people).

• In cities, CCP penetrates down to neighborhood

committees
Key Party Structures
 National Party Congress President & Vice Prime Minister
President
Central Committee State
CPPCC
Vice Premier Councilors
Standing
Politburo
Committee of
Central Discipline
National People’s the Politburo State Supreme Supreme
Inspection Secretariat
Congress Commission Council People’s Court People’s
Procurator
26 Departments including: Military Affairs
NPC Standing
Organization Dept, Rural Commission Ministries and
Committee
Work Dept, Propaganda Dept Commissions

Provincial-level
Provincial-level Provincial-level Party Provincial-level
Government Intermediate
People’s Congresses Committees Bureaus
& Lower Court
& Procurators
Municipal Party Municipal
Committees Governments Municipal
County-level People’s Bureaus
Congresses County-level Party County-level
Committees County-level County
Governments
Township People’s Bureaus court
Congresses
Township Party Township
Committees Governments
Representative Village
Committee
Village Committee
Village Party Committees

Legislative Party Executive Judicial

Standing Committee of Politburo
(SC-PB)

• Most powerful people in China!

• Controls all aspects of political system
• Currently 7 members—has been as few as 5
• Most members control one of key SIX “systems”
1. party affairs—relations with other CPs and party life.
2. organizational affairs—allocates all party positions
3. propaganda and education-education, news, colleges
4. political and legal affairs—responsible for courts, police, “strike
hard campaign” was recently moved out of the PB-SC.
5. finance and economics—led by Prime Minister
6. Military—CCP maintains civilian control of army
You’re Nobody if you’re not on the
Central Committee!!

• All key power brokers either full or alternate members.

• Meets in Plenary Session about twice a year to approve important

policy decisions

• Can redirect previous policy and take China in new direction

• Reform era began in with 3rd Plenum of Eleventh CC in December

1978, Deng overturned strategy outlined by Hua Guofeng in July
1977 at 11th PC.

• Hu Jintao introduced his reform program, “Scientific Model of

Development” at 6th Plenum of 16th Central Committee, though it
had no real traction in terms of policy
 Data on the Central Committee,
1945-2007
Number of members No. of
Military Reps
Year Full Alternate Total
Elected by 7th Party Congress 1945 44 33 77 N/A
Elected by 8th Party Congress 1956 97 73 170 N/A
Elected by 9th Party Congress 1969 170 129 279 N/A
Elected by 10th Party Congress 1973 N/A N/A 319 N/A
Elected by 11th Party Congress 1977 201 132 333 90
Elected by 12th Party Congress 1982 210 138 348 77
Elected by 13th Party Congress 1987 175 110 285 51
Elected by 14th Party Congress 1992 188 129 317 70
Elected by 15th Party Congress 1997 193 151 344 N/A
Elected by 16th Party Congress 2002 198 158 356 N/A
Elected by 17th Party Congress 2007 204 167 371 63
 Party Secretariat and Key Departments

• 26 Departments, most important being:

• Organizational Dept.— responsible for all party posts, key

government posts, key to succession.

• Propaganda Dept.—monitors media, ideological study

campaigns.

• People’s Daily— top CCP newspaper, editorials all approved

• United Front Department – deals with non-party people

 Party Secretariat and Key Departments

• Office of the Central Committee – manages daily affairs

• Political and Legal Affairs Committee, controls all legal,

security

• Overall Social Stability Management Committee

• Others: Party School, Policy Research Office, Foreign Affairs

Office, State Secrets Office, Personnel Files Office, Qiushi
Magazine
 “Leadership Small Groups”

• Not on the formal hierarchical map, but are inter-agency leadership

organizations with specific tasks.
• “Finance and Economics Leadership Small Group” decides all aspects of
economy, drafts policy documents for Politburo or PB-SC.
• Members include PM, Vice-Premiers, Ministers, advisors on rural policy,
Head of Bank of China, People’s Bank, etc….
• Other well know “Leadership Small Groups” include for Taiwan Policy;
Hong Kong and Macau; Foreign Policy; “Human Talent;” etc.
Government
and the Party
State Council

● Equal to cabinet in most governments, with a smaller Standing

Committee

● Overlapping directorship — Prime Minister was 3rd ranking member

of SC-PB since 1992, but Li Keqiang now ranked No. 2 on the PB-SC.

● Some Vice Premiers are members of PB-SC or Politburo. Zhang Gaoli

as Executive VP is on PB-SC, while Wang Yang, also Vice-Premier of
State Council is on Politburo.

● Prime Minister needs support of General Secretary of CCP to push

policies.

● State Council can make important policy announcements.

Party Penetrates the Government

• Every government office, university department, or enterprise,

has a party branch and party secretary.
• Province, has governor and party secretary -- latter has greater
authority.
• In state-owned factories, party secretary wields greater power
than manager.
• Politics permitting, Party Secretary will intervene in economic
decisions.
• Xi Jinping trying to place Party branch within NGOs.
 Central Committee

Secretariat

Organizational Department Lists Nomenklatura

of Post: System and
the Power of
Appointment
Chinese Academy of Science
Ministry of Education

LIST: LIST:
Beijing University
• President • Minister
• Vice President • Party Secretary LIST:
• Members of Party Core Group • Members of Party • Party Secretary
• Head of Discipline Inspection Core Group • President
Group

• Key to party control over personnel appointments and source of its

power over government
Nomenklatura System

● Key to CCP control over personnel appointments and power over

government

● List of posts, not lists of people

● approximately 4000 posts within entire political system on such lists,

controlled by CCP

● Individuals face overlapping supervision, need to keep support from

several organizations
Territorial Party Committees

● Party Committee at each level of administrative hierarchy

dominates.

● Often interferes in government decisions.

● Members responsible for education, industry, agriculture,

population control, propaganda, and selection of key government
officials at next level down through Organizational Department.

● Tiao tiao, kuai kuai – meaning that horizontal CCP supervision is

more important than vertical/professional government supervision.
 Overlapping Hierarchy

Guangdong Provincial CCP Guangdong Provincial

Committee Government
Guangdong Provincial Energy
Department
Guangzhou Municipality CCP
Guangzhou Municipal
Committee,
Government
Organization Department
Guangzhou Municipal
Energy Department
Zhongshan City CCP Zhongshan City
Committee, Government
Organization Department

Zhongshan City
Energy Department
China’s Legislature
National People’s Congress

● Meets every year; every 5 years it elects government

leaders – President, PM, Vice Premiers, all pre-approved by
PB-SC.

● Delegates can express dislike of officials by abstaining – but

differences often between 97% and 91% support.

● Largely “rubber stamp,” as key decisions originate with CCP,

approved by CCP’s committees.
National People’s Congress

● During NPC, top leaders visit provincial delegations, discuss

regional problems.

● Centre for popular input into laws and economy through

committees; professionals work with committees.

● In 1987 only 2/3 of NPC members supported Three Gorges

Dam, 1/3 abstained.

● Very few sub-national legislatures have legislative authority

The Chinese Communist Party (CCP)
and China’s Military
 National Party Congress President & Vice Prime Minister
President
Central Committee State
CPPCC
Vice Premier Councilors
Standing
Politburo
Committee of
Central Discipline
National People’s the Politburo State Supreme Supreme
Inspection Secretariat
Congress Commission Council People’s Court People’s
Procurator
26 Departments including: Military Affairs
NPC Standing
Organization Dept, Rural Commission Ministries and
Committee
Work Dept, Propaganda Dept Commissions

Provincial-level
Provincial-level Provincial-level Party Provincial-level
Government Intermediate
People’s Congresses Committees Bureaus
& Lower Court
& Procurators
Municipal Party Municipal
Committees Governments Municipal
County-level People’s Bureaus
Congresses County-level Party County-level
Committees County-level County
Governments
Township People’s Bureaus court
Congresses
Township Party Township
Committees Governments
Representative Village
Committee
Village Committee
Village Party Committees

Legislative Party Executive Judicial

Military Affairs Commission

Mao: “Political power grows out of the barrel of a gun”

● About 12 members, directly under SC-PB.

● CCP Gen. Secretary usually Chair of MAC
● Vice-Chair may be civilian, other posts belong to military.
● Jiang Zemin held this post 2 years after giving up General
Secretary of CCP and Presidency to provide leverage over
new leader, Hu Jintao.
How does CCP control the PLA?

Mao: “The Party must always control the gun, the gun
must never control the Party.”
● Military Affairs Committee (MAC)
● budgetary allocations from State Council and Ministry of
Finance
● Political Commissars--every military unit has CCP official who
maintains party authority.
● Overlapping membership of Minister of Defense of Chief of
Staff in Politburo, but no member of PB-SC for many years.
● Many regional commanders are members of Central
Committee
CCP Controls the Judiciary
CCP Controls the Judiciary

• Personal power dominates—”rule of man” over the

“rule of law,”
• enhances officials’ control.
• Older judges ex-officers with no legal training.
• New generation of younger judges, some with
foreign education.
• Sensitive crimes that impact social order judged on
political terms.
CCP Controls the Judiciary

• Forced confessions acceptable, defendants rarely

prove police made false arrest.
• Outsiders would rarely win in another city—
Chongqing firm won’t sue Shanghai for IPR
infringement because it cannot win in Shanghai.
• Lower levels judges were appointed and paid by
territorial party committee, but policy has changed.
• Now paid by provinces, weakening local party
committee’s influence.
Elite Politics affects
Economics and Business
How can Elite Politics affect
Economics and Business?

1. Ideological differences can be destabilizing if “leftists” or

nationalists who favour a more open economy, battle with
more liberal leaders who think that an open economy and
FDI is good for growth.

– Resulting inconsistency in policy may undermine FDI

and affect local economic decisions.

2. Fights among leaders scare foreign investors.

3. New elites bring new economic policies.

How can Elite Politics affect
Economics and Business?

4. Weak elites have difficulty implementing policy  local or

regional power allows problems to fester.

5. Bad economic policy  social unrest.

6. Elites must deal with challenges and economic crises that

emerge from the international system.
Leadership Values,
Structures of Conflict
and Political Stability
Ideology and Conflict:
Politics under Mao

• Ideological conflicts are fundamental fights and highly

destabilizing.

• Large differences in the distribution of values among

leadership can be highly destabilizing.

• Mao’s concern about “capitalist restoration” within the CCP

led to Cultural Revolution, where 100 million people
suffered, economy performed poorly with little growth into
late-1970s.

• Politics under Mao was “zero-sum” game; losers were

“defenestrated” !
Structure of Elite Conflict may be
organized in “factions”

• Factions within CCP link leaders through personal ties,

ideology and policy.

• Sometimes based on historical ties, such as having served

in same Field Army during Civil War.

• Chinese elites believe in these ties — when Defense Minister

Lin Biao died after trying to kill Mao in 1971, all former
commanders who served with Lin in 4th Field Army forced
to retire.

• Factional links can be based on shared views about

reform — conservatives bureaucrats, radical reformers,
Maoists.
Factional Split in 1980s over Reforms

• Two factions held very different views about China’s

economic and political policies and future.

• Polarization between “radical reformers” Hu Yaobang and

Zhao Ziyang, versus “conservatives” Li Peng, Yao Yilin, and
Chen Yun. Deng Xiaoping maintained balance.

• Tiananmen crisis of May-June 1989 was the result of political

battle between “conservatives” and “radical reformers”.
Factional Split in 1980s over Reforms

• Purge of Hu Yaobang (1987) and Zhao Ziyang (1989),

narrowed conflicts and created consensus on most policy
after 1989.
• Why consensus?
1. The radical reformers were no longer in the leadership;
2. While “conservatives” won, Deng reignited economic reform
in 1992 with his famous “southern journey” to Shenzhen and
pulled the “conservatives” into the middle.
• Since mid-1990s composed of moderate reformers, with
consensus on economic reform, avoid political reform.
Distribution of Political Attitudes
Among Elite
Leftist Values Rightist Values
- socialism - economic development
- equality a core value - inequality acceptable
- ideology (CCP rule) - more capitalistic policies
- class analysis - more market, less plan
Shared Leadership Values
Increase Stability

• Limited elite conflict after 1992-93, except over WTO entry.

• Debate over terms of joining WTO resurrected ideological

divisions, with Li Peng and central ministers opposed to
Zhu Rongji’s concessions to US.

• In 1999 almost cost then Prime Minister Zhu Rongji his job.

• Little disagreements on privatization of small and medium-

sized SOEs in 1990s.
Shared Leadership Values
Increase Stability

• Some challenges to Jiang Zemin through parts of 1990s, but

based largely on desire for power by two top officials.

• Jockeying for power between Jiang Zemin and Hu Jintao in

2002-2005

• Jiang did not want to give up posts, but instead indirectly

maintained influence.

• In 2010, Bo Xilai tried to raise his profile by introducing

more leftist policies, created some instability.
Key Strategies for Elite
Success and Elite
Mobility in China
Key Strategies for Elite Success in China

• Be on winning side in key battles

• Avoid getting caught in widespread purges – Lin Biao Affair
(1971), Cultural Revolution, 1942 or 1983 Party
Rectification Campaign
• Have deep base and wide network of power
• Deng vs Hua, vs Gang of Four
• Excellent ties with the Peoples’ Liberation Army (PLA) are
critical
Key Strategies for Elite Success in China

• Generational alliances
– Xi Jinping, Li Keqiang

• Join key campaigns in early years

– early entry to upward track, Land Reform

• Be Political Secretary or office director of top leader

– Wen Jiabao best example

• Don’t die!
Key Strategies for Elite Success in China

• Diversify experience in regions and center

– Hu Jintao, Wen Jiabao, Zhao Ziyang, Xi Jinping, Li Keqiang, Li
Yuanchao, all had provincial experiences

• Pick right patron

– Song Ping for Hu and Wen

• Members of Shanghai Faction made it to PB-SC on coat tails

of Jiang Zemin
• Don’t challenge top leader before you have power
– Hu Yaobang challenged Deng in 1986  purged
 Elite Mobility in China, 1921-2013
Elite Mobility in China, 1921-2013

Death

Death

Death
 Leaders Purged in 1976-81

Zhang Chunqiao of the

“Gang of Four” arrested
right after Mao’s death

Ji Dengkui and Chen

Yonggui (“leftist” peasant
leader) purged by Deng in
Feb 1981

Photo taken by Prof. David Zweig

Selection of Leaders:
What do we know?
New leaders do not pick their teams

• Makes succession long-term process

• Irony of Chinese succession: Retiring leader selects incoming

elites that surround new Prime Minister and new General
Secretary on PB-SC because his ally controls Organization
Bureau of CCP

• As if Bill Clinton had picked George Bush’s cabinet

Slow Process to Consolidate Power

• Jiang took 8 years to consolidate power (1989-1997)

• Moved Shanghai allies into PB-SC in 1997, then pushed

political agenda

• Cautious until Deng died (2/1997), then privatized SOEs at

16th Party Congress (10/1997) and in spring 1998 pushed
“reform wave”

• Needed 2nd Party Congress as General Secretary to control

appointments, purge opponents, set policy agenda.
 Takes time to consolidate power
despite top position

• Hu Jintao, after two years in power, finally became Chair of

Military Affairs Commission, but never controlled MAC

• Also never overcame influence of Jiang Zemin; never

controlled the PB-SC
Hu Jintao’s Political Weakness

• No members from
Hu’s Faction on 17th
PB-SC

• 3/9 main were key

members of Jiang
Zemin’s “Shanghai
Faction”

Photo source: South China Morning Post

 Xi’s Reform Program may have
come too early

• Xi Jinping challenges this perspective.

• But Xi slow to implement his reforms, has few allies on PB-

SC.

• May need to wait until 19th Party Congress to implement his

policies.

• Currently Chairman of all committees, trusts few.

 Succession Often a Crisis

1954 Gao Gang, potential successor, disappears

1969 Liu Shaoqi, likely successor, dies of pneumonia in prison

1971 Defense Minister, Lin Biao, Mao’s chosen successor (in 1969) and “close comrade in arms”
died in plane crash fleeing China
1973 Wang Hongwen of Gang of Four promoted, but never made it

1976 Deng pushed from office by Gang of Four and Mao

1976 Gang of Four, top “leftists” including Mao’s wife, Jiang Qing, arrested

1981 Deng pushed out Hua Guofeng who was Prime Minister, Chair of CCP and MAC

1987 General Secretary Hu Yaobang kicked out

1989 General Secretary Zhao Ziyang begins 17 years of house arrest

2002-04 Jiang holds on as Chairman of MAC

Retired Leaders and
the Succession Process
Continued Influence of Retired Leaders

• Source of continuity and stability or opposition to political

reform

• “Eight Immortals”, all Long Marchers, helped Deng purge

Hu Yaobang in January 1987 and purge Zhao Ziyang in
June 1989

• Joined Expanded Politburo Meetings, with no right to be

there by CCP norms
Prisoner of the State: The Secret Journal of Premier Zhao Ziyang,
by Zhao Ziyang as translated by Bao Pu

Elite Mobility in China, 1921-2013

Some of “Eight Immortals” participated in illegal

“Expanded Politburo Standing Committee” Meeting at Deng’s house
which purged Zhao Ziyang from post as General Secretary
 Continued Influence of Retired Leaders

• Deng saved Jiang in 1993 from attack by Yang brothers.

• Jiang to Hu succession first peaceful transition of power in

CCP history! (took them a long time!!!)

• 11 March 2003, Hu Jintao held 2 of 3 top posts in China; Yet

Jiang dominated.
Jiang was able
to maintain
dominant
position for
two years
despite having
retired as
General
Secretary of
the CCP and
President of
PRC.

Jiang Zemin,
in Chinese
Elite Mobility in China, 1921-2013
Rejection of two
reformers for Standing
Committee at 18th Party
Congress, Li Yuanchao
and Wang Yang,
showed influence of
retired leaders

Figure source: South China Morning Post

New Leaders Bring
Policy Changes
New Leaders Make a Difference!

• Every leadership change in any communist country since

1917 followed by budgetary allocations and policy changes
under new economic teams, like elections in democracies.

• Elite policy differences shape economic development

strategies and budgetary allocations.

• Affects growth rates, regional development, consumption

versus savings, attitude to FDI and China’s role in the world,
role of private versus public sector in China, etc.
New Leaders Lead “Policy Waves”

• Major changes in policy in the reform era came in “Waves”—

1978-79, 1984-85, 1987-88, 1992-93 and 1997-98

• In each case a significant change in leadership occurred.

Below are some examples:

• 1978-79: Deng returned to power and opened coastal China

to international market, dismantled collective agriculture,
established diplomatic ties with US, declared “reform and
opening policy”
New Leaders Lead “Policy Waves”

• In 1987, Zhao Ziyang became the General Secretary of the

CCP and in 1987-88 he introduced “coastal development
strategy”, major political reforms, established 6,000 foreign
trade companies, established high tech zones, and
liberalized prices

• In 1997, Jiang Zemin consolidated his power at the 15th

Party Congress and in 1997-98, he and his Prime Minister
privatized all public SMEs, introduced private housing
market reform, and dramatically cut the bureaucracy

• Current reform is “Sixth Wave of Reform” since 1978

Hu Jintao unable to introduce
“Policy Wave”

• Weak leader, good values but unable to implement his

policies

• Vested interests became very powerful

• Environmental degradation increased due to SOEs

• Prime Minister could not close private coal mines that were
killing 6,000 miners per year!
Hu Jintao unable to introduce
“Policy Wave”

• Retrenchment on WTO commitments made in 1999 in order

to join — increased protectionism

• Jump in investment in domestic security forces

• Challenged for power by Bo Xilai, son of one of “Eight

Immortals”, who was backed by Oil/Security Faction

• No major policy wave under his leadership

What about leaders in your country?

Do policies seem to change each time
the leaders change?
Characteristics of
Chinese Middle-level
Leadership
Background of Middle-level Officials

• Replacement of politically trained officials by college

trained, often engineers

• Many bureau chiefs in central ministries spent time at

Kennedy School or other MPPA programs

• Data in following 2 slides show how political events change

nature of local elites
Age and Education of Elites before and
after 1982 Administrative Reform

:
Change in leader’s work experience,
1982-87

Result of 1985 search for new generation of leaders

Rise and Fall of Technocrats in Ministerial and
Provincial Leadership Posts (1982–2013)

Cheng Li, “The Rise of the Legal Profession in the Chinese Leadership,”
China Leadership Monitor, no. 42, 2013.
“Law of Increasing Disproportion”
Few Women in Top Leadership

• Although Chinese society fairest to women in East Asia

(other than Hong Kong), women rarely rise to top positions
in CCP or government

• Dismantling of CCP during Cultural Revolution prevented its

“selectorates” from keeping women out

• Largest number of women into CC-CCP in 1973

Female Members of Central Committee,
1956-2012
Percentage of
Percentage Female Female
Central Total Female Of Female Alternate Alternate Alternate
Committee Members Members Members Members Members Members
8th (1956) 97 4 4.1% 73 4 5.5%
9th (1969) 170 13 7.6% 109 10 9.2%
10th (1973) 195 20 10.3% 124 21 16.9%
11th (1977) 201 14 7.0% 132 24 18.2%
12th (1982) 210 11 5.2% 138 13 9.4%
13th (1987) 175 10 5.7% 110 12 10.9%
14th (1992) 189 12 6.4% 130 12 9.2%
15th (1997) 193 8 4.1% 151 17 11.6%
16th (2002) 198 5 2.5% 158 22 13.9%
17th (2007) 204 13 6.4% 167 24 14.4%
18th (2012) 205 10 4.9% 171 23 13.5%
“Law of Increasing Disproportion”
Few Women in Top Leadership

• No woman has reached PB-SC without being married to a

member of PB-SC

• Generally only one woman on Politburo, though 18th CC

Politburo has two

Looking at your own country, what is the status

of women in your country’s parliament?
Generations among
Chinese Elites
Importance of Generations

• Definition: leaders of similar age who share common

experiences and rise to power at the same time

• Often rising as a cohort or collective

• Assumption that shared recruitment experiences yield

shared values and attitudes towards politics
Importance of Generations

• Four key generations

First Generation:
• Long marchers, dominated Chinese politics until mid-1990s, but
now almost everyone is dead

• Deng called “second generation” but I don’t know why

Third Generation: “Soviet trained generation”
• Graduates from universities in 1950s, many trained in USSR, Li
Peng, Jiang Zemin

• Positive view of reforms under socialism

Numbers of Chinese Students going to the
Soviet Union and Returning, 1951-1965

2085 2072
2000
1932

1500
1375
1287 1249

1000
828

645
583
483 460
500
375
378 317 307
339
220 122 115
250
74 55 20
7 103 3 54
0
1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965

Number of Students Going to the USSR Number of Returned Students

Source: Chinese Education Achievement (1949-1983) (Beijing: People’s Education Press, 1995)
Importance of Generations

Fourth Generation:
• Graduated from college in first half of 1960s
• On the job when Cultural Revolution begins
• Too old to go to countryside during Cultural Revolution
• Great concern about stability
• No foreign experience
Importance of Generations

Fifth Generation was expected to take power in 2012

• Took important posts at 17th CC-CCP
• Lived in countryside during Cultural Revolution, active in
reforms of 1980s after college

• Many took college entrance exams in 1977-79, known as “77-

78-79 group”

• Share power between “tuan pai” and “princelings”

Do you have ‘political generations’

in your country?
International Experience
of Top Chinese Leaders
 Decline in International Experience
Among Leaders

• Decline in percent of leaders in Nationalist Party which ruled

China in 1927-1949 and CCP (1956-2007) who had studied
abroad.

• 1956, over 40% of CCP leaders had studied overseas, many

in Europe, but major decline after Cultural Revolution.

• No leaders studied abroad from 1960-1978.

• Soviet education of CCP leaders in 1949-1954 meant that in

mid-1990s, 13% of elites had overseas education, due to
time lag until they get into the CC-CCP or Politburo.
 Return Migrants in the KMT CEC (1926-1946)
and CCP Central Committee (1956-2007)

80%
70%

60%
50%
Percent

40%
30%
20%

10%
0%
1926 1929 1931 1935 1945 1956 1969 1973 1977 1982 1987 1992 1997 2002 2007

Year

Source: Donglin Han, "International Migration and Domestic Politics: Perspectives from Overseas Return Migration in China,
1920-2007" (Ph.D. Thesis, Hong Kong University of Science and Technology, 2009).
 Returnees in Political Bureau and its
Standing Committee, 1982 to 2002
Politburo Standing Committee
Period Session No. of Total No. of Returnees Total
returnees Members Members

1982.9 12th 1 (4%) 25* 0 (0%) 5

1987.11 13th 2 (12%) 17 2 (29%)** 7

1992.10 14th 6 (30%) 20 3 (43%) 7

1997.9 15th 6 (27%) 22 4 (57%) 7

2002.11 16th 1 (4%) 24 0 (0%) 9

Notes:
* Number based on 5th Plenum, 12th Party Congress, Sept. 1985.
** Leadership changed in 4th session of 13th Party Congress, after Tiananmen.
Source: Donglin Han, "International Migration and Domestic Politics: Perspectives from Overseas Return Migration in China,
1920-2007" (Ph.D. Thesis, Hong Kong University of Science and Technology, 2009).
 Current Leadership Group

• 2002-12 CCP leaders had the least foreign educational

experience of any group since 1927.

• Zhang Dejiang studied in Kim Il-Sung University in North

Korea.

• Current group has people — Wang Qishan — with important

international relationships.
Returnees in Political
Bureau and its Standing
Committee, 2012 with
some overseas
educational experience

Figure source: South China Morning Post

Policy Process in
Chinese Politics
What is the Policy Process?

• The way leaders and their governments determine what

issues they wish to resolve, make decisions about those
issues, and turn those decisions into concrete actions

• Key is to look at:

1. How issues do or don’t get onto the decision making agenda
2. The selection and evaluation of options to solve a problem
3. The decision itself
4. The implementation (or evasion) of the policy
5. Feedback that allows the assessment of the policy’s outcome
and any adjustments to make the policy successful
Eleven Key Characteristics of
China’s Policy Process

1. China has not “institutionalized” its policy making institutions

• leaders move decision making authority to new government

bodies to enhance their control over policy making

• They may alter the rules or membership of these organizations

2. The ability to control decisions often based on leader’s power, not

fixed rules in established institutions

3. Although it’s an authoritarian system, China’s leaders often hear

society raising problems to which they respond

4. Based on their priorities, new leaders introduce new policies,

strategies and directions
Eleven Key Characteristics of
China’s Policy Process

5. The bureaucracy both implements policy and impedes

implementation when feeling threatened

6. Most “reforms” shift China from a planned to a market economy. This

“deregulation” weakens bureaucrats’ authority over goods and
services, so bureaucrats must be “bought off”

7. Tension exists between localities and Beijing as each introduces

policies to expand their own resource base

• The central government usually allows adjustments based on local

conditions, but central government has trouble monitoring evasion
Eleven Key Characteristics of
China’s Policy Process

8. China often tries out a new policy in “test points” before introducing
it to the whole country, and investigators (“work teams”) check
implementation in localities

9. Since the mid-2000s, vested interests – the bureaucracy, SOEs,

mining and energy factions, the public security apparatus, etc. – have
used their power to resist new policies
10. Reforms often occur through a big push from the central leadership
– “policy waves” – when a series of new reforms are introduced
simultaneously
11. Power comes from setting the agenda — if something does not get
on the agenda, it cannot happen, except at the locality
The Politics of Policy
Making in China
Agenda Setting

• Leaders decide which issues need resolving.

• Leaders propose policies that enhance their political strength,

resolve social problems, fulfill promises made while
campaigning for office or match their ideology.

• Even in non-electoral systems, elites are pressured to

respond to demands from society.

• “Crises” are thrust onto political agenda from overseas.

• Who calls the meeting sets the agenda.

Non-Decisions Reflect Political Power

• Definition: Issues that need resolving for the good of society

but remain off the decision making agenda.

• Non-decisions often equated with “Second Face of Power.”

• If power is the ability to make A do B when she did not want

to do it, the “second face of power” is the ability to stop A
from doing B when she wanted to.

• Powerful forces, known as “vested interests”, try to prevent

decisions that hurt their interests.
Examples of Non-Decisions

• When every one knows there is an environmental problem

but the government does nothing about it.
• Beijing has had dirty air for many years;
• U.S. Reagan Administration denied existence of acid rain.

• Sexual assaults of women in India kept off the agenda.

• Look at two cases of similar environmental problems where
one locality cleans up but another doesn’t.
• The answer will say a lot about power in the locality.

Can you think of some kind of “non-decision” in your part of the world?
Agenda Setting Through “Policy Winds”

• Issues can get on policy agenda through “Policy Winds”

• Leaders mobilize support for their policy within society or

among local leaders, then force it onto CCP’s decision making
agenda

• Usually occurred when leaders resisted the policy of the

dominant leaders
Mao’s Collectivization Strategy, 1955,
as a “Policy Wind”

• Big debate in CCP over pace of collectivization in 1954-55

• Mao wanted to move from Mutual Aid Teams, where peasants
only helped each other farm, into collectives with community
ownership of land
• Most leaders worried that a rapid shift to collective
agriculture would undermine support for socialism among
peasants who owned property
• In spring 1955, central leaders dismantled 20,000 collectives
• So, in August 1955, Mao spoke to an meeting of provincial
party leaders that had no decision making authority
Mao’s Collectivization Strategy, 1955,
as a “Policy Wind”

• Mao accused leadership of “walking along like women with

bound feet,” falling behind the masses’ desire for socialism

• Some provinces pressed localities to establish cooperatives

• Mao’s personal secretary, Chen Boda, collected reports from

these locations showing that peasants wanted
collectivization

• By October 1955, a CCP plenum approved speed up of rural

collectivization
Deng’s “Southern Trip” as “Policy Wind”

• After collapse of Soviet Union in August 1991, leaders in CCP

feared their reforms would destroy Party’s dictatorship

• Deng, however, argued that absence of economic reform

would insure CCP’s collapse, so in late 1991, he called for a
renewed reform program

• Conservatives in the CCP blocked his efforts, demonstrating

“second face of power”
Deng goes South to mobilize support
for his policy of reform

• Deng went to Guangdong and Fujian provinces where

reforms began in 1978-79 and called on local leaders to “be
bold” and “take risks”

• He spoke to frustrated local leaders who wanted to develop

their localities but were financially constrained from doing so

• For two months, Beijing newspapers ignored his trip

• But after pressure from provincial leaders and one or two

leaders in Beijing who took Deng’s side, trip reported in
People’s Daily and reforms were off and running
Selecting Policy
Alternatives
The Sources of Alternative
Policy Options

• Experiences learned overseas, though visits, or from World

Bank reports

• Experiences from China’s recent past

• Leaders’ ideas, especially Mao’s, may be tested

• Insights from Overseas Chinese in Hong Kong

• Ongoing peasant experiments

• Policies need to show success before being expanded

Numbers of Chinese Students going to the
Soviet Union and Returning, 1951-1965
Experiences from Abroad

• In 1950s, massive borrowing from Soviet experience, with

administrative planning, education, science and technology,
collectivization, controlling grain markets or foreign trade
• Reforms in 1975 from Hungary — overseas study tours

• 1978-79, United Nations Development Programme (UNDP)

took leaders, including Jiang Zemin and Zhu Rongji, to South
Korea, Sri Lanka, and Rotterdam to study export zones
• Deng sent advisors overseas before 1978 reform meetings
• “Export-led growth” learned from World Bank report on
China's trade or from visits to East Asian Tigers
Learning from China’s Previous Experiences

• In 1960s, Mao forbade dividing land among families, but by

1978, Mao was dead, so peasants returned to earlier reforms
carried out in 1961-62 in wake of Great Leap Forward (GLF),
and proceeded to redivide the land to the households.

• Special Economic Zones of 1979-81 modelled on export

processing zones of 1960s in Guangdong Province
Competition among bureaucracies
over policy alternatives

• Cuban Missile Crisis showed that bureaus promote solutions

to problem that channel resources into their coffers or
expand their role

• Policy for funding retirement in China delayed for years in

1980s and 1990s as ministries fought for right to run the
policy

• Ministry running the policy would handle lots of money, build

new bureaus
Ideology as constraint on
policy selection

• Some policies are not publicly discussed because the name of the
strategy — “privatization”, “decollectivization” — is ideologically
unacceptable.

• Division of land among households in 1978 called “Household

Responsibility System,” as Mao criticized “setting contracts to the
household” in 1962.

• 1997 privatization of SOEs called establishing “various forms for

materializing public ownership that can greatly promote the growth
of the productive forces”, as leftists would attack Jiang for
“privatization” (siyouhua) as abandoning socialism.

• Here the emphasis is on promoting growth not the ownership rights.

Making the Decision
Decision Making Models

• One leader dominant — “Mao in Command” model

• In 1943, CCP decided that when top leaders in CCP

disagreed, Mao was the final arbiter

• No. 1 leader, the General Secretary of the PB-SC, gets

final say

• Today, Xi Jinping dominates all important committees

and is the final decider of just about everything
Factionalism and Decision Making

• In 1980s, Hamrin saw policy “packages” as outcome of

negotiations among competing factions, each getting some
of their interests into an overall policy program.
• But decision process stagnates if factional disagreements
strong, while reforms likelier when one faction dominates.
• Some argue that factionalism is overstated, little influence
on policy.
• Cultural Revolution narrative of a “two line struggle”
between Mao and a bureaucratic faction led by Liu Shaoqi
may misrepresent history.
Locus of Decision Making

• Organization where decisions are made may change,

affecting who attends the meeting and who sets the agenda.
• Leaders fight over which organization has authority to make
decision.
• Leaders moved authority back to committees that had lost
authority during political unrest.
• Party Secretariat, which Deng ran in 1950s and 1960s, closed
during CR but re-established under Hu Yaobang in 1980 to move
decisions away from Hua Guofeng who ran the PB-SC.
• Xi Jinping has established new “Leadership Small Groups” on
issues such as national security or reform, which he can
dominate.
“Expanded” Politburo Meetings

• Strategy of Mao and Deng to gain votes at specific meetings.

• Mao purged Liu Shaoqi at 8th Plenum of 8th Central

Committee in August 1966 by stacking the meeting with PLA
officers and radicals who supported his views.

• Deng used it to remove Hu Yaobang in Jan 1987 and Zhao in

June 1989 when he brought in retired top leaders.

• In 2012, when new PB-SC chosen, Jiang Zemin and Li Peng

reportedly attended meeting that made final decisions.
Social Interests and
Policy Making
Bureaucratic Interests

• Which bureaucracies involved in making the decision and

how policy affects their interests impact the decision and
how it is carried out
• Reforms succeed when bureaucrats gain financially from
reform
• Reforms targeting officials — anti-corruption campaigns,
streamlining the bureaucracy, deregulating bureaucratic
controls, etc. — meet resistance
• Bureaucracy is one of the strongest forces in China — needed
for policy implementation, but also adjusts, twists or blocks
policies
Social Forces and Policy Initiation

• Authoritarian systems prevent citizens having access to

policy process

• Skilling and Griffiths saw “tendencies of articulation” where

citizens cannot directly advocate (articulate) new policies,
but raise issues that need to be resolved

• Environment, housing, health care, retirement, education,

land

• Occurs today through widespread protests, public opinion

polls, internet chat rooms, blogs
“Social Contracts” and
“Path Dependence”

• “Social contract” — support for CCP due to special

treatment of a social class — lets workers or peasants
constrain policies.

• Industrial structure entails commitment to working class,

creating “path dependence,” where leaders must consider
coalitions and influential groups in transitional era.

• In Nantong, Jiangsu Province, in 1980s, funds from central

government to develop city’s harbour and export zone used
to support SOE workers’ wages in older section of town.
“Social Contracts” and
“Path Dependence”

• As of 1992, despite plan to open Nantong to outside world

under Coastal Cities Policy, no road from zone to harbour

• Zhangjiagang refused to move county capital to harbour as

most officials and their families lived in old town

• Social contract hard to break, but Jiang Zemin did replace

“worker-peasant alliance” established in 1950s, with alliance
with leading social classes under reform, including letting
capitalists into CCP
Policies Driven by Society

• Local division of land preceded formal policy declarations

• CCP officially forbade “household quotas” after they began in

poor parts of China

• Deng Xiaoping and reform leaders let poorer areas

demonstrate the policy’s value

• Policy, once approved officially, forced on all localities —

“one cut of the knife” — ignoring local conditions

• Areas that did not want to do it were forced to do it

Policy Implementation
through Campaigns
“Campaigns” as a form of Policy
Mobilization and Implementation

• Particularly under Mao, most policies implemented through

campaigns which mobilized society to fulfill the policy goals.

• Media campaigns and propaganda to support the policy.

• Work teams went to check on implementation, lived with

peasants in a locality — “three together” — work, live and
eat together.

• Great pressure on citizens to fulfill state targets and

implement the policy.
Campaigns

• Documents outlining the policy sent down through

bureaucracy to counties, where county officials report to
local leaders who gathered in county seat

• County officials could alter the content of the policy

• Economic, political, ideological or mass indoctrination

campaigns

• Mobilization placed CCP members under enormous pressure

to meet targets or quotas; failure could affect their careers
Economic Campaigns

• “Models” helped implementation show positive impact of

policy

• But models often succeeded because central government

assisted models get benefits that later participants could not
gain

• 1988 policy pushed TVEs to export, massive media

propaganda about villages getting rich

• But many villages that tried to export lost money due to

excess production and no foreign markets
Political Campaigns

• Targeting enemies — “killing the chicken, scare the monkeys!”

• Under Mao, former “class enemies” dragged out as targets
• During campaigns, leaders attacked opponents, accusing them of
resisting the policy or being the source of opposition to the policy,
even if not guilty
• Quotas of political targets set at 5%, forcing local officials to arrest
innocents to meet their quota
• Officials who responded slowly to political campaigns could be
accused of “rightist” behaviour, while taking the wrong “class
standpoint” made someone potentially a “class enemy”
Conformity under Campaigns

• Campaigns increased the likelihood of implementation but pressured

officials to carry out policies with negative consequences
• Policies were to be adjusted to “local conditions” but campaigns led
to uniform implementation
• If economic campaign became political and top leaders made it a
priority, then much harder to resist
• During the Cultural Revolution, fields were terraced and grain was
planted throughout the country to enhance food independence, in
many inappropriate places as local leaders played it safe
• “Better to be left than right”
Local Response,
Unintended Consequences
and Policy Adjustment
Local responses to national policies:
Dilemmas of monitoring compliance

• Because of size of country, there are many expressions about the

difficulty of monitoring policies

• “The mountain is high and the emperor is far away”

• “Upper level has its policies, while we have our counter policies”

• Diffusion of authority within bureaucratic systems — “leakage of

authority”, as the policy moved down the bureaucracy

• In 1950s and 1960s, poor society relied on “telephone” conferences

from centre to localities to monitor compliance
Local officials mold policies to
their interests

• Policies often implemented in way unanticipated by central

leaders as local officials twist policies to match their needs
or goals

• 1997 call for “diversifying the forms of ownership” in SOEs

led to widespread Manager Buy Out (MBO) in summer of
1998

• “Content” of policy changed — officials reported

“diversification” as they stripped factories of equipment or
took over the enterprise
Impact of Local Characteristics

• Speed and form of decollectivization varied based on local

characteristics
• Poor areas with weak collective economies quickly divided land
while wealthy suburban areas, with strong collectives — including
mechanized agriculture — delayed
• Strong local leaders imposed their interpretation, while weak
leaders influenced by elders and strong families in locality
• On speed of decollectivization, types of crops mattered as did
land/labour ratios, importance of carefully managed irrigation
systems, etc.
Think about how local conditions, such as the level of mechanization, the crop
type, or the density of the population could make a difference as to whether or
not a locality may want to divide up the land among families.
Use of quantitative measures and
quotas to demonstrate compliance

• Quotas make it harder to evade policy but allow for false

compliance.

• In 2009, CCP demanded that cities recruit overseas talent;

many cities counted people already returned to fulfill quota.

• Use of quotas during political campaigns, such as Anti-

Rightist Campaign, when 5% of people declared to be bad,
forced local officials to include people who had not done
anything wrong.

• Also gave local officials chance to arrest opponents.

Policies with heavy political content
hard to oppose

• Political pressure to mobilize support for policies makes it

difficult to challenge policy or let real information reach the
leadership.

• During 1959 Anti-rightist Campaign, great story of local

leader who stopped talking for 20 years.

• Nationalistic foreign policies become hard to challenge, so

today Chinese who don’t like China’s policies in South China
Sea under threat on the internet.

• Today, may be very difficult to challenge anti-corruption

movement.
Interconnectedness of Policies

• Under planned economy, policy change in one realm may affect

related policies, forces readjustment in existing policies.
• Central leaders may ignore rational calculations of local officials
when pushing a new policy while local leaders, under pressure to
implement the policy, deny interconnectedness of policies.
• Conversation with local official, spring 1981 on decollectivization’s
impact on birth control.
• Dividing land among families based on size of household created
incentives for more, not less, children, leading to draconian
population controls in rural China in 1983.
“Policy Fevers” as Policy Outcome

• In reform era, policies cyclical with deregulation followed by

retrenchment — led to “feverish” implementation of policies in fear that
they would be rescinded.
• Administrators could re-establish regulations or limit a new liberal policy
before some of the localities had implemented it.
• Laggards to new policies may not benefit from early economic benefits
• So many policies, such as established export-processing zones, joint
ventures, SOE privatization, going overseas to study — occurred very
quickly.
• Local government plans to confiscate land in 1988-89 were shut down by
Tiananmen, but in 1992-93, cities expanded zones, creating “zone fever.”
Policy Failures
and Successes
Policy Failures: The Great Famine,
1959-1961

• How could CCP that came to power with support of peasantry

introduce a policy that killed 30-40 million peasants in
largest famine in world history?
• Tide of radicalism began in spring 1957, with Anti-Rightist
Campaign, followed by Great Leap Forward and creation of
“communist-style” People’s Communes in summer 1958.

• High tide of ideological fervor, false grain projections fed

predictions of imminent communist utopia.
• Officials exaggerated grain estimates tenfold, had to turn
over grain to avoid being accused of falsifying statistics and
“rightism”.
Policy Failures: The Great Famine,
1959-1961

• When grain deliveries not met, local officials accused “class

enemies” among former wealthier peasants of hiding grain in
mass conspiracy.
• Leaders knew reports false, but deluded themselves that
peasant ideological fervor could promote production.
• Although Mao knew of deaths, he launched new “anti-
Rightist campaign” against opponents of Great Leap, making
policy revision impossible.
• Feedback was blocked and millions died.
Mortality Rates in China, 1956-62
(per 1,000 population)
Example of success: Waves of Reform

• “Six Waves of Reform,” 1978-79, 1984-85, 1987-88, 1992-93,

1997-2000, 2013-
• Consolidated factional power due to elite rotation, brings
allies into PB-SC and often purges previous leaders or their
allies
• Failure of previous conservative restrictions facilitates new
consensus for reform
• Economy doing very well or in crisis
• Popular social support for policy shifts
Waves of Reform

• Positive international environment + good U.S. ties.

• Unintended consequences not yet visible.

• Whole package creates strong national context for implementation

and weakens bureaucrats’ ability to resist policies.

• May involve bureaucratic streamlining, leaving fewer bureaucrats or

weaker bureaucracy to resist the policy, but they must be given jobs
or opportunities in emerging economic sector.

• Example: Deregulation of foreign trade sector in 1980s allowed

bureaucrats to set up foreign trade companies, work as
intermediaries.
Fifth Wave of Reform, 1997-98

• In 1997, Jiang moved his team in from Shanghai

• Death of Deng in Feb/97 and retirement of Qiao Shi and Li

Ruihuan, with Zhu Rongji as PM

• Purge of Chen Xitong, party secretary of Beijing

• Jiang’s successful trip to US, major tariff cuts in preparation

for entry to WTO

• Housing reform, privatization of SOEs and major cut in

number of bureaucrats
Political Culture
in China
How do Chinese people pursue their
political interests?

• Two key questions:

1. Does Chinese culture affect the way Chinese people

engage in politics? Are Chinese people passive, or does
the impact of culture change as education, wealth and
political institutions change?

2. What modes or methods do Chinese citizens employ to

press their claims, why do they employ the ones they do
use and how effective are they?
Defining Political Culture

• “A particular distribution of political attitudes, values,

feelings, information, and skills that affects the behaviour of
a nation’s citizens and leaders throughout the political
system”

• What people know or feel about their political system affects

their behaviour towards it

• Variations among countries can be measured through

surveys
Three Views of Chinese
Political Culture

Chinese Political
Culture

Political culture as a
System-wide characterization or characteristic of an entire
Culturalist Approach society

Political culture determined

by rules and incentives
within organizations
System-wide characterization or
Culturalist Approach

• China seen to have a “passive” political culture

• Based on traditional peasant, and Confucian cultures

under which citizens accept hierarchy, respect for
political authority, conflict avoidance

• Leadership based on “virtue” of the

emperor, not on political institutions,
rule of law, limited political authority Chinese Political Culture

• Creates system with limited System-wide characterization

Political culture as a
characteristic of an entire

leadership accountability
or Culturalist Approach society

Political culture
determined by rules and
incentives within
organizations
Anticipated Results of
Culturalist Approach

• Popular demands for participation should be quite low.

• Citizens should be comfortable with authoritarian rule.

• People easily bought off by increased wealth.

• China should be unable to establish modern political

institutions, particularly democracy, as people do not have
the right values.
Anticipated Results of
Culturalist Approach for Elite Politics

• Elites not pressured to respond to social demands.

• Elites prone to mistrust, court politics, and factionalism.

• Elites reject diverse opinions needed for democracy.

• Unwilling to yield authority when in power in fear of

reprisals.
Political culture determined by rules and
incentives within organizations

• Organization’s rules and incentives determine how people

behave within the organization, leading to variations in
behaviour based on the incentives

• Negative impacts of tradition can be overcome

• Change possible by creating new

organizations with positive, Chinese Political Culture

non-traditional incentives
Political culture as a
System-wide characterization characteristic of an entire
or Culturalist Approach society

Political culture
determined by rules and
incentives within
organizations
Political Culture
as Empirically
Measurable Variable
Political culture as empirically
measurable characteristic of a society

• Some values more widespread in different societies.

• Some societies possess “participant” political culture, others have

“subject” political cultures.

• Chinese made uncomfortable by public display of conflict.

• China, with many uneducated people, would

demonstrate “subject” as compared to
“participant” political culture. Chinese Political Culture

• But as Chinese become more Political culture as a

System-wide characterization
educated, willingness to accept
characteristic of an entire
or Culturalist Approach society

public displays of conflict may Political culture

determined by rules and
become stronger. incentives within
organizations
Cross-national tolerance for
speaking at meetings, by education

• Chinese with no
education show little
tolerance, but once they
have some college
education, gap with
Western, democratic
societies shrinks.

• So education is an
important intervening
variable.

Source: Andrew J. Nathan and Tianjian Shi, in “Requisites of

Democracy,” Daedalus.
Variations among Chinese Societies

• Data suggest that Chinese discuss politics a lot

• Attitudes towards politics vary across different Chinese

societies which show that “Chinese” political culture is not
fixed

• Depends on political system and the type of regime in the

Chinese society
 Frequency of Discussions on Economic or Political
Issues in Three Chinese Societies, 1991-99

Taiwan, Hong Kong, Rural China,

1991-1997* 1996-1998 1999
Often 14.3 11.7** 15.5
Sometimes 29.7 62.4*** 37.2
Not often/very little 35.8 27.6
Never 19.4 26.0 14.5
Notes:
* Used average score for 1991 to 1997

** Significant upward trend in people choosing "often" with 8.6% in 1996

*** Hong Kong survey used three-point (rather than four point) scale
Political culture determined by
structures or institutions

• Political culture can affect what institutions are established,

but culture influenced by a change in the institutions or
nature of the political regime.

• Zhu Yunhan: Electoral change in Taiwan due in large part to

experience of participating in elections.

• Wang Zhenyao: By third round of village elections in rural

China, local officials could no longer fool the peasants.
Percent Disagreeing with Political
Norms in Taiwan, 1985-1991
1985 1990 1991 1985-1991

Norms % % % % change

1. Elders should manage politics 49* 81 81 +32

2. Many political parties lead to bad politics 34* 77 78 +44

3. All government ideas should be decided by the government 47* 60 65 +18

4. The government should decide what ideas are disseminated 38* 57 62 +24

5. Thought diversity leads to chaos 18* 29 32 +14

6. Diverse interest groups means there will be no peace 19* 32 30 +11

7. Enforce order rather than service 85* 81 82 -3

8. Legislative questioning leads to bad government 64 63 59 -5

9. Town/Village mayors should be appointed, not elected 74* 84 - +10

10. Violent criminals should be sentenced immediately 28 28 38 +10

Source: 1985 and 1990 Social Change Surveys; 1991 Yi-hsiang

Note: * p<.05 when 1985 is compared to 1990
Survey; and 1990-8Yi-hsiang Survey (item 8 only).

• Taiwanese attitudes towards politics changed as regime moved from Martial

Law (1985) and authoritarian state to more open democracy (1990)
Political Culture
in Rural China
Villagers and Democratic Idea

• Assumption in urban China that peasants lack democratic

values and are highly vulnerable to political manipulation

• Perhaps urbanites fear nationwide elections would bring

policy changes and end pro-urban policy bias

• My survey in 1999, 2400 villagers in 120 villages, in 4

counties, in two provinces in China — Heilongjiang and
Anhui — show that peasants have strong sense of democracy
Measuring the “Democratic Idea”

• Villagers responded to 6 statements including the 5 below:

1. “Only people with specialized knowledge and ability have the right to
speak during periods of decision making”
2. “If villagers disagree with local policies, they have the right to
petition the higher levels”
3. “People with good economic conditions have more right to speak out
on village policy as compared to people with poor economic
conditions”
4. “As long as the village economy shows stable development, there is
no need to raise the level of democracy”
5. “If current cadres are capable and trusted, there is no need for
democratic elections”
Distribution of the “Democratic Idea”
in Rural China, 1999

Strongly supported +2
Agreed somewhat +1
Disagreed somewhat -1
Strongly disagreed -2

• We gave 2400 villagers

an overall score for
“democratic idea”
Wealth and Political Culture

• Survey data showed that wealth affected view of politics and

democracy

• In rural China, people with middle and upper middle levels of

wealth most democratic

• Most wealthy oppose democracy while poor too busy trying

to make a living
Democratic Idea by Perceived Level
of Wealth (%)

Self-Perceived Level of Wealth

Lower Lower Middle Middle Upper-Middle Upper Total
(n=250) (n=435) (n=1415) (n=419) (n=102) (n=2621)
Democratic idea % % % % % %
Not democratic 41 28 26 29 38 28
A bit democratic 42 50 47 41 43 46
Democratic 9 14 16 17 13 15
Very democratic 8 8 11 13 6 11
Total 100 100 100 100 100 100
Measure of Linear Association, p=.003 Source: Zweig survey in rural China, summer 1999
 Businessmen strategies to deal with
government, Guangzhou and Xian, 1994
Ways to solve conflicts with particular Ways to protect themselves when particular
government departments government policies are hurting their interests
GZ Xian Total GZ Xian Total
Bear the consequences quietly 14.0 12.5 13.3 22.0 17.5 19.8
Directly negotiate 23.0 27.1 25.0 7.0 6.2 6.6
Through personal connection by a 9.0 11.5 10.2 2.0 4.1 3.0
third party
Bring it to local government 9.0 12.5 10.7 5.0 13.4 9.1
Bring it to court 12.0 9.4 10.7 3.0 6.2 4.6
Appeal to Beijing 0 4.2 2.0 8.0 1.0 4.6
Through political representatives 10.0 6.3 8.2 15.0 19.6 17.3
Through associations 16.0 8.3 12.2 26.0 18.6 22.3
Media (public opinion) 2.0 8.3 5.1 8.0 9.3 8.6
Collective action 1.0 0 0.5 1.0 0 0.5
Other 4.0 0 2.0 3.0 4.1 3.6
Total (N) 100 96 196 100 97 197

Note: Guangzhou people more likely to turn to their business associations and political representatives.
Villagers Not Passive!

• We asked villagers if they had tried to solve a problem in

their village over past 10 years

• Of 2,637 villagers who were asked to outline a major

problem in their village, 16.7% had tried to solve it
Rural Views on Economic
Development and Democracy

• Statement: “If village economy experiences stable development, we

do not need to raise the level of democracy”

Completely agree 6.6%

Relatively agree 14.4%
Not so agree 32.3%
Totally disagree 33.1%

• Challenges view of wealthy, anti-democratic elites who say

Chinese people care little about democracy, only about wealth
To explain why villagers would support increasing the level of democracy, even if the level of economic
development continued to expand, we can propose several hypotheses.

Which of the following hypotheses do you think best explains the situation?

o As the economy grows, and per capita income reaches a certain level, the demand for greater democracy
increases. So, there is a causal relationship between economic growth and demands for democratization.

o The two are not related at all. Villagers support greater democracy because they want greater democracy,
regardless of the level of economic development.

o Villagers know that if the economy continues to grow, there will be greater wealth in the locality. Therefore,
officials will be more likely to engage in corruption or stealing for public funds, which will also be expanding.
Enhanced democracy and greater transparency will prevent those trend.
Rural Views on Petitions to
Upper Levels

• Statement: “If villagers disagree with local policy, they have the right
to petition to upper levels”

Completely agree 41.1%

Relatively agree 40.3%
Not so agree 6.4%
Totally disagree 2.4%

• Petitions are a traditionally acceptable form of protest against

mistreatment by local officials
• Acceptable culturally, but CCP tries to limits its use
Good Governance, Economic
Development and Democracy

• Statement: “If current cadres are capable and trusted, there is no

need for democratic elections”

Strongly agree 12%

Agree somewhat 24%
Disagree somewhat 33%
Disagree strongly 22%
Don’t know/no response 9%
• Good governance not enough for 55% of our villagers — they want
democracy
Hypothetical responses to news that
cadres will carry out unfair activities

How to Respond No. Percent

Work with others to solve it 401 15.2
Do something or your own 58 2.2
No use to do anything 326 12.4
Don't want to participate 664 25.2
Express your views to the cadres 819 31.1
Contact the Village Assembly 504 19.1
Speak to Party Secretary or Village Leader 40 1.5
Other 14 0.5
Don't know 182 6.9
No answer 70 2.7
Total 3078 100.0
Political Participation
Definition of Political Participation

• “Political activity by private citizens designed to influence

government decisions, policy outcomes, or change leaders”

• Participation, other than in local elections, not sanctioned by

CCP but occurs in various forms

• CCP sees all “group” efforts outside its control as

illegitimate, based on assumption that CCP’s role is to direct
social change, not respond to social demands
Modes of Participation in
Political Science Literature

1. Run for Office

2. Vote

3. Campaign related activities

4. Group activities

5. Personalized contacting

6. Passive resistance to the state

7. “Everyday forms of resistance”

Modes of Participation in
Chinese Politics

1. Join the CCP and try to become an elite

2. Vote in elections
3. Join a mass campaign
4. Collective action or protest
5. Passive Resistance
6. Petition higher levels
7. Lobby government agencies
8. “Unorganized collective action”
9. Adjust government policies during implementation stage
10.“Everyday Forms of Resistance”
11. Personalized contacting
12. Become a dissident
Details on the
Modes of Participation
Join the CCP and try to become an elite

• Join the CCP

• Join a mass campaign — very important in 1950s and during

the Cultural Revolution

• Become a “Revolutionary Rebel” during the Cultural

Revolution, example of Gang of Four member, Wang
Hongwen

• Take civil service exam for government official

Gender, Ethnicity, Age and Education
(of 2.8 million new members in 2008)

• Women were 36.4% of

new members in 2008

• Under 35-year olds made

up 81% of new members
in 2008

• College educated
composed 31% of new
CCP members in 2008
Rural Elections

• Under collective system, elections for team leader were

sometimes run democratically

• In 1980-81, elections let villagers express displeasure with

local leaders

• Elections for Village Director introduced by Ministry of Civil

Affairs in late 1980s to get farmers to invest in rural
projects, bring stability

• Great variation in openness, campaigning, secret ballot,

with 40% of elections truly competitive as of 1999-2000
 Participation in Election-Related Activities
in Four Counties in Rural China, 1999

Number* % participating
Participate in propaganda to encourage people to vote 542 20.6
Nominate candidates 346 13.1
Vote for Village Committee members 2,092 79.3
Participate in Village Assembly or Party Members Assembly 259 9.8
Never participated in anything 263 10
Don't know 65 2.5
No answer 20 0.8

Notes: N = 2,637 Source: Zweig survey in rural China, 1999

* Villagers can select more than one response
Rate of Re-election in Anhui Province,
1999

N %

Former director ran for office and was re-elected 22 37

Previous director ran for office but not re-elected 27 45

Previous director did not run for office 11 18

Total 60 100
Note: Source: Zweig survey, summer 1999
45% of officials ran for office again but people voted
them out in a true indication of democracy.
CCP and Elections for Village Director

• In 1999, independent candidates able to run for office, while

local CCP Secretary not allowed to run for office, so elected
officials not previous official

• In 2000s, CCP worried about “two centers” in villages;

elected Director of Villager Committee and CCP secretary
who was selected

• As the former was more legitimate, conflicts emerged

between the two officials

• CCP decided to allow Party Secretaries to run for Village

Director
Elections for Provincial
People's Congress

• In 1980, after Deng speech supporting democracy, very

open elections

• Some candidates ran on anti-party platform but if elected,

not allowed to take office

• Elections in 1986 open in some cities

• When CCP tried to control them in December, students in

Hefei, Shanghai, Beijing, took to streets

• Led to fall of liberal General Secretary of CCP, Hu Yaobang in

January 1987
Group Activity and
Group Politics
Group Activity and
Pluralist View of Democracy

• Definition of Group activity: "conscious awareness of shared

interests" with leaders autonomous from state.

• Group interests key component of “pluralist view of

democracy”, where social groups compete for resources
from the state.

• Their competition to control the state makes society

democratic rather than the right to vote.
Party efforts to limit Groups

• In China, formal interest groups not allowed but they

emerge from formal organizations, such as Writers’ Union, if
CCP lets them

• CCP organizes people into associations to co-opt

independent political activity

• CCP claims to be “vanguard” or leading force in society

representing the working classes, and demands to
monopolize legitimate authority to determine the best
interests of the nation

• Sees interest groups as too narrow, self-interested

Reform, Groups and Participation
in 1980s

• In 1980s, reformers saw autonomous groups as way to generate

popular support and resolve social problems.

• In fall, 1986, SOE managers organized by reformers to discuss

political reform.

• Heated debate in 1987-88 about whether CCP should accept that

people with common interests should be recognized as having
legitimate interests and be allowed to organize and pursue those
interests.

• Zhao Ziyang's believed competing social interests were emerging

from economic reform, so after 13th Party Congress, he recognized
competing group interests in Beijing Review.
 Different Interest Groups
under Socialism

“There are very complex

relationships of interest
between town and
countryside, cadres and
masses, the various
professions, different age
groups, people with different
educational levels, central
and local governments, the
coastal areas and the
hinterland, raw-material –
producing and goods
processing areas and sellers
and buyers. All these interest
relationships are shifting,
creating new contradictions
and conflicts which must be
taken into account . . . .”
Source: Beijing Review, Nov. 30 – 5 Dec., 1987
Conservative Reaction to
Emergence of Interest Groups

• In fall 1988, conservative Prime Minister, Li Peng rejected

Zhao’s liberal ideas on interests in society

• In late 1988, liberal intellectuals demanded reevaluation of

1957 Anti-rightist Campaign

• Student efforts to build Autonomous Student Union in spring

1989 resisted by CCP leaders as was effort to have
independent trade unions
Controlling the Diversification of
Interests

“the diversification of interests

has complicated the distribution
and use of social wealth,
simultaneously increasing the
difficulties in coping with the
problems that are thrown up.
Chaos has emerged in various
economic fields. . . .

In sum, many orders have been

disobeyed and many prohibitions
have been ignored. Behind these
phenomena are local and groups
interests — in the final analysis,
private interests.”

Source: Beijing Review, Oct. 24-30, 1988

Lobbying government agencies

• Business associations actively give policy input and lobby

government agencies responsible for their associations

• Western Returned Students Association promotes better

ties overseas, advising on how to improve China’s image

• Local governments, particularly provinces, lobby central

government for favorable policies, investments, projects,
etc.

• Each province has its own office in Beijing to carry out such
activity
Collective Action
and Protest
Collective Action

• April 4th, 1976 saw major protest or public rally in support of

reform, and against Gang of Four

• Protest marches common in 1980s, as students engaged in

widespread collective action

• Tiananmen (June 4th) as largest protest against CCP since

1949

• Massive action in 1990s, by laid off workers

• Today widespread peasant protests over land become violent

Pro-reform rally in Tiananmen
Square, April 1976

Photo by David Zweig ©

Pro-reform rally in Tiananmen
Square, April 1976

Photo by David Zweig ©

Protests as the major form of
political participation

• Few legal institutions through which people can protect

interests

• Weak court system has favoured the powerful

• Protests attract press who publicize grievances

• Liberal CCP leader said protests help them locate local

problems

• One rural friend told me that peasants need to stay within

legal bounds but also make trouble!
Rising “Rights Consciousness”

• Corruption, inequality, and environmental degradation lead to

extensive social unrest
• Apartment owners form associations to fight developers
• Number of protests reported by security bureaus:
2003 55,000
2004 74,000
2005 86,000
2009 125,000
2010 180,000

• One protest breaks out every 3 minutes, 250 underway at any one
time!
Key Social Groups who
Participate in Politics
Key Social “Groups” who participate
in politics

• Some ”Leading Intellectuals” generated debates about

important issues in newspapers circa 2005

• Students participated in campus elections in early-80s, anti-

Japanese protests in mid-1980s, debating “salons” in 1986-
87, campaigns in Dec 1986 - Jan 1987

• Journalists highlight social problems, fight corruption, risk

their lives to bring attention to coal miner deaths, land
confiscation, etc.
Key Social “Groups” who participate
in politics

• Because value of collective land changes after it is

confiscated — peasants get 1-10% of final value and left
with no means of income, peasant activism major force

• 50% of all 185,000 protests over land disputes, second over

environment, then elections and corruption

• Lawyers frequently take up the apartment owners

complaints or challenge state on human rights
Dissidents: Why become one?

• Religious/Cultural conflicts, such as Christianity or Falun

Gong.

• Ethnic independence or rights, such as Tibetans or Uighurs.

• Human or legal rights consciousness — lawyers, journalists.

• Dissidents often know they have crossed a line and will be

treated harshly by the Chinese state, but this has become
their “profession”.
Estimating the Numbers

• No publicly available name list.

• Number in the 1000s.

• Prominent ones include Wei Jingshen, recipient of Nobel

Peace Prize, and Ai Weiwei, a famous artist.

• Cult trials in 2014 at 1555.

• There are 1000s of underground churches

Concluding the Modes
of Participation
"Unorganized Collective Action" –
a concept of Zhou Xueguang

• Chinese share similar institutional constraints — people’s communes,

tight control by work units, etc.
• Efforts to escape constraints may occur across the country as state’s
control weakens.
• Appears to be orchestrated but is really unorganized.
• Decollectivization saw 100s of millions leave communes at same time.
• Critique of CCP during “100 Flowers Campaign”, spring 1957, looked
organized, leading to “Anti-Rightist Campaign”, but it was not.
Wide-scale “passive resistance”

• In 1973, factory workers slowed down to protest poor

working conditions
• Work slowdown by bus drivers in Beijing in 1986 to protest
jump in taxi driver incomes and huge income gap
• Peasants in 1986 outside Nanjing stopped farming after a
village leader gave collective land to uncle to grow tree
seedlings
• Tibetan monks set themselves on fire
Personalistic Contacting

• Under planned economy (Socialism), many resources and

opportunities were controlled by officials, not market

• Scope of “politics” wide in planned economies, making

approaches to officials highly political

• People lobbied officials for access to goods — apartments,

permission to have a child, ration coupons, permission to
transfer jobs, etc.
Petitions to Upper Levels of
Government

• 9 million petitions in 2010

• In 1986, villagers outside Nanjing protested land

confiscation by township government; photographs and
petition to Nanjing Party Committee forwarded to township
government for resolution

• Likelihood of response 1/1000, offering few solutions but

alienating people who see the fraud
Policy Evasion as Participation

• Local levels resist unpopular policies or ignore central

leaders
• In 1950s, local officials “pressed from above” but “skewered
from below”!
• Often involves conspiring between local officials and citizens:
• Not closing coal mines
• Not implementing birth control policies
• Opening “private plots” during attacks on private sector in
countryside during CR
• Planting grain only on main road but growing other crops where
cadres will not go
Six Components of
China's Political Economy
China’s Political Economy

• Few developing societies have as political an economy as China.

• After 37 years of reform, bureaucrats, local and national leaders,

and new and old regulations maintain remarkable influence over the
allocation of goods and services in the economy.

• Ideology still influences economic policy; under Mao, it led to

extremism; under reforms, it limits privatization and global
integration.

• CCP’s authority depends on the economy, so managing inflation,

growth and economic challenges from the external world, give
economics enormous political significance.
Six Components of
China's Political Economy

1. National leaders' preferences for developmental strategies shape

China’s policies.

2. Economic deregulation threatens bureaucrats' power.

• Decades of planning/regulations gave bureaucrats control over

the allocation of wealth, resources, jobs, and people’s right to
participate in the economy.

• Reform means “deregulation,” taking control from bureaucrats

who as a result oppose change; the state must “buy them off”.
Six Components of
China's Political Economy

3. Leaders generally favour State-owned Enterprises (SOEs) over

private sector;
• Private sector creates more jobs but easier to control public
sector.
• Even in “going out policy,” SOEs still favoured.
4. State power determines country’s relations to global economy.
• How tightly to regulate economic interactions with outside world?
• Appropriate balance among imports, exports and consumption?
• International rules, norms, regimes, organizations, trading
structures, transportation networks, and pricing mechanisms
constrain leaders’ choices.
Six Components of
China's Political Economy

5. Dynamic tension between central and local state:

• Decentralization and deregulation (reform) of the economy left
local officials, not the market, in control over many resources.
• Despite booming private sector, central State-owned Enterprises
(SOEs) control 33% of China’s GDP.
6. Close link between private business and local state:
• Private sector works with local CCP and government, in part
because many entrepreneurs had been former officials.
• Local leaders depend on GDP for promotion, so they protect local
firms from competition.
• Local governments strengthened through joint ventures as they
owned half the firms.
China’s Political Economy
on the Eve of Reform
 Rural China and Agriculture

• Limited support for collective farming, particularly in famine

areas in 1959-62.

• All private firms in countryside, including hotels, restaurants,

food, feed and grain stores, collectively owned after 1956.

• Sharp constraints on off-farm labour, overemphasis on grain

production and grain self-sufficiency, led to limited income and
growth outside of farming.

• In 1976, risk of famine high in Sichuan and Anhui provinces.

 Urban “Bias”

• 2% annual growth in agriculture couldn’t drive the economy

• “Hu Kou system,” China’s own apartheid system, relegated

peasants to rural areas and rural income, strengthening the
urban bias.

• Bias included subsidized grain, food, housing, retirement

benefits or pensions, better urban schools for children, public
health care coverage, with large SOEs as welfare units.
Industry on Eve of Reform

• Excessive investment in heavy industry beginning in 1950s.

• Missed opportunities for export of light industry which is

natural benefit of low income economy.

• SOEs tried to be self-sufficient, hoarding, little specialization.

• No development of service sector.

• Too much industry in inland areas as China’s fear of war

after US build-up in Vietnam (1964-65) and Soviet build-up
along northern border after 1968-69, led to dramatic jump
in investment in Sichuan and Guizhou provinces.
Third Front Development, 1964-72

Capital Construction in Sichuan and Guizhou Provinces,

as % of National Total Investment, 1958-1984
16
14
12
10
8
6
4
2
0
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Guizhou Sichuan

Source: Barry Naughton, “The Third Front: Defence Industrialization in Chinese Interior,” The China Quarterly, No. 115 (1988): 351–386
Pre-1978 Labour Policy

• Villagers could not move to the city or into non-farm labour

where they would have earned higher incomes.
• Using “moral incentives” rather than clear material rewards
to encourage hard work, created egalitarian and sexist
reward system.
• Labour/dependency ratio within each household strongest
explanation for inter-family inequality.
Foreign Trade

• Role only to support imports, not force for growth.

• Central government major beneficiary, no incentives for
enterprises to export.
• Overvalued exchange rate made Chinese goods
uncompetitive.
• Domestic prices not in line with global prices, so trade
companies could manage prices to balance import and
export revenues.
• High degree of autarky from the global economy.
Impact of Reforms on
China’s Political Economy
Rural Reform triggers nationwide
growth

• China is one of few countries to rebalance urban-rural incomes and

let rural areas drive growth of the entire economy.
• Driven by 25% increase in price paid by state for agricultural
products in 1978, as well as growth of off-farm labour, rural
household income in 1978-1984 grew by 12.4% per year, urban
incomes grew 6.8%.
• Average annual increase of the gross value of agricultural output
between 1952 and 1978 was 4.2%, rose to 7.4% in 1979–1984.
• Annual grain output rose from 2.3% per year in 1952-78 to 5.1%
per year in 1979-84.
• The quality of food in cities, not just countryside, improved.
Villagers farming on their own in
rural areas outside Nanjing, Spring 1981

Photo by David Zweig © Photo by David Zweig ©

 Average Annual Growth in Agriculture,
1978-2012

14.0% Impact of decollectivization

and price increases
12.0%

10.0%
Annual Growth (%)

8.0%

6.0%

4.0%

2.0%

0.0%

-2.0%

• Source: China Statistical Yearbook, 2013.

Positive Impact of First Stage of
Rural Reform, 1978-84

• Increased support for CCP and its reform wing.

• 80% of peasant families renovated their homes in the

1980s, equal to 14.5% (18% × 80%) of world’s inhabitants
in the largest housing boom in world history!

• With more money, China’s peasants demanded more

consumer goods, driving light industry.
Rural Household Possession of Consumer
Goods, 1978-95 (per 100 household)
The Impact of Reform on
Rural Income
Urban/Rural Income Gap Narrows and
then Reemerges

• Between 1978 and 1984, rural incomes rose 12%, while

urban incomes rose only 6.5%.

• But in 1984, state shifted attention to urban industrial

reform, let prices of industrial goods rise to stimulate the
urban economy.

• By 1994, urban-rural income gap was greater than on eve of

rural reform in 1978.
Rural and Urban Per Capita Income
Annual Growth Rates, 1978-1994
Remarkable Decrease in Poverty

• In 1978-1995, number of people living under national

poverty line decreased from 270 million to 70 million and
down to 30 million in 2004.

• In 1997 (nominal) GDP per capita reached US$860, so World

Bank re-classified China from “low income” group to “lower-
middle-income” group.

• In 2003, (nominal) GDP per capita surpassed US$1,000.

Million rural residents under national
poverty line, 1978-2005

Million
250
250

200

150
125

100 85
65.4
50
32.1
23.7

0
1978 1985 1990 1995 2000 2005

Source: China Statistical Yearbook, various years

China’s Township and
Village Enterprises (TVEs),
1984-1994
TVEs benefit from decollectivization and
industrialize parts of the countryside

• Massive growth in off-farm labour after decollectivization

made farming more efficient.

• Millions left agriculture for higher value added work, with

the majority going to work in rural enterprises of various
sorts.

• Township and Village Enterprises (TVEs) employed 140 mil.

labourers by 1990 and drove Export-Led Growth in 1984-94.

• TVEs outside the state plan, funded by local governments or

by loans from local credit cooperatives where peasants had
put new wealth.
Relations between TVEs and SOEs

• Some TVEs under contract to urban SOEs wanting to escape state-

control or find floor space and workers for expansion.

• Shanghai-based engineers spent weekends upgrading rural

factories in southern Jiangsu and northern Zhejiang provinces.

• With few welfare costs — peasant workers received no housing,

medical benefits, subsidized meals, schooling or retirement
benefits — TVEs more competitive in domestic and international
market than SOEs.

• In 1984, government pushed SOEs to export but SOEs unwilling to

respond to foreign expectations. So TVEs stepped in.
Sub-urban centres of collective industry,
1985

Gross output of TVEs:

Over 2 billion RMB

1 billion to 2 billion
RMB

500 million to
1 billion RMB

Source: Perkins, Dwight H. Perkins, “The Influence

of Economic Reforms on China’s Urbanization.” in
Chinese Urban Reform: What Model Now? R. Yin-
Wang Kwok and William L. Parish, eds. (Armonk,
NY: M. E. Sharpe, 1990), p. 94.
TVEs Move into Export Economy

• In 1980s, TVE labor cheaper relative to Taiwan, Hong Kong, and East
Asia.

• In 1987, “Coastal Development Strategy” gave TVEs incentives to

export — could keep more US$ earned through exports.

• Rural joint ventures boomed, as Hong Kong and Taiwanese firms

moved into Pearl River Delta, Min River region in Fujian across from
Taiwan, and lower Yangtze River.

• By 1994, 50% of products purchased by state-run foreign trade

companies for export came from TVEs.

• In mid-90s, TVEs were fastest growing sector of economy, 30% annual

growth — more than 2/3 of increased exports.
Decline of Collective Rural Industry

• In the 1990s, competitiveness of TVEs began to decline due

to their heavy social responsibility and excess employment.

• In Jiangsu Province, in 1994, village and township leaders,

as well as enterprise managers, began to privatize TVEs.

• Many had been collective only in name, paying a fee to

local government for right to use the collective’s name.
No. of Collective Enterprises and TVE workers,
1979-2006 (year on year changes)
Role of the Public Sector in
China's Political Economy
Decline of the Public Sector,
1994-2003

• Industrial profits as % of GDP accounted for by SOEs and TVEs

shrunk from 14% in 1978 to 6% in 1987, to less than 1% in 1996.

• Public sector burdened by over-employment and welfare

responsibilities for millions of retirees.

• 15th Party Congress (1997) called for changing SOE ownership

structure.

• By summer 1998, rapid privatization of publicly owned SMEs led

government to call for “gradualism” but local officials pillaged public
sector.

• “Asset stripping” by new owners (mostly former SOE managers), left

workers jobless, without share of enterprise’s value.
 SOE Profit, 1978-2014
16%

14%
Percent of GDP

12%

10%

8% Downsizing Policy Set

6%
begins in for Period of
earnest Recovery
4%

2%

0%
1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004
Source: Barry Naughton, "State Ownership in a Market Economy: SASAC”, lecture at the
Center on China's Transnational Relations, HKUST, 15 Feb 2006.
Rapid Privatization as China's own
"Big Bang"

• Debate among economists and politicians in post-Communist world

after 1989 about privatizing SOEs gradually or by “big bang.”

• Naughton saw rush to privatization in 1990s as China’s “big bang.”

• In 1993-2003, 30 million SOE workers laid off, plus layoffs in urban

collective enterprises and state bureaucracy cost urban China 50
million jobs in 10 years!

• Privatization or closing of TVEs laid off 35 million rural workers.

• Total loss was 85 million jobs!

• Public sector workers declined from 24% of labor force in 1996 to

7% in 2003.
 Newly Laid Off Workers,
1993-2003
16
14
12
10
Million

8
6
4
2
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: Barry Naughton, "State Ownership in a Market Economy: SASAC”, lecture at the
Center on China's Transnational Relations, HKUST, 15 Feb 2006.
Social and political implications of
public sector decline

• Working class insecure about jobs, retirement, affordable housing,

medical costs and educating children to improve their social status.

• Falun Gong, spiritual movement, mobilized retirees, promising good

health — CCP attacked them in 1999 after rally near Tiananmen.

• In 1999, National People’s Congress new law legitimized

management buyout (MBO) of SMEs, changing private sector from a
“supplement to the public sector” to a “core component” of national
economy.

• In 2001, Jiang Zemin’s theory of the “three representatives” shifted

CCP base of power from historic “worker, peasant, soldier alliance”
to white collar and capitalist class.
Emergence of State-owned Assets Supervision
and Administration Commission (SASAC)

• While 1990s saw major privatization of SMEs, in 2003,

State-owned Assets Supervision and Administration
Commission (SASAC) established as ownership body
for major SOEs which remained publicly owned.
• Let State Council own key industrial enterprises in a few natural
resources and telecommunications which had natural monopolies,
and maintain support of working class.
• SASAC still controls 33% of total industrial assets nationwide.
• Many SASAC companies spun off subsidies which went for public
offerings (IPOs) on stock markets in Hong Kong and New York.
• Between 2003 and 2015, number of SASAC owned firms declines
from 196 to 110.
SASAC firms in top five sectors, 2006

Top Five Sectors Firms Capital Workers Total Cap Total

(Billion) (Million) (%) Workers
(%)
Oil and Refining 3 1,321 2.07 19.1 24.1
Ferrous & Non- 6 360 0.56 5.2 6.5
Ferrous
Electricity 10 1,500 1.20 21.7 14.0
Telecom 5 1,308 0.94 18.9 11.0
Military Industry 10 600 0.92 8.7 10.7
Total (Top Five) 34 5,089 5.69 73.4 66.3

Source: Barry Naughton, “Top-Down Control: SASAC and the Persistence of State Ownership in China”, Paper presented at the conference on “China and the
World Economy” Leverhulme Centre for Research on Globalisation and Economic Policy, University of Nottingham, June 23, 2006.
Central-Local
Financial Relations
Central-Local Relations and
Tax Revenue

• Political economists debate which level of government best

promotes national development.

• National governments must invest in public goods and

services, welfare, or transfer wealth from rich to poor
regions. Education sometimes provincial expenditure.

• In some Western countries, federal system gives both

central and local governments their own taxes.

• In Canada, provinces control taxes on extraction of

resources within the province, provincial sales taxes, while
cities control property taxes.
“Financial Responsibility System”
enriches localities

• In 1984, “Financial Responsibility System” gave each level of

government fixed amount of taxes to remit to level immediately
above.
• Amount remitted set for 3 years, based on average tax revenues of
previous 3 years, so growth in revenues in second or third year was
kept at level of government that collected them.
• Governments at various levels owned enterprises in China, so this
systems gave governments incentives to promote economic
development and government entrepreneurship.
• From 1978 to 1995, central government revenue as share of GDP
dropped from 33.8% to 10.8%.
• Jump of “extra-budgetary funds” outside central controls.
Recentralization of capital into
central government’s hands

• In 1994, Prime Minister Zhu Rongji increased taxes paid to central

government by provincial and local government, impoverishing
many local governments.

• Central government also imposed new tasks on localities—running

schools, reestablishing health care programs, building new roads —
without giving them adequate funds.

• Local officials imposed “arbitrary” taxes and “illegal fees” on

peasants for activities, such as slaughtering livestock or taxes for
building new schools or roads.

• Financial burdens and official behaviour led to upsurge in rural

protests.
Recentralization of taxes pays off
for Beijing

• Extracting local wealth improved centre’s ability to invest in

infrastructure — railroads, harbors and other public
facilities.

• Hu-Wen administration allocated more funds to countryside

and China’s Northeast.

• Government used 4 trillion RMB (US$585 billion) as stimulus

package to deal with 2008 Global Financial Crisis and to
promote growth in rural areas.
China as a “Trading State”
China as a “Trading State”

• Since WWII, states expand national power mostly through trade,

trade surpluses, Foreign Direct Investment (FDI), tech transfer,
foreign capital accumulation, and enhancing human capital through
education and inbound migration, but not through territorial
expansion. (Rosecrance)

• Leadership restructuring of investment from heavy to light industry

in 1979-1982, Solinger’s from “lathes to looms,” prepared China for
rapid export growth.

• Also laid groundwork for trade growth by investing in harbours and

roads in coastal regions beginning in early 1980s.

• China has benefited enormously from free trade since 1970s.

Learning from World Bank in 1980s
to shift to Export-Led Growth

• Significant cut in tariffs in 1990s helped export processing

sector by cutting the price of bringing in unassembled
products.

• Major transfer of labour from agriculture and inland regions

into export economy along the coast through TVEs.

• Huge FDI boom in 1993-95 and in 1997-2000.

• Joining WTO made trade major force for economic growth.

• China has had some success moving up product cycle, and

certainly has improved the quality of its manufacturing.
Annual Utilization of Foreign Direct
Investment (FDI), 1990-2014
140

120
US Dollars (Billion)

100
WTO entry
80
Deng’s
“southern trip” Global Financial
60
Crisis
40

20
Asian Financial
Crisis
0
1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014
Year

Source: Chinese Statistical Yearbook, various years

China’s Export and Import as
Shares of GDP, 1978-2014

Source: Chinese Statistical Yearbook, various years

Trade Promotes Autonomous Development,
Exports based on processing, 1999-2014

• Share of exports based on processing, rather than technology,

peaked in 2002 and declined significantly as of 2014.

Share (%) Growth of exports based on

processing compared to previous
year (%)
1999 47.0 61.0
2002 57.0 22.0
2005 54.7 27.0
2008 47.3 9.3
2012 42.1 3.3
2014 37.7 1.8
Dilemmas of a “Trading State”
Dilemmas of a Trading State

• Increased dependence on wide variety of goods, services,

access.

• Insecurity of high seas.

• Vulnerability to global financial markets.

• Need for competitive brand names for exports.

• Significant demand for energy imports as in 2006, 50% of

China’s energy imports were used for goods manufactured
for foreign firms.

• China depends on foreign firms for much of its exports.

Chinese exports, by type of enterprise,
1997-2012

Foreign-invested
and domestic
private firms
take control of
exports between
2000 and 2012
China's top export markets: Heavy
dependence on U.S. market

2005 2006 2007 2008 2009 2010 2011 2012 2013

United States 21.4% 21.0% 19.1% 17.6% 18.4% 18.0% 17.1% 17.2% 16.7%

Japan 11.0% 9.5% 8.4% 8.1% 8.1% 7.7% 7.8% 7.4% 6.8%

South Korea 4.6% 4.6% 4.6% 5.2% 4.5% 4.4% 4.4% 4.3% 4.1%

Germany 4.3% 4.2% 4.0% 4.1% 4.2% 4.3% 4.0% 3.4% 3.0%

Netherlands 3.4% 3.2% 3.4% 3.2% 3.1% 3.2% 3.1% 2.9% 2.7%

As U.S. is China’s no. 1 trading partner, U.S. Administration and Congress

has some leverage to push China to open its markets.
Source: Chinese Statistical Yearbook, various years
 US-China Trade Interdependence, I

(in bil. USD) 1998 2000 2002 2004 2006 2008 2010 2012 2014

China’s Total Trade 324.0 474.3 620.8 1154.6 1760.4 2563.3 2974.0 3867.1 4303.0

US’s Total Trade 2032.5 2523.2 2376.4 2933.0 3677.0 4392.0 4201.9 4974.8 5194.7

Sino-US Trade 54.8 74.5 97.2 169.6 262.7 333.7 385.4 484.7 555.1

Sino-US trade as % of
China’s total trade 16.9% 15.7% 15.7% 14.7% 14.9% 13.0% 13.0% 12.5% 12.9%

Sino-US trade as % of
US total trade
2.7% 3.0% 4.1% 5.8% 7.1% 7.6% 9.2% 9.7% 10.7%

Source: China’s total trade and Sino-US trade statistics are from China Statistical Yearbook Database, various years
US’s total trade statistics is from United States Census Bureau, historical series.
https://www.census.gov/foreign-trade/statistics/historical/index.html
 US-China Trade Interdependence, II

Sino-US trade as percentage of China and

U.S. total trade, 1998-2014 U.S. becoming far
18.0% more dependent on
16.0% exports to China,
14.0% fastest growing
12.0% market for US
10.0%
exports, as trade
dependence
8.0%
becomes more
balanced.
6.0%

4.0%

2.0%

0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Sino-US trade as % of China's total trade Sino-US trade as % of US's total trade
Chinese Firms “Going Out”
China’s Firms “Go Out”

• Definition: Government decision to encourage Chinese enterprises

to move “outward” – buy foreign firms, invest in overseas
companies, form joint ventures in foreign countries, buy oil fields,
mines, or other sources of raw materials, buy core technologies.

• Policy begins in 2003.

• National and provincial documents from Ministry of Foreign Trade

and Commerce outlined which resources, and in which countries,
Chinese firms will get cheap loans from Chinese government.

• Regulations introduced in 2005 favour SOEs over private sector.

• Some chaos as energy firms compete against each other for oil.
Dominant reason for firms to “go out:”
“Search for Markets”

Seek markets 85%

Search for strategic assets 51%
Global competitive strategy 50%
Support from Chinese government 43%
Favorable policies of foreign governments 41%
Making use of domestic production capacity 41%
Resource seeking 39%
Efficiency seeking 39%
Tariff-jumping by building branch plants 36%
Risk reduction 26%
Pressure from domestic competitors investing abroad 12%
Source: Joseph Battat, China’s Outward Foreign Direct Investment,
Foreign Investment Advisory Services, World Bank (2006).
Leaders’ reasons for “Going Out”

• Use enormous U.S. dollar holdings to invest in overseas

resources and buy companies.

• Many MNCs won’t bring core technologies to China, while

others complete manufacturing process — the secret
component — in their home country.
 No. of firms “going out” and Chinese
Outbound FDI (COFDI), 2002-12
US$ (billion)

Source: Statistical Report of China's Outward Foreign Direct Investment, various years. Ministry of Commerce
(2013年度中国对外直接投资统计公报)
One Belt, One Road Policy, 2014

• Use its foreign exchange to create external demand for its own
products, especially excess steel capacity.

• Link to Central Asia and Europe, China’s major trading partner.

• New initiative by Xi Jinping to establish policy credibility.

• Enhance ties with Southeast Asia.

• Recognizing that building infrastructure (roads, rails, harbours)

is critical for economic development, China established Asian
Infrastructure Investment Bank (AIIB) to facilitate Chinese
Overseas Direct Investment and loans, but not supported by
U.S.
Conclusion

• China benefitted enormously from 37 years of open policy.

• Previous experience of global integration was relationship
dictated by foreign imperialism, and then by USSR.
• Not easy to live with increased state of “interdependence”.
• Close link between domestic and global economies since
1978 as exports drove TVEs and now the state is linking
China’s capital surplus to overseas investment as a strategy
for developing its own economy.
• Difficult to shift from reliance on exports and expand role of
domestic consumption.
China’s Future
Will China change and if so, how?

Three scenarios:
1. Political Development and Democratic Transition
• Liberalization, leading to political reform and gradual democratic
transition.

2. “Market-Leninism”*
• Continued or even tightened political control, albeit with flexible policies
that keep stability and support for CCP.

3. Collapse of CCP
• Rejection of reform  internal disintegration and collapse of CCP system.

* Nicholas D. Kristof, “China Sees 'Market-Leninism' as Way to Future,” New York Times, September 6, 1993.
 Scenarios of China’s Political Future

Resource Allocation Mechanism

Administrative Market
Commands Mechanisms
(Planning)

Scenario 3**
CCP Party/ Continued Market Leninism
Totalitarianism (Scenario 2)
Locus of State
Power
Political Development and
Society Heavily Regulated
Democratic Transition
Democracies
(Scenario 1)

**Scenario 3 not on table as CCP would no longer be part of the system.

Scenario 1:
Political Development and
Democratic Transition
Gradual Liberalization and
Democratic Transition

• Increased marketization and the strengthening of society

could move China from Market Leninism into a stage of
political development and a possible democratic transition.

• Such a change would involve increased political participation,

enhanced “civil society,” with organized interests competing
for control of the government and limiting the power of the
CCP.
Theories from Political
Development Literature

1. Economic modernization
2. Institutional Transformation or Pluralism
3. Local elections
4. Pluralist democracy
5. Value transformation and changes in political culture
6. “Civil Society”
7. Intellectuals
8. Independent media
9. Growth of a Middle Class
10. Rule of Law and legal reform
Economic Modernization and the
Preconditions for Democracy

• Economic development  democratic transition.

• Passing a certain threshold in per capita/GDP, perhaps
US$7,000, turns societies towards democracy.
• “Social mobilization” – increased literacy, enhanced
communication flows (through media) and urbanization
break down traditional values.
• Economic development leads to emergence of middle class
and private property, two preconditions for democracy.
• Key problem is the “political transition,” where the ruling
party or military give up power peacefully.
Democracy and Per Capita
GDP, 2006

Note: Value of Democracy based on Freedom

House political rights and civil liberties score.

Source: Ranganathan, S., Spaiser, V., Mann, R.

P., & Sumpter, D. J. (2014). Bayesian dynamical
systems modeling in the social sciences. PloS
one, 9(1), e86468.
Institutional Transformation
or Pluralism

• Different institutions in a political system are given authority, creating

inter-institutional competition.
• Competing leaders in China control different organizations, such as
National People’s Congress (NPC), Chinese People’s Political Consultative
Conference (CPPCC), Central Discipline Inspection Committee (CDIC),
State Council, Military Affairs Commission.
• Each develops semi-autonomous power base and strengthens their
institution.
• Most likely scenario is NPC as democratic force.
• Village elections allow for challenge to local CCP Committee.
• Village, township or county-level Congresses with real authority.
Local Elections and Democracy in
Taiwan and Rural China

• Democratization in Taiwan moved from local elections up the system,

eventually bringing island-wide democracy.
• Chu Yun-han, a leading specialist on Taiwan’s democratization,
argues that continuous participation in elections increased
democratic values of Taiwanese.
• My 1999 rural survey showed positive values for democratization:
• peasants had high levels of democratic consciousness.
• Rates of participation, voting at 80%, work for nomination quite high.
• Split of village leader and Party Secretary.
• Significant local elite turnover: only 37% of Village Directors returned for
another term, 45% ran and lost, while 18% decided not to run again.
• Local elite values: candidates who lost the election for Village Director felt
that losing an election did not constitute too much of a loss of “face.”
Participation in Election-Related Activities
in Four Counties in Rural China, 1999
Democratic Pluralism

• Growth of interest groups which compete for control over governing

institutions, such as Legislatures or Executives, or pressure the
institutions to favour them in the distribution of resources.
• Lobbying by independent social interests very important to this
model.
• Argues that elections less important for democracy; more important
is fair competition among social interests for resource and value
allocations to society.
• American-centric perspective; Europe and Canada do not give
lobbying groups such easy access to policy makers.
• Possible evolution in 1987 under Zhao’s view of “interest groups
under socialism.”
Scenario 1:
Further Forces for
Political Development and
Democratic Transition
Political Culture and Democracy

• Democratic development depends on emergence of pro-

democratic values among citizens and elites.

• For citizens, sense of efficacy, willingness to engage,

interest in politics, respect for differing opinions, sense of
legitimacy for political institutions  felt with intensity.

• Certain percentage of citizens must hold these views for

democracy to take root.

• As we saw in an earlier class, Taiwanese quickly

demonstrated democratic values as soon as “martial law”
was lifted.
Elite Political Culture and Democracy

• Elites in democratic society:

• Respect competition and willingly step down if they lose;
• Emergence of “loyal opposition;”
• Respect for rule of law;
• Citizens’ right to select candidates and elect leaders;
• Accept role of society as watchdog.

• Within a communist party led system:

• Inner party democracy, without popular elections, could be
trend as CCP sees party members having higher political
consciousness.
“Civil Society”

• Definition: “Infrastructure of mediating institutions that link

multiple interests of citizens with the political regime."

• State keeps order, prevents social chaos, citizens abide by laws.

• Growing “private sphere” and narrowing of state-controlled “public

sphere” and larger autonomous public space.

• CCP gave up control over some social functions under reform:

battered women, environmental non-governmental organizations
(NGOs).

• Emergence of interest groupings, professional associations.

• NGOs as major indicator of Civil Society.

Role of Intellectuals

• Social pluralism, free speech, "public opinion" and expansion of public

sphere.

• As defenders of public morality, challenge the state when it oversteps

its rights.

• “Critical" intellectuals stay outside state institutions, and transform

power relations by explaining relationship among individuals, society,
and the state.

• Potential to become dissidents, resist Party/State propaganda, present

alternative value system to that of the ruling party.

• Intellectuals helped liberalize Czechoslovakia through media, plays,

novels and Charter 77, which Chinese dissidents copied in 2008.
Greater Independence for Media

• Free press is one of Hong Kong’s critical attributes making it

democratic.
• Best indicator of a newspaper’s quality in China is the frequency with
which the editor gets fired.
• Sales competition creates market for negative reporting.
• Freedom of the press is big threat in era of widespread corruption and
great opportunities for official profit taking.
• Journalists keen to investigate corruption, but often threatened with
physical violence.
• Text messaging, internet, society sends messages to media.
• Free flow of information across borders creates popular force for
political reform.
Growth of Middle Class

• Based on the model of democracy that emerged in England,

Barrington Moore’s book: Social Origins of Democracy and
Dictatorship, argues that emergence of middle class or
capitalists was critical for democracy.

• Also, peasantry had to be destroyed — otherwise if it allied

with landlords  Fascism, or alliance with intellectuals 
Communism.

• Taiwan, Korea tend to confirm this view.

• In China, privatization of SMEs in 1996-2000 produced a

new middle class.
Emergence of “Rule of Law”

• As a constraint on politicians and bureaucratic misbehaviour.

• Hong Kong’s economic strength and stability based on this.

• Long term goal of CCP has been to develop the “rule of law,”
replacing the “rule of Man,” to control officials misbehaviour.

• But CCP always maintained dominance and local CCP officials

insisted that their authority was above the law.

• Under Fourth Plenum (2014) documents, local courts more

independent as judges appointed and paid from above.

• In 2015, in several major environmental cases, SOEs lost to

government supported environmental NGOs (GONGOs).
Lessons from Scenarios
of Democratic Transition
Theory of Democratic Transitions

• In Latin America, ruling elite split and “soft” faction emerged against
“hardliners.”

• Civil unrest against authoritarian government led by middle class,

sometimes through a political party.

• Emergence of “pact” to protect military after democratization so they

were willing to give up power.

• Hungarian transition carried out by emergence of “parties within the

party” — three factions or viewpoints within Hungarian Working
People’s Party — which evolved into three political parties.

• In South Korea, military leaders have never been charged with murder
despite killing many students when they suppressed the Kwanju
uprising.
Importance of International Events

• Democratization in Taiwan (1986-89), South Korea and Gorbachev’s

reforms influenced student activists in China in 1989.

• Asia Financial Crisis of 1997 triggered democratization in Indonesia,

new constitution for Thailand.

• Loss in Falklands/Malvinas War to Britain undermined Argentinian

military and led to its replacement with democracy.

• Withdrawal of American support undermined military in South Korea

in 1987-88, forcing it to negotiate a withdrawal from politics.

• Continuing influence of the “Global Financial Crisis” (2008) has

weakened CCP’s ability to deliver greater standard of living in the
short-term.
Scenarios of Democratic Transition:
China’s Experience

• China came closest to emergence of “parties within the

party” in 1987, at 13th Party Congress.

• 1989 Tiananmen opportunity emerged due to highly split

within leadership, with Zhao as “soft liner,” but Deng and
CCP did not negotiate.

• Support from urbanites for students, but no middle class

social movement or party emerged, and Deng forced
military to suppress demands for democracy.
Scenario 2:
Continued Market Leninism
Learning from the
Soviet Union’s Collapse

• CCP explained the collapse on Gorbachev introducing major

political reforms — “glasnost” and “perestroika,” i.e., media
opening and elections — before economic reform was
successful.

• So, since 1992, CCP wedded to economic reform with very

limited political reform.

• In a speech in late 2012, right after taking power, Xi Jinping

emphasized that he was not a Gorbachev and would not let
the CCP collapse due to misguided political reform.
Elite Politics and Continued
Authoritarianism

• Xi Jinping should remain in power through 2022 and may be

able to select a successor who supports his policies, so very
limited chance of democratic reform.

• Xi demonstrates strong attachment to authoritarianism,

“cult of personality” as means to maintain support, wedded
to continued authority of CCP and maintenance of the
revolution that his father helped bring about.

• Xi maintains loyalty of the People’s Liberation Army (PLA)

by putting his own people into top military posts.
“Authoritarian Resilience”

• CCP remarkably adaptable and responsive to ongoing crises.

• “Authoritarian Resilience” (Nathan) suggests that CCP has

developed a “norm based” rotation system, allowing China
to avoid factional conflicts that could damage the
Party/State.

• Some Western (Bell) and Chinese (Pan Wei) academics see

China possessing and maintaining an effective
“meritocracy,” where well-trained elites come to power and
hold public office.
Xi Jinping’s Strategy of
“Four Comprehensives”

1. Turn China into moderately rich society by 2050, following

Deng Xiaoping’s proposal.

2. Comprehensive economic reform based on 3rd Plenum

documents (2013), includes 360 points of reform.

3. Rule of Law outlined in 4th Plenum (2014).

4. “Party Reform” largely through anti-corruption campaign.

Using the Courts to Fight
Environmental Degradation

• As a major source of unrest comes from environmental problems,

Xi’s reforms have aggressively targeted this issue.

• In June 2015, Environment Minister Chen Jining told NPC Standing

Committee that 3,400 companies and 3,700 construction sites were
found to have violated laws in 2014.

• More than 3,100 workshops shut down after inspections.

• He also reported that the number of criminal cases handed to the

police by environmental protection departments in 2014 reached
2,080, twice the total during the previous decade.

• More than 8,400 people were arrested.

Constraints on
Society and Ideology
Decline of Village Elections

• Fear of two power centers, elected official has greater

legitimacy in peasants’ eyes.

• So CCP has allowed Party Secretary to run for post of Village

Director, recombining power in the villages.

• CCP control nominations in many villages.

• No transition to township elections since first raised at 16th

Party Congress in 1997.
Constraints on Intellectuals,
Academics and Students

• CCP suppressed the 2004 trend under which “public

intellectuals” were able to speak out in media and advocate
policies.

• Cut them off without arresting them and kept its own
monopoly on advocacy of new policies.

• Limited tradition in China of intellectuals publicly challenging

the state – intellectuals want power.

• Constraints on free discussion on university campuses,

emphasis on studying Marxism-Leninism at university and
constraints on use of foreign teaching materials.
Tight Constraints on Media: Taboo
Topics, 2010

• Deaths of four children in Shanxi province after vaccinations against hepatitis

B and other diseases and aftereffects for 70 children;
• High medical fees;
• Disparity of wealth;
• Reform of household registration system separating urban and rural residents;
• Forecasts of appointments for Communist Party leaders;
• Expansion of autonomy at universities;
• Collapse of schools in 2008 Sichuan earthquake and delays in reconstruction;
• Beating death of steel plant president in Jilin Province;
• Collusion between police and gangsters in Chongqing;
• Rising real estate prices and the housing shortage;
• Real estate developers trying to increase land prices.

Source: “China bans reporting on 18 subjects,” Asahi Shimbun, 26/03/2010

Communique on the Current State of the Ideological
Sphere (CCP Document No. 9), April 2013

Forbids propagating Western values and viewpoints which challenge CCP

rule, including:
1. Western constitutional democracy including tripartite separation of
powers, multi-Party system, universal suffrage, and judicial
independence;
2. “Universal values” which deny the values the CCP proposes;
3. “Civil society” which deconstructs the CCP’s social base;
4. “Neoliberalism” which denies the state’s role in the national economy;
5. Western news views which challenge CCP’s monopoly on information;
6. “Historical nihilism” which overemphasizes mistakes of the Mao era;
Suppression of Civil Society

• While Xi wants to improve the environment and end corruption, he

sees only danger from allowing society to engage on these issues
without CCP leadership.
• NGOs acceptable only if they are officially affiliated with government
ministries and work within the legal system — particularly true for
environmental NGOs.
• Arrests of dozens of lawyers in 2015 in crackdown on “rights
movement.”
• Tough new law on NGOs gives police power to oversee foreign NGOs
and domestic NGOs that work with them, weakening domestic NGOs
that rely on foreign support and that adopt Western values.
Xi Jinping’s Intense Attack
on Corruption
Effective Anti-Corruption Campaign

• Xi attacked corruption in speech in 2004, and has made this

his major policy since 2012.
• Used both to save the CCP from traditional threat and to
defeat anti-reform forces.

• For first time, a former member of PB-SC, Zhou Yongkang,

arrested for corruption.
• Two former members of Military Affairs Commission (MAC),
one of whom had been Defense Minister, arrested as well.
• 48 officials at provincial level or higher have been detained
as of 2014.
Corruption Arrests by Rank, 2011-14

2011 2012 2013 2014 Change

(2011-2014)

"Flies" 30043 31757 34680 37447 25%

County/Department 2326 2390 2610 3451 48%

District/Bureau 191 174 253 561 194%

Province/Ministry 7 5 8 28 300%

Total 32567 34326 37551 41487 27.4%

Source: Procuratorial Work Reports to the NPC, various years

Reform of CDIC

• In the past, Local Discipline Inspection Committees (DICs) reported

to horizontal, territorial party committee, which may have included
people they were investigating.

• Little wonder that there was little progress under Hu Jintao.

• Post-3rd Plenum of 18th CCP, local committees of Central Discipline

Inspection Committee (CDIC) will report both to their direct
superiors in CDIC and territorial party committee.

• Upper level Discipline Inspection Committees (DIC)will help hire

lower-level DIC party secretary and vice secretary, enhancing
information exchanges.

• Result has been much more effective anti-corruption campaign.

Taking on “Vested Interests”

• Emergence of “vested interests” in the 2000s during rule of Hu

Jintao who lacked authority to challenge them.

• Included SOEs, energy, security forces, PLA, Shanxi coal sector.

• To push reforms, Xi attacked “Petroleum faction” which had

emerged from Shengli Oil Field in 1980s and expanded to control
wide sectors of state power.

• Purges covered head of State-owned Assets Supervision and

Administration Commission (SASAC), former head of CCP’s
controlled energy, public security, Sichuan Province and SOE sector.

• Reform of PLA where posts were sold by head of MAC and Defense
Ministry.
Jiang Zemin’s “Three
Representatives” and the
Role of the Middle Class
Jiang Zemin and the
“Three Representatives”
• Original base of support of CCP was ”alliance of peasants and
workers,” but after privatization of 1990s, Jiang changed social base
of CCP.

• Under “Three Representatives,” his contribution to Marxist “thought,”

CCP firstly represented “advanced social forces” — scientists, white
collar workers, urban middle class, capitalists and managers

• “Broad masses,” which reflects workers and peasants, fell to third

place.

• CCP constitution amended in 2002, allowing capitalists to join CCP.

• Only 22% of capitalists joined the CCP because as following table

shows, most already in CCP!
 Prior Occupation of Private
Entrepreneurs, 1991-2002

Prior occupation 1991 1997-98 2000 2002

Professional, technical, skilled (%) 4.6 4.6 10.5 11.3
Government/administrative officials* (%) 11.0 23.5 25.1 5.3
Manager in state or collective enterprise (%) n.a.* n.a.* 22.9 15.7
Worker (%) 8.1 10.7 14.0 17.8
Soldier (%) 2.7 n.a. n.a. 1.9
Commercial/sales personnel (%) 4.5 n.a. n.a. 8.7
Farmer/villager (%) 60.9 16.7 9.6 20.3
Self-employed (%) 1.3 38.2 17.4 19.0
Other (%) 6.9 6.3 0.5 n.a.
Total 100 100 100 100
Valid response 13,142 1,947 3,073 1,465

* Note: Managers in SOEs or collective enterprises included in government/administrative officials in 1991 and 1997-98
surveys.
Source: Kellee S. Tsai, Capitalism without Democracy (Cornell University Press, 2007) p. 74.
CCP’s “Social Contract”
with Middle Class

• Floating population frightens urbanites  urban middle class

supports “order”

• “Social contract” with urban middle class  CCP gives them chance
to buy cars, apartments, travel abroad — but no political reform.

• Private entrepreneurs fears organized workers

• Middle class works with CCP and many are CCP members, what
Wank calls ”Symbiotic Clientelism.”

• Many invited to join Chinese Peoples’ Political Consultative

Conference (CPPCC) and National Peoples’ Congress.
 Value of Political Freedom
vs. Order, by Class

% Disagree with
statement
Statement Middle Other
Classa Classesb
In general demonstrations should not be allowed
because they frequently become disorderly and 22.9 35.6**
disruptive.

The harmony of the community will be disrupted if

people form organizations outside the 23.5 37.4**
government.

Notes: a. N = 739; b. N = 2,330; **Significant at the 0.05 level.

Source: Jie Chen, “Attitudes towards Democracy and the Political Behaviour of China’s middle class,” in Cheng Li, ed.,
China's emerging middle class: beyond economic transformation (Brookings Institution Press, 2010), p. 342.
 Support for Participatory Norms,
by Class

% Disagree with
statement
Statement Middle Other
Classa Classesb
Government leaders are like the head of a family;
we should all follow their decisions and don’t need 24.9 33.7**
to participate in government decision making.

Measures to promote political reform should be

initiated by the party and government, not by 28.1 40.1**
ordinary people like me.

Notes: a. N = 739; b. N = 2,330; **Significant at the 0.05 level.

Source: Jie Chen, “Attitudes towards Democracy and the Political Behaviour of China’s middle class,” in Cheng Li, ed.,
China's emerging middle class: beyond economic transformation (Brookings Institution Press, 2010), p. 342.
 Support for Competitive Election,
by Class

% Agree or Disagree with

statement
Statement Middle Other
Classa Classesb

Government officials at various levels should be 69.9 71.2

selected by multi-candidate elections. Agree Agree

Competition among several parties in election of 24.9 38.7

government leaders should not be allowed Disagree** Disagree**

Notes: a. N = 739; b. N = 2,330; **Significant at the 0.05 level.

Source: Jie Chen, “Attitudes towards Democracy and the Political Behaviour of China’s middle class,” in Cheng Li, ed.,
China's emerging middle class: beyond economic transformation (Brookings Institution Press, 2010), p. 342.
Scenario 3:
Collapse of the CCP
Predicting “Collapse”

• While Chinese criticize Western observers for predicting CCP’s collapse,

President Xi believes that without attack on corruption, CCP will collapse.

• Western observers explanations/predictions of collapse of CCP based on

1990s banking debt crisis (Gordon Chang), Xi’s halt to inner party democracy
(Shambaugh), current anti-corruption crisis (MacFarquhar), and alienation of
elites and society due to continued repression (Pei).

• Walder sees Soviet Union’s collapse because its Communist Party waited too
long for reform—20 years of Brezhnev’s resistance to reform (1964-1984) —
bringing deep internal disintegration.

• Party on road to collapse before Gorbachev took power in 1985.

• Also, USSR overinvestment in military economy led to collapse.

Is China a “Fragile State?”

• The Fragile States Index, 2014**, using 75 variables, ranked China

68th of 178 states (110 states less “fragile”).

• Placed China in “high warning category,” right below to “very high

warning.” More unstable categories are three levels of “alert.”

• But prof. who runs fragile-state model said a decade ago that:
“State failure was a remote possibility in China at present, but
gradual transition to democracy necessary to safeguard long term
stability …. At the moment I don’t think there will be a …. collapse
of the government. But there is a sense of fragility during this
transition. It could go either way.”

**http://library.fundforpeace.org/library/cfsir1423-fragilestatesindex2014-06d.pdf
Xi’s Rejection of Political Reform
Could Increase Unrest

• Total absence of any mechanisms for citizens to resolve grievances

against state officials means continued if not increasing levels of
social unrest.

• While petitions are a traditional and modern form of political

expression, many of the thousands who go to Beijing to protest
each year are arrested and sent home or put in “black jails.”

• Hu Jintao, in 2009, included number of petitioners as indicator of

poor local leadership, creating strong incentive to suppress them.

• Yet, expanding the “petition system” was President Xi’s sole

political “reform” in 3rd Plenum Report (2013).
Sources of
Political Instability
Risks of Ethnic Unrest

• Tibetan riots of 2008, driven largely by religious support for Dalai

Lama and influx of Uighur and Han into Lhasa, capital of Tibet, and
other Tibetan cities, where they control local economy.

• Xinjiang riots of 2009, driven largely by intra-regional inequality.

• Following maps show strong overlap between Uighur regions,

which on ethnic distribution map are in blue, with poorest income
levels on income map, which are in red, maroon and gold.

• Uighur terrorism undermines state legitimacy but increases

support for tighter public security.
Ethnicity and Per Capita GDP,
by regions in Xinjiang, 2013.

Uighur regions in blue

Poorest
Han areas in brown
Regions
Kazakh areas in gold

Source: Lewis, 2013 Xinjiang, China: Ethnicity and Economic

Development, retrieved at Geonotes /xinjiang-china-
ethnicity-and-economic-development.
“Externalities of Development”

• Rapid development on so many fronts within context of weak

laws and regulations creates massive economic and social
problems which bring about unrest – social mobilization.

• Most rapid urbanization in world history with poorly

regulated land laws  massive land grabs and fights with
peasants.

• Developers who do not complete their projects push

apartment owners to get organized.

• Environmental degradation with no compensation and weak

environmental laws  RIOTS.
Economic Decline and
Population Issues

• Population bombshell — ”one child policy” has created very

heavy dependence burden, where as workers retire there
are few available to replace them, meaning that each
worker will soon need to support 5 retired people.

• China as the “first state to get old before it got rich.”

• Rising unemployment as economy slows dramatically, with

many college graduates unable to find jobs.
Inequality, Corruption
and CCP Rule
Comparative Inequality:
Gini Coefficients, 2013
Countries Gini Coefficient
Low inequality
Sweden 0.25
Some people argue that China’s Gini
Hungary 0.31
Taiwan 0.34
Coefficient is actually over 0.50
Moderately low inequality
Canada 0.34
India 0.34
Vietnam 0.36
Cameroon 0.39
Moderately high inequality
Russian Federation 0.40
Philippines 0.43
Singapore 0.46
Malaysia 0.46
CHINA 0.47
Costa Rica 0.51
High inequality
Brazil 0.55
Haiti 0.59
South Africa 0.63 Source: United Nations Human Development Report, 2013.
 Corruption Perceptions Index (2010)

• Based on assessments and business opinion surveys, Transparency International

ranks countries according to perception of corruption in the public sector.
• Includes questions on bribery of public officials, kickbacks in public procurement,
embezzlement of public funds, strength/effectiveness of anticorruption efforts.
• Of 178 countries, China 78th, better than mid-point of 89.
• Among BRICS (Brazil, Russia, India, China and South Africa), China’s corruption
more serious than South Africa and Brazil, less serious than India and Russia, but
still a problem at 3.5.
• Scale of 0–0.9 (highly corrupt) to 9.0–10 (highly clean):
Russia 2.1
India 3.3
China 3.5
Brazil 3.7
South Africa 4.5
“The Original Sin”

• In 2007, big debate in China over “original sin” — how

people got their “original pot of gold”.

• Many of today’s billionaires got started in mid-1980s,

during “dual price system” — arbitrage based on co-
existence of planned and market prices.

• SMEs privatized in 1996-2001, when managers and party

secretaries became medium-sized capitalists.

• “Bureaucratic capitalist class” links power and wealth.

• In 2012, 800,000 millionaires, 90% children of officials.

China’s 400 Families?

• Extremely close connection between revolutionary leaders, the

current leaders and family businesses.
• Bo Xilai, son of Bo Yibo, worth US$200 million.
• Xi Jinping’s brother-in-laws each reportedly worth US$200 million.
• Wife of Wen Jiabao, former Prime Minister, worth US$2.4 billion
due to insider trading on ‘Ping An’ IPO.
• 9/12 property developers in Guangzhou, children of officials.
• Over 90% of people with over US$100 million are children of high
ranking officials.
• Will they act like Guatemalan elite of 300 families who block all
efforts at reform?
Is there a volcano?

• Chinese citizens not as upset about size and unfairness of current

inequalities as many analysts and Chinese government officials
assume.

• Many Chinese see inequalities as excessive, but international

comparison shows China not among highest in this concern.

• Chinese citizens more than most others see merit-based attributes

as main reason people are poor or rich.

• Suggests that inequality not a major threat to CCP.

Why people are poor or rich?
Items China Russia Hungary Czech R. U.S. W. Germ. Japan
2004 1996 1996 1996 1991 1991 1991
Panel A. National income gap too large (% agree) 71.7 86.3 94.9 78.6 65.2 70.8 72.6
Panel B: Why Some People are Poor
Lack of ability 61.3 28.0 39.5 33.5 35.2 30.1 25.7
Bad luck 26.9 28.4 30.2 21.6 15.2 23.0 24.6
Loose morals 31.2 74.0 69.3 60.0 41.7 40.3 63.1
Lack of effort 54.0 39.1 35.4 43.2 47.8 35.8 62.0
Unequal opportunity 27.5 61.2 56.4 36.1 33.4 41.1 23.1
Unfair economic system 21.0 72.6 73.6 31.9 44.9 32.0 36.2
Panel C: Why Some People are Rich
Ability and talent 69.5 48.3 53.1 59.4 59.7 64.2 65.1
Dishonesty 17.4 74.1 75.7 71.6 42.9 34.0 27.8
Hard work 61.8 38.1 37.3 50.9 66.2 57.6 48.4
Personal connections 60.0 84.1 83.5 78.8 75.0 75.1 49.3
Better opportunities 45.3 55.3 75.2 56.4 62.5 68.1 54.4
Unfair economic system 26.0 72.7 61.6 56.2 39.4 25.1 53.0

Source: Martin K. Whyte, Myth of the social volcano: perceptions of inequality and distributive injustice in contemporary China
(Stanford University Press, 2010).
Hard Work Always Rewarded
(strongly agree + agree (%))

90
80
65.5
70
61
60
50 47
34.7 37.4
40
25.9 22.7
30
18.7 16.6
20
10.7 2.8 8.5
10
0
2004 2009 1996 1996 2005 2006 2006 1991 1991 1991 2006 1991
China China Russia Bulgaria Hungary Czech R. E. Germ. Poland U.S. G. W. Germ. Japan
Britain
China Eastern European Countries Others

Source: Email to David Zweig from Marty K. Whyte.

Conclusion
Short-term Challenges to Xi’s Reforms

• As Xi tries to reform important parts of system which he

believes increases CCP’s survivability, he meets major
challenges.

• August 21st, 2015, after annual CCP meeting at Beihdaihe,

Peoples’ Daily reported that Xi’s reforms were meeting
“unimaginably” fierce resistance.

• August 22nd, Peoples’ Daily warned that officials who did

not get behind the reform effort would get “demoted.”

• Xi will retire 170,000 land-based lieutenants ranking to

senior colonels to promote reform of PLA.
Fear of Reform May Increase Risk

• Xi Jinping strongly resists “inner party democracy” and increased

role for society in politics, but great uncertainty within CCP about
how to move forward.

• Inner Party fears because NGOs, Coloured Revolution, Arab Spring,

all create concerns that external forces seeks to subvert China and
stop its rise.

• China able to resist international pressures for democratization

and political reform and able to withstand economic crises coming
in from overseas.

• Therefore in my view the likelihood of significant political reform is

small.
Solve Sources of Social Instability
— but what then?

• CCP must resolve land confiscation and environmental problems, the two
key sources of societal unrest. Doing so, would significantly decrease
number of protests.
• Enhanced “rule of law” will help.

• If anti-corruption drive succeeds and economy recovers from current

downturn, regime may last a long time using a coercive form of Market
Leninism.

• These are Xi Jinping’s targets and his strategy.

• Still, while some Western observers believe China and the CCP are in deep
trouble, we will know much more about China’s future after the 19th Party
Congress in 2017, when Xi may strengthen his own leadership team
allowing him to push through much of his bold reform program.
Question for Discussion

Now that you have heard this lecture,

what do you think is the most likely
scenario for China’s future, and why?
Explaining China’s Opening to the
World, 1978-2000:
“Second Image Reversed” and
“Relative Prices”
Introduction

● This module will focus on China’s initial opening (1978-2000),

explaining why it did so, who were the key players, and
extent to which the opening was due to external factors,
China’s leaders, or domestic forces within China.

● It draws heavily on my own book, Internationalizing China:

Domestic Interests and Global Linkages (Cornell University
Press, 2002).

● So first let’s first conceptualize those forces in terms of

understanding how China links with the world and then look
at two case studies in greater detail.
“Second Image Reversed”

● According to Waltz (The Theory of International Relations), a

state’s domestic politics affects how it interacts with the
world, what he called “the second image,” as compared to
both global factors, such as the “balance of power” among
states at the level of the international system, which he
called the “first image,” or the “third image,” which looks at
how the views of leaders affects a state’s policies.
● However, one way to understand a state’s response, or its
connection to the global system, is what Gourevitch** called
the “second image reversed,” which means that what goes on
outside a country can affect what goes on inside a country.
** Gourevitch, "The second image reversed: the international sources of domestic politics,”
International Organization, 32, 4 (Autumn): 881-911.
Wars can Affect Internal
Investment Strategies

● In particular, changes in the world can affect domestic politics or the

political economy within countries.
● For example, a war on a state’s border can force leaders of that state
to invest more in their state’s military; or the threat of war may
enhance the military’s power within the country in terms of financial
resources or decision making authority.
● Wars can threaten regions of a country and push leaders to move
investments away from areas at risk.
● The expansion of U.S. military forces in South Vietnam in 1964
influenced the national budget in China in 1965 as China’s leaders
moved investment away from the coast.
Role of International Economic
Forces, including Foreign Investors

● One way to apply the “second image reversed” is to think

about how changes in the relative prices of goods and/or
services in the global economy can affect the internal political
economy of a country.
● Changes in prices for goods inside or outside a country can
cause actors to try to move goods across the border to where
they can get a better price for the good.
● Those changes in international prices may become even more
important when a country lowers its barriers to trade, such as
tariffs and quotas, which allows the goods with different
prices to cross the border more easily.
The Relative Price of a Professor’s Labour

● For example, a professor in China in 1991 taught 4 courses a

year for RMB 500/month or US$1,500/year.
● The same professor, if she could get overseas to teach the
same courses in a college town in the U.S., could earn
US$40,000/year. The value of her labour has changed
dramatically simply by crossing the border and working
overseas in a different political economy.
● Not surprisingly, in the early 1990s, as information about
overseas salaries became known, many Chinese faculty
wanted to teach abroad for a year or two and pressured their
universities to set up teacher exchange programs.
 Potential Beneficiaries Advocate
Internationalization

● Changes in relative prices create coalitions of potential beneficiaries who

understand that resources they control compete internationally if barriers to
participation are lowered.

● So potential beneficiaries may push for lower tariffs, easier exports of labour
intensive products, natural resources or greater engagement with global economy.

● For example, rising price of oil strengthens groups within a society who control
access to oil, such as regions of a country, or oil ministers.

● In China, the oil price increase after the 1973 Arab Oil Embargo strengthened a
faction with experience extracting oil who became influential in the central
government.

● Similarly for labour, as the price of labour in East Asia increased in the 1970s,
cheap labour in rural China, gave Chinese rural enterprises (TVEs) a major
comparative advantage that rural leaders wanted to use to manufacture light
industrial goods.
Explaining China’s Opening to the
World, 1978-2000:
Linkages, Leaders and Models
Agents Link the Inside with
the Outside

● People who control or facilitate exchanges profit from the increased

demand for more flows of resources across national boundaries.

● Drawing on the ideas of Karl Deutsch, who saw power as the ability to
affect or control the flow of goods, we look for “linkage agents” and see if
the opening increased their power.

● In China, the flows of resources, information, technology, people, capital,

all went through “channels of global transaction” controlled by “linkage
agents” who expanded their power as the demand for transfers increased.

● These channels included foreign trade companies, run by officials from the
Ministry of Foreign Economic Relations and Trade (MOFERT), “foreign
affairs” officers in universities who managed exchanges, or officials in
“Special Economic Zones,” which could do exports on their own.
Role of Leaders

● New leaders can bring fresh viewpoints, and be more

supportive about opening the economy or the society to the
outside world.
● For examples, pro-business parties tend to be more open,
while pro-labour parties tend to be more protective.
● Even within communist countries, some leaders were more
pro-market while others favoured protecting the domestic
economy from foreign competition.
● So which party, faction or leader controls the decision making
process is important.
 Learning from External Models

● Countries may look at what development strategy has succeeded in other

countries.
● The “East Asian model of development” which succeeded in the 1970s
affected China after 1978.
● World Bank did a big study in 1983, showing how China could benefit from
trade and what policies it needed to introduce to succeed in trade.
● “Epistemic communities,” groups of like-minded individuals living in different
countries, transfer information across national boundaries.
● Members of the Diaspora, who are of the same ethnic group but have a more
global perspective because they live abroad — can teach leaders about the
outside world and placate their fears about outside threats.
● Leaders in closed countries may send study tours overseas to learn how
things work elsewhere before they decide to follow such policies themselves.
Visualizing China’s Opening:
From Autarky to Mercantilism
Pattern of Transnational Linkages

Level of Regulatory Constraints

High
Quadrant A Quadrant B
Mercantilist/
Autarky Developmentalist
Level of
Transnational Low High
Flows

Isolated Liberal-market/
Interdependent

Quadrant D Quadrant C
Low
Real Direction of Change Assumed Direction of Change
 Pattern of Transnational Linkages (continued)

● We saw in Table 1, that after 1978, the number of transnational exchanges

increased dramatically, moving China along the horizontal axis, out of Quadrant A.

● People thought that as exchanges increased, China would move into Quadrant C.

● But the central government wanted to keep control by forcing goods to enter or
leave the country through “channels of global transaction” which meant keeping
“regulatory constraints” — Quadrant B.

● Local governments wanted to evade constraints and colluded with officials to

bend rules so number of transactions increased while level of constraints
decreased.

● U.S. pushed China to liberalize its trade policy in 1990.

● Under internal and external pressure, the central government eased regulations,
China moved down the vertical axis a bit more into Quadrant C, increasing
“internationalization.”
Applying the Model to
China’s Opening
 Elite Politics and Attitudes

● Role of Deng Xiaoping and other reformers was critical at particular points.

● In 1978, Deng emphasized China’s need for foreign technology, capital,

and management skills and believed China could control the “mosquitoes
and flies.”

● Only very top leaders could overrule Maoist insistence on “autarky.”

● Only Deng could overcome domestic blocks to liberalization after the June
4th Tiananmen crackdown by travelling to South China in 1992 on his
southern tour, at which time he invited local officials to open up to the
outside world, something that provincial leaders along the coast really
wanted to do.

● Central leaders must permit some liberalization before domestic actors

know their interests, that is, can see the benefits that might be derived
from global transactions.
 “Relative Prices” of Goods and
Services propel Transnational Flows

● In China, in the late-1980s and 1990s, bringing in foreign

technology unavailable in China created opportunities for
firms to earn extra-normal profits because very few people or
firms had that same technology;
● so there was very little competition and firms could charge
high prices until someone else began to compete for those
profits.
● This situation creates incentives to demand the right to move
goods across the border from social groups who can benefit
from exports, such as labour, or benefit from bringing in
technology or management skills that bring comparative
advantage in the domestic market (as compared to exports).
China’s Regulatory Regime: Bureaucrats
Control Transnational Exchanges

● Bureaucrats served as “gate keepers” or “linkage agents”

who controlled “channels of global transactions.”
● Initially they blocked the opening in order to protect SOEs
from foreign competition, maintain control of foreign trade
companies and prevent foreign influence.
● But bureaucrats could charge fees only if they let goods
cross the border; no fees if they blocked the goods, “no flow,
no dough,” so around 1984, bureaucrats started to allow
more transactions than the centre preferred.
Problems of Monitoring Non-compliance

● As the flows of goods or capital jumped, the centre could not

approve so many applications, so it decentralized the
“channels of global transaction” and let local governments
monitor the process.

● But localities had incentives to support more exchanges and

the centre could not monitor them.

● For example, decentralization of trade to lower levels of the

state in Jiangsu Province helped promote trade.
 Decentralization of Foreign Trade in Jiangsu
Province, 1985-1997 (% and US$1,000)

1985 1989 1991 1992 1995 1997

Exporting Unit

Centrally Controlled 155,881 213,227 241,302 238,336 299,877 320,494

Foreign Trade Companies (100%) (87.4%) (69.7%) (51.0%) (25.4%) (21.1%)

Municipal-Level Foreign 0 22,022 59,336 98,120 471,548 543,156

Trade Companies (0%) (9.0%) (17.1%) (24.0%) (40.0%) (36.0%)

0 8,862 45,415 130,639 407,793 658,160

Joint Ventures
(0%) (4.0%) (13.1%) (27.9%) (34.6%) (43.3%)

155,851 244,111 346,053 467,095 1,179,218 1,521,810

Total
(100%) (100%) (100%) (100%) (100%) (100%)

Source: Jiangsu Tongji Nianjian, 1994, 1996, 1997 and 1998, (Jiangsu Statistical Yearbook).
Local Government Incentives

● Under the “Financial Responsibility System,” local governments had

to send a predetermined amount of taxes up to the next level, but the
quota was set for three years, so if local governments could collect
more taxes than they had to pass up for years 2 and 3, they could
keep the excess as “extra-budgetary funds.”
● So local governments looked for ways to increase the GDP and labour
intensive exports while producing new products in joint ventures
with a high demand in the domestic economy was also a great
opportunity for local governments along the coast.
● And when the centre relaxed regulations or created new “channels of
global transaction,” local governments looked for ways to increase
their tax base.
The Policy Process:
Deregulation, Cycles and Fevers

● Policy changes in this period were cyclical; openings were

always followed by retrenchments.

● One opening was 1984, when 12 cities were declared as

“Open Coastal Cities,” with each having an Export Processing
Zone where firms payed less taxes so long as the final
product was exported.

● Or in 1988-89, 90 cities established high tech zones, where

firms could import high tech equipment duty free.
“Fevers” for Opening Up

● Once the centre eased constraints, local governments, firms or

individuals linked to the outside world as quickly as possible because
they had seen how previously, after too many people “feverishly” utilized
the new opportunities, the government had tightened up.

● We saw “zone fevers,” “joint venture fevers,” “fevers to study overseas,”

because the easing of constraints was often short lived – if you missed
your chance this time, it could be several years until the next opportunity.

● So after 1984, liberalizations triggered local “fevers” for international

exchanges or for establishing “channels of global transaction,” and even
if the central government closed some zones or trading companies, the
level of openness after one of these frenzies was always greater than it
had been before the “fever” began.
Case Study: Rural Joint Ventures
and the Local Alliance with
International Capital
 A Brief History of TVEs

● As of the mid-1980s, rural China was closed to FDI and even though the rise
in the price of labour in East Asia gave rural China comparative advantage
in labour intensive exports, officials on the coast, who were home to TVEs,
did not call for opening rural China to the global economy.

● Before 1987, rural elites didn’t “know” of their comparative advantage in

exports because they were unaware of the prices for which their goods
were sold internationally — state foreign trade companies bought their
goods in RMB and then sold them overseas for undisclosed prices.

● Then, in 1987, under his “Coastal Development Strategy,” and with the
advice of his advisors, General Secretary Zhao Ziyang, recognizing that
China was not utilizing its cheap rural labour, opened rural China to the
global economy.
 Clarified Interests Lead to
More Competition

● Under that strategy, rural factories and foreign investors linked through
“joint ventures,” and local governments could keep some of the US dollars
they earned from exports.

● Local governments and local party committees, what I call “developmental

communities” along the coast, organized rural labour for export promotion.

● These communities competed intensively for foreign investors and trade

networks through what Yang Dali calls, “competitive liberalization,” where
each local government gave foreign investors better investment terms
than the central government policies allowed because if they did not cheat,
their neighbour would.

● Overseas Chinese who were looking for smaller investments and

processing factories, flocked into rural China, creating an alliance between
local governments and Diaspora capital.
Local Governments LOVE Joint Ventures!

● If the joint venture’s product was not available in China, the firm
could get “extra-normal profits.” And the local government, as a 50%
partner of the joint ventures, got 50% of profits.
● Joint ventures had export rights, allowing rural factories to deal
directly with foreign markets and avoid foreign trade companies.
● Even though local Ministry of Foreign Economic Relations and Trade
(MOFERT) officials had to approve the joint venture, the local party
leaders could pressure the bureaucrats to approve the deal.
● For example, if a joint venture wanted special privileges, such as a
low tax rate of 15%, rather than the 33% tax rate for Chinese firms,
it had to prove that it exported 70% of its production.
Looking to the Domestic Market
for Extra-normal Profits

● Some goods produced by rural joint ventures had little

domestic competition but were in great demand; this price
differential made local governments sell domestically.

● The domestic market was a major motivation for Taiwanese

to set up rural joint ventures.

● As these opportunities or interests were clarified, a “joint

venture fever” emerged.
 Foreign Direct Investment in
Rural China, 1989-1998
Number of Rural Joint
Year Foreign Direct Investment
Ventures2
mil. RMB1 mil.$ USa 1992
1989 788.19 209.63 n.d.
1991 1,611.09 302.84 7,000 Note the enormous
1992 2,459.05 446.29 15,000 jump in 1992 after
Deng Xiaoping’s
1993 18,034.81 3131.04 27,153
“southern tour”
1994 22,959.10 2663.47 29,400
1995 30,603.22 3665.06 38,743
1996 32,250.92 3880.97 39,500
1997 31,815.41 3392.09 29,779
1998 29,381.28 2938.13 27,658

Source: 1 Zhongguo xiangzhen qiye nianjian (China TVE Yearbook), various years.
2 Selected newspaper reports and State Council documents.

Note: a The data were reported in RMB and we converted it into US$ at the average current exchange rate for that year.
Joint Venture Fever Sweeps
Southern Jiangsu Province

● In 1992-93, following the opening triggered by Deng’s “southern

tour,” every rural factory (TVE) in Suzhou Municipality, west of
Shanghai, and its six counties, set up a joint venture with foreign
investors.
● Decentralization of the approvals for joint ventures to local MOFERT
officials made monitoring by the central government difficult.
● Suddenly foreign-owned joint ventures were selling domestically,
something China had wanted to control.
● So using rural China as their platform, these foreign firms came in
under the radar, set up joint ventures in rural China with local
governments, sold in the domestic market and shared profits with
local governments who also got rich at the expense of SOEs.
Selling Joint Ventures Products
Domestically

● Quote from one local leader in rural China whose village ran a joint
venture with a Taiwanese firm which manufactured high conductivity
copper wire which was in great demand within China:

“Next year we will begin to sell about 20-30 percent of

our wire domestically. The foreign partner raised this
idea and we agreed. If we sell domestically, Chinese
state-owned factories will know that their domestic
costs are too high. When we began this business, we
saw from our own firm's perspective there was a
domestic market, so we decided to import technology
and produce for the domestic market. The state ‘gets
burned’ (chi kui) but it is good for our firm.”
Foreign Exchange Earnings from
TVEs, 1984-1998 (billion US$)
TVE Export Earnings China’s Total Exports TVE Exports as % of
Year
(US$ bil.) (US$ bil.)1 Total Exports
6
1984-5 2.4 52.1 5.0
5
1986 4.5 31.4 14
4
1988 8.0 47.6 17
3
1990 12.5 64.5 19
2
1991 17.0 71.9 24
1992 20.0 85.5 23.4
19937 38.1 91.6 41.6
19947 37.3 121.0 30.8
19968 72.3 151.1 47.8
1997 83.8 182.8 45.8
1998 82.7 183.8 45.0
Foreign Exchange Earnings from
TVEs, 1984-1998 (billion US$)(continued)

Sources:
1. 1984 figure is from Direction of Trade Statistics Yearbook 1991, International Monetary
Fund. 1992 and 1993 data from Direction of Trade Statistics Yearbook, 1994, p. 151. All
other data are from Direction of Trade Statistics Yearbook, 1999, International Monetary
Fund. All figures are DOTS World Total.
2. Xinhua General News Service, October 4, 1992.
3. Beijing Review, 24 (January 28-February 3, 1991): 29.
4. China Daily, September 25, 1989, 1.
5. China Daily, December 15, 1987, p. 1.
6. Based on Foreign Broadcast Information Service, April 13, 1990, which reported that 1984-
89 TVE exports totaled US $35 billion.
7. The number was converted from RMB to US dollar, since 1994, the Average Rate of RMB
Yuan Against US was changed from 5.76 to 8.62.
8. From 1996, the value of TVE Export Earnings was converted from Renminbi to US dollars by
using Average Exchange Rate of RMB against the US for the year.
 TVE Exports as Share of China’s Total
Exports, 1988-1992, by product

1988 1989 1990 1991 1992

Garments 49.6 65.2 72.0 77.5 89.7

Artwork and Handicrafts 39.0 43.1 45.0 52.0 63.7

Light industrial goods 19.3 22.8 28.5 38.7 53.9

Chemical products 23.6 36.3 27.3 31.5 53.2

Silk products 21.4 25.1 24.3 33.7 54.0

Textiles 16.4 19.2 21.9 25.0 n.a.

Machinery 16.2 19.6 21.8 23.8 n.a.

Source: Zhongguo xiangzhen qiye nianjian (China Rural Enterprise Yearbook), cited in Yan Shanping,
“Export”- Oriented Rural Enterprises,” JETRO China Newsletter, 118 (Sept.-Oct.1995): 11.
 Conclusion

● Rural China, and particularly TVEs, had been closed to the world through 1987
and suddenly it became deeply integrated into the global economy.

● How did it happen? Who drove it?

● Potential beneficiaries of opening to the outside world did not organize to push
the central government to bring down the barriers because local officials did not
know that they had comparative advantage in the exports of light industrial goods.

● Only after CCP General Secretary, Zhao Ziyang, lowered barriers, letting people
know the price differentials, did local governments begin to push.

● But they did not form business associations to lobby for access to global markets
or foreign capital; such organizations were illegal in China’s political system.

● Instead each locality sought its own interests, inviting foreign investors into
China, helping them make a profit, feverishly pushed forward internationalization.
Case Study: China’s
Decision to Join the World
Trade Organization
Background to WTO Accession

● Joining WTO was a different story, but it helps us understand

the difficulty of opening up when there were few direct
beneficiaries and many potential losers.

● WTO replaced the GATT (General Agreements on Tariff and

Trade) in 1995. The latter had lowered tariffs at the border
and therefore facilitated trade.

● WTO was much more intrusive, setting rules about how a

country should treat foreign firms working in their country,
with the key element being no discrimination — i.e., no
special policies which made doing business more difficult for
them.
Pattern of Transnational Linkages

Level of Regulatory Constraints

M arket Lim iting
Quadrant A Quadrant B
Mercantilist/
Autarky Developmentalist
Level of
Transnational Low High
Flows

Isolated Liberal-market/
Interdependent

Quadrant D Quadrant C
M arket Facilitating
Real Direction of Change Assumed Direction of Change
Bureaucratic Opposition and Interests

● Under WTO, China could not discriminate against foreign

firms, but a regime with no discrimination against foreign
firms (Quadrant C) ran counter to Quadrant B, where
regulations would not be removed; so bureaucrats had strong
disincentives to accept WTO.

● Quadrant B, where lots of transnational exchanges pass

through “channels of global transactions” is a bureaucrat’s
heaven, as it affords lots of opportunities for charging fees.

● Therefore, it offers no incentive to leave Quadrant B and

move into Quadrant C where less regulations facilitated the
market.
The Role of Leaders

● China’s leaders, particularly Jiang Zemin and Zhu Rongji, who led China in the
late- 1990s and early-2000s, understood the risks due to the incentives created
by price differentials as it encouraged people to smuggle goods into China.
● While some corruption may help goods flow more easily among firms, Zhu
knew that barriers to trade could create “system disintegrative corruption”**
which, rather than help the market, threatened the political system.
● But if regulations at the border or regulations limiting trade between provinces
and internally disappeared, constraints would recede, bureaucrats would lose
power and corruption may end.
● Zhu also thought WTO would drive economic reform forward, while Jiang
wanted to be remembered as a visionary who brought China into the global
economy.

** Yufan Hao and Michael Johnston, "Reform at the Crossroads: An Analysis of Chinese
Corruption,” Asian Perspective, vol. 19, no. 1 (Spring-Summer 1995): 117-150.
 International Learning

● According to Pearson, ** international learning in this case was very important.

● Starting in the mid-1990s, China cut tariffs, ended non-tariff barriers, adopted
international rules and norms, and made important concessions to the WTO Working
Group’s demands.

● Creation of a GATT/WTO office in the Ministry of Foreign Trade, staffed by many young
officials with international experience, created an “epistemic community” willing to
listen to foreign advice and information.

● Long Yongtu, who led China’s WTO negotiations, had an MA from London School of
Economics and represented liberals who saw benefits for China from global competition.

● He told me that opponents of WTO accession included old leaders who told top leaders
that accession would lead to rural protests and bankrupt the rural economy.

** Margaret M. Pearson, The Case of China’s Accession to GATT/WTO,” in David M.

Lampton, ed., The Making of Chinese Foreign and Security Policy in the Era of
Reform (Stanford University Press, 2001), pp. 337-370.
Opposition to WTO Accession

● Besides challenging the bureaucrats’ authority, WTO accession went

against nationalistic intellectuals who opposed deeper global
integration after 1995, and it prevented government ministers from
protecting new “sunrise” industries, such as the IT sector.

● Pearson, reflecting on the “mercantilist” perspective, said that

“prevention of undue foreign competition in the Chinese domestic
market was perhaps the foremost value of advocates of this view.”

● So a major opponent of WTO accession in 1998-99 was Wu Jichuan,

Minister of the Ministry of Information Industries (MII), who became
famous in China for opposing WTO accession.
Leaders Force the Issue

● Paying off the bureaucrats, by letting them go into business,

(“xia hai”) and open their own trading companies, helped,
but in the end Zhu and Jiang forced the deal down the
country’s throat.

● Pearson: “opposition was not won over but run over.”

● Then a massive campaign was organized by the state to

argue that the benefits outweighed the risks. (li da yu bi –
“advantages are greater than disadvantages”)

● No opposition was acceptable.

Conclusion to
the Two Cases
Conclusion to the Two Cases

● Leaders had to defeat bureaucratic resistance.

● For TVEs, Zhao Ziyang’s Coastal Development Strategy opened the

coastal countryside to the international market where it had a
comparative advantage. TVEs drove foreign trade for almost 10 years.

● For WTO accession, Jiang and Zhu ran over the bureaucratic opposition
and made the right decision for China.

● Changes in the relative price of labour in East Asia gave TVEs

comparative advantage in light industrial manufacturing.

● On the other hand, WTO accession made other countries open their
markets to Chinese goods which competed for market share in these
other countries.
Conclusion to the Two Cases (continued)

● Foreign Forces imposed great pressure on WTO accession; China needed to

meet the criteria of WTO through direct bilateral negotiations with US, UK,
Australia and Canada.
● FDI was very good for TVEs, brought 40,000 rural joint ventures under the
radar, helping local governments benefit in the domestic market.
● Local Bureaucrats were a target of WTO, but many shifted to business, where
they made money.
● For TVEs, local governments profited, using foreign capital and technology.
● Learning was important for both policies, as Zhao learned from the World Bank
and from young advisors in his think tanks.
● P.M. Zhu Rongji and General Secretary Jiang Zemin had learned a lot during
their time in Shanghai and in foreign trade sections of industrial ministries, and
pushed forward with the support of young liberal economists who saw benefits
in China joining the world.
International Structure:
Realism and Constructivism
 China’s Changing Relations
with the World, 2000-2016
● General Secretary of the CCP, Xi Jinping, is changing Chinese foreign
policy in rhetoric, tone, and substance.
● Deng Xiaoping’s dictum — “lay low and hide one’s capabilities” — but
given China’s current power, Xi wants to assert China’s interests more
forcefully, and promote “China Dream,” — the “great rejuvenation of
the Chinese nation.”
● China, as a great power, should reassert its rightful position in the
world.
● Now less emphasis on abiding by the liberal economic order, and more
emphasis on molding the international order to match Chinese interests.
● Hong Kong’s pro-Mainland newspaper, Wen Hui Bao (Jan. 2016), says
China has become a “system designer.”
 Realism

● “Realism” assumes that nations live in “state of anarchy” — each state

must protect itself because there is no world government or police.
● States enhance their security and reduce threats by (1) “internal balancing,”
i.e., developing national power, by (2) “external balancing” — treaties or
alliances, or by (3)“bandwagoning” (yielding to the dominant global or
regional power).
● States’ choices influenced by whether the distribution of power is multi-
polar, bipolar, or hegemonic (one state is stronger than all the rest).
● After Soviet Union collapsed in 1991, US had hegemonic, “unipolar
moment” — it dominated the world and asserted its interests with little
opposition.
● Then, Deng’s dictum to “lay low and hide one’s capabilities” made sense.
● But with China’s rise, international structure now composed of a reigning
hegemon, facing a rising challenger.
 Power Transitions are Dangerous

● According to Organski’s “Power Transition Theory” (Tammen and

Kugler, 2006) war is possible because hegemon decides to weaken the
challenger, or challenger brings the hegemon down.
● “Realist” American officials support increasing US defense capabilities
to contain China, insure US preeminence and avoid “power transition.”
● 2008 Global Financial Crisis convinced some Chinese analysts that the
world is undergoing “power transition,” where China in 20-30 years
may surpass US.
● In their and Xi’s view, a rising power should assertively press its
interests.
● Some Chinese analysts believe the transition has happened.
● They push for force to solve territorial disputes in neighbouring waters.
 China’s Rise Threatens Other States

● China says it is rising peacefully, but by rising so quickly,

China is changing the global distribution of power,
destabilizing the system, and undermining many state’s
ability to protect themselves.

● Even if it does not want to threaten other states, it can cause

East Asian states to strengthen their defense ties with the US.

● Is China a dissatisfied rising power which may use its power

to threaten them, or will it maintain the current global
economic order?
 Constructivism: A Competing
Paradigm to Realism
● “Constructivism” argues that maximizing military and economic power cannot
enhance a state’s security if other states do the same.
● States should create international “regimes” with rules and punish states that
ignore those norms.
● Regimes = “norms and decision making procedures accepted by international
actors to regulate an issue area” — such as free trade (WTO), intellectual
property rights (Berne Convention), etc.
● Elites and citizens must support these norms, and “epistemic communities”
transfer them across states.
● Because of “century of humiliation” (1842-1949), Chinese leaders tightly
protect their sovereignty from international regimes.
● Great powers dislike being subject to other states’ scrutiny.
● But China gave up its sovereignty to join WTO so some Chinese officials
“internalized” the values of transparency and free trade.
International Political Economy
and National Power
International Political Economy

● Focuses on how political forces (states, regimes and global

institutions) affect economic interactions, and conversely how
economic institutions, including markets, influence domestic and
global political structures, national power and political outcomes.

● China – we have witnessed an amazing event in IPE.

● The rapid rise to economic prominence of a massive state has greatly

influenced natural resources — aluminum, nickel, iron, copper, oil,
etc. — and growth rates of countries around the globe.
China’s Imports of Key Natural
Resources, 2004-2012
 Volume of Chinese Exports and Imports,
by Countries and Regions (US$bil)
Countries
or Regions 2010 2011 2012 2013 2014
Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese
Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports

U.S.A. 283.3 102.1 324.4 122.1 351.8 132.9 360.4 152.3 396 159.0
EU 198.7 79.5 209.5 96.8 219.1 108 203.0 107.5 242 131.8
ASEAN 138.2 154.7 170.1 193 204.3 195.9 244.0 199.6 272 208.2
Japan 121 176.7 148.3 194.6 151.6 177.8 150.1 162.2 149.4 162.9

South Korea 68.7 138.3 82.9 162.7 87.7 168.7 91.2 183.1 100.3 190.1
North Korea 2.3 1.2 3.2 2.5 3.5 2.5 3.6 2.9 3.5 2.9
India 40.9 20.8 50.5 23.4 47.7 18.8 48.4 17 54.2 16.3
Russia 29.6 25.9 38.9 40.4 44.1 44.2 49.6 39.7 53.7 41.6
Australia 27.2 61.1 33.9 82.7 37.7 84.6 37.6 98.9 39.1 97.6

Source: China Statistic Yearbook, 2011, 2013, 2015; and Ministry of Commerce, http://zhs.mofcom.gov.cn/index.shtml; European Commission,
http://ec.europa.eu/trade.
Competing IPE Models

● Two visions of the global economy, liberalism versus mercantilism.

● The former says all states benefit from the open global economy,
producing efficiently and trading those goods on global markets.

● Under “mercantilism,” states manipulate domestic and international

markets so they can grow faster and across more economic sectors,
using economics to augment national power.

● East Asian Model of Development, as in Japan or Korea, suggests that

mercantilism can succeed.
Using its Economic Power

● China can leverage its economy versus most states, although its
influence is limited by the military influence and soft power of the US.
● But also feels its political influence in global economic institutions
(IMF, World Bank, WTO, Asia Development Bank) limited by US and
its allies.
● China to get around US containment by starting its own Asian
Infrastructure Investment Bank (AIIB), and through policies such as
“one belt, one road,” (also called the Maritime and Overland Silk
Road), it uses its economic power to enhance its influence overseas.
● As we will see in the next two weeks, the Chinese party/state
engages actively in the global search for energy, resources and the
human talent to develop its economy power.
 China’s Inward FDI and Outward ODI, by
Countries and Regions (US$bil), 2010-2014
Countries or 2010 2011 2012 2013 2014
Regions FDI ODI FDI ODI FDI ODI FDI ODI FDI ODI
Asia 77.59 44.89 89.51 45.49 86.70 64.78 94.67 75.60 98.65 84.99
Hong Kong 60.57 38.51 70.50 35.65 65.56 51.24 73.40 62.82 81.27 50.99
ASEAN 6.31 2.33 7.00 4.28 7.07 3.71 8.30 4.83 6.30 5.26
Japan 4.08 0.34 6.33 0.15 7.35 0.21 7.06 0.43 4.33 0.39
South Korea 2.69 -0.72 2.55 0.34 3.04 0.94 3.05 0.27 4.00 0.55
North Korea 0.01 - 0.001 - 0.002 - 0.003 - 0.00 -
Africa 1.28 2.11 1.64 3.17 1.39 2.52 1.38 3.37 1.02 3.20
Latin America 13.53 10.54 12.50 11.94 10.18 6.17 8.21 14.36 7.72 10.55
North America 4.01 2.62 3.58 2.48 3.83 4.88 4.03 4.90 3.26 9.21
U.S.A 3.02 1.31 2.37 1.81 2.60 4.05 2.82 3.87 2.37 7.60
Europe 5.92 6.76 5.88 8.25 6.29 7.04 6.89 5.95 6.69 10.84
Russia 0.04 0.57 0.03 0.72 0.03 0.79 0.02 1.02 0.04 0.63
EU 5.55 0.77 5.26 5.41 5.34 3.73 6.50 2.59 6.22 3.34

Source: China Statistic Yearbook, 2011, 2013, 2015

Comprehensive National Power
(CNP) and Foreign Policy
● National power is a relative concept; states always balance against
other states, so CNP should be framed in terms of a state’s relative
status.

● Combination of military, economic power, national will, leadership

unity, global status (soft power), trade dependency (or other state’s
trade dependency), population, mobilizational ability of regime,
legitimacy of leadership, trust in government.

● CNP lets us evaluate the pace of change, which can impact how states
perceive each other.

● For a long time, mixed view about China’s rank in CNP, but China now
number 2.
 Relative Comprehensive
National Power
China US Russia Japan India
Comprehensive Ranking 2 1 3-6 4-7 5-10
Territory in 10,000 km2(rank) 959* (4) 962 (3) 1709 (1) 38 (61) 329 (7)
2015 Population in million (rank) 1,374 (1) 322 (3) 146 (9) 126 (10) 1,283 (2)

2014 GDP by PPP, trillion $(rank) 18.1 (1) 17.3 (2) 3.6 (6) 4.8 (4) 7.4 (3)
Military Strength Rank** 3 1 2 9 4
Natural Resource Ranking 6 2 1 Very poor ~20

Permanent Member of UN Security Yes Yes Yes No No

Council

Other US $ as world currency

Notes:
* This only includes the territory in real control of the PRC government
** Global Firepower Ranks 2015 http://www.globalfirepower.com/countries-listing.asp
China’s Soft Power

● China much weaker in “soft power,” — the ability to get states to accept
your position on foreign affairs through persuasion not coercion or money.

● Currency of soft power is culture, political values, and foreign policies.

● Xi tries to “socialize” the region to accept China’s view of its “core

interests” and not challenge those interests, but Pew survey data of 2014
show that only 16% of Vietnamese have a positive view of China and 74%
see it as the greatest threat!

● China promotes soft power through Confucius Institutes worldwide, but

some institutes generate suspicion as fronts for Chinese propaganda.

● China is also having trouble attracting very best scientists of Chinese

ethnicity to return to China full time to work in universities and
laboratories because of the problematic “research culture.”
Domestic Politics, Leadership
and Foreign Policy
Domestic Politics and Foreign Policy

● Political parties take positions when fighting for election, or

due to intra-party factional conflict, as in Japan.
● Public opinion and perceived need to maintain government
legitimacy.
● Nationalism can force leaders to act forcefully on foreign
policy.
● Inter-bureaucratic or inter-ministerial conflicts often affect
policy implementation or the selection of policy options.
● Ethnic policies influence foreign policy because China wants to
insure ethnic unrest is resolved without overseas forces
playing a role.
 Leadership Views

● Belief systems of top leaders or a leadership group affects their policies,

expectations of other leaders, perceptions or misperceptions of other’s response.
● Looking at Xi’s views, we see him revising Deng’s emphasis on building economic
strength first.
● He gives military power equal weight to economic power.
● At Politburo meeting in Jan 2013, Xi emphasized that, while China will adhere to
the path of a peaceful rise, it “will not sacrifice its rightful and legitimate interests.
No other countries should expect us to trade away our core interests. Nor should
they expect us to swallow the bitter results of injuries to our sovereignty, security,
and development.” **
● Xi reflects leadership desire to overcome “century of humiliation,” making the
deep concern of “national humiliation” an explosive force in Chinese foreign policy.

** “Xi Jinping: Further Integrate the Domestic and International Fronts and Harden the Foundation for the Road
of Peaceful Development” at http://news.xinhuanet.com/politics/2013-01/29/c_114538253.htm (in Chinese).
Sino-US Relations:
The Most Important Bi-lateral
Relationship in the World
Strategic Issues

● Relations deeply affected by the potential for power transition as China seeks
more influence while US wants to prevent China from challenging US
dominance.
● Xi recognizes “Thucydides’ Trap” of power transition, where the rise of Athens
frightened the leaders of Sparta who started the Peloponnesian War, but says
it is not inevitable. “Peaceful rise” is possible.
● Yan Xuetong of Tsinghua University assumes US will defend status as hegemon
against any challenger, so China becomes US opponent.
● US spends 5% of GDP on defense, China only 2%, and US outspends China,
Russia, UK and France combined.
● China’s goal towards US is “big power relations of a new kind,” where one side
does not challenge the other’s definition of its core interests.
● Xi rejected “G-2” status to replace G-7, because China doesn’t want the global
responsibilities that would come with it; prefers a multi-polar, not a bi-polar
world.
Domestic Politics: Americans see a variety of
problems in their relationship with China

The large amout of American debt held by China 67% 22%

The loss of U.S. jobs to China 60% 29%

Cyberattacks from China 54% 32%

China's policies on human rights 53% 32%

The U.S. trade deficit with China 52% 34%

China's impact on the global environment 49% 36%

China's growing military power 47% 35%

Tensions between China and Taiwan 21% 45%

Serious
Very Servious Somewhat serious

Source: Spring 2015 Global Attitudes survey. Q26xa-h. PEW research center
 Since 2012, Americans Give
China Mostly Negative Ratings
60
55 54
55 52 51 52
50 49
50
Percentages

45 43 42 39
40
40
42 40
35 39 38 38
36 36 37
30
35 35

25 29
20
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

favorable unfavorable

Source: Spring 2015 Global Attitudes survey. Q26xa-h. PEW research center
Inter-Ministerial Relations

● Annual “Strategic Dialogue” between top government

officials is just one of 60 dialogues between officials of two
countries, on issues such as shale energy, cross border drug
smuggling, global warming, North Korea (Six Party Talks).

● The US military prefers engagement, increasing transparency

and flow of information.

● Yan Xuetong calls this a “false friendship,” not deeply rooted

and vulnerable to rapid shifts in domestic politics on both
sides.
Political Economy

● Chinese investment in US affects key states, such as

Washington State, which is highly dependent on trade with
China, and 11 states export energy to China.

● US exports to China is a major source of growth for US

exports.

● But Chinese government challenging Multi-National

Corporations (MNCs) for the prices they charge Chinese
customers.

● Trade interdependence shifting in China’s direction.

 US-China Trade Interdependence

(in bil. USD) 1998 2000 2002 2004 2006 2008 2010 2012 2014

China’s Total Trade 324.0 474.3 620.8 1154.6 1760.4 2563.3 2974.0 3867.1 4303.0

US’s Total Trade 2032.5 2523.2 2376.4 2933.0 3677.0 4392.0 4201.9 4974.8 5194.7

Sino-US Trade 54.8 74.5 97.2 169.6 262.7 333.7 385.4 484.7 555.1

Sino-US trade as % of
China’s total trade 16.9% 15.7% 15.7% 14.7% 14.9% 13.0% 13.0% 12.5% 12.9%

Sino-US trade as % of
US total trade
2.7% 3.0% 4.1% 5.8% 7.1% 7.6% 9.2% 9.7% 10.7%

Source: China’s total trade and Sino-US trade statistics are from China Statistical Yearbook Database, various years
US’s total trade statistics is from United States Census Bureau, historical series.
https://www.census.gov/foreign-trade/statistics/historical/index.html
Sino-Japanese Relations
Strategic Issues

● Asia never faced period where both Japan and China are
strong.
● Nationalism in both countries due to deep mistrust, with both
seeing each other as major threat.
● Japan donates ships to India, Vietnam, Philippines to confront
China.
● Japanese Defense Agency in Dec. 2004 publicized three
scenarios for war with China, one based on resource conflict in
East China Sea.
● Yan Xuetong: China’s rapid rise gives Japan little time to
adjust mentally to loss of status as major power in East Asia.
Bureaucratic Politics

● Chinese coastal navies, such as Coast Guard, Customs

officials, confronted Japan’s Defense Forces around
Senkaku/Diaoyu Islands.

● While most textbooks in Japan are factual, conservative

Ministry of Education approves textbooks for schools that
significantly downplay Japan’s terrible behaviour in China
during WWII.

● The two militaries hold regular meetings when ties with

China are not in difficult shape.
Leadership

● Prime Minister Abe very nationalistic, cannot accept power

transition where Japan becomes No. 2 in East Asia.

● “China threat” helps Abe pass new defense law through Japan’s
legislature to make Japan a “normal state” with normal defense
policies, ending influence of Article 9, which even stops the use of
any military force beyond its borders (even as peacekeepers).

● Chinese leaders mistrust Japanese leaders who go to Yasakuni

Shrine where 12 Class A war criminals from WWII have shrines.

● First meeting between Xi and Abe in two years described as the

“Cold Handshake.”
History, Apologies and
Domestic Politics
● China teaches hostility towards Japan from generation to
generation, but Japan’s interpretation of history and nuanced
expressions of regret for WWII war crimes complicate Sino-
Japanese relations.
● Yasakuni Shrine in Tokyo, which
is private, presents WWII as
Japan’s effort to drive Western
colonialism out of East Asia and
liberate the countries of East
Asia. They even have film
footage of Japan’s attack on
Shanghai (at which time Japan
used poison gas).
 Apologies

● Chinese complain that Japan never fully apologized for war crimes, but Japanese have
apologized over 20 times.

● In 2001, Prime Minister Junichiro Koizumi commenting on the “Comfort Women” issue,
said (Also signed by all PMs since 1995):
"As Prime Minister of Japan, I thus extend anew my most sincere apologies and remorse
to all the women who underwent immeasurable and painful experiences and suffered
incurable physical and psychological wounds as comfort women. We must not evade the
weight of the past, nor should we evade our responsibilities for the future.”

● In August 1995, PM Murayama, in speech “On 50th anniversary of the war's end,” said:
"Japan, through its colonial rule and aggression, caused tremendous damage and
suffering to the people of many countries, particularly those of Asia . . . I regard, in a
spirit of humanity, these irrefutable facts of history, and express here once again my
feelings of deep remorse and state my heartfelt apology."

● But no sitting LDP Prime Minister has ever made a full apology on Japanese soil and in
2007, 44% of Japanese felt Japan had not apologized enough.
Domestic Politics in China and Japan

● Japanese business community was strongly pro-China and opposed visits by

PMs to Yasakuni Shrine – it stops summit diplomacy which hurts business deals.

● Now no strong pro-China lobby in Liberal Democratic Party (LDP), Japan’s

strongest party, as in 1970s and 1980s during normalization of relations.

● Pew: only 7% of Japanese have favorable view of China, only 8% of Chinese

have favorable view of Japan.

● 68% of Japanese see China as their biggest threat.

● Chinese citizens easily mobilized to protest against Japan.

● Chinese government constantly raises fear of resurgent Japanese militarism,

but small percent of Japanese is supportive resurgence as Japan is the only
country in the world which has suffered nuclear attack.

● Strong passivism.
Energy Conflict in East China Sea

● Conflict in East China Sea due to competing interpretations of

Exclusive Economic Zone under United Nation Convention on the
Law of the Seas (UNCLOS).

● Japanese fear that China is drilling in its own EEZ but gas is from
Japanese zone.

● Japan and China have met over 20 times with no solution.

● 30% of Chinese students in my 2006 survey saw Japan as biggest

rival for energy (57% said US was, only 5% saw India in that role).

● Chinese students in Shenzhen surveyed adopted very hardline

stance to Japan on discussions on oil and gas field in East China
Sea.
East China Sea Dispute
Sovereignty

● Islands are very sensitive for both sides, and for China, they
are major issue of sovereignty.

● In 2012, when a Chinese ship captain rammed a Japanese

naval patrol in waters claimed by both states and was
arrested, decision to try him in Japanese domestic court
triggered major protests in China.

● Mayor of Tokyo triggered recent crisis by threatening to buy

islands from private owners. Japanese government decided
to nationalize the islands, which China took as provocation.
Sino-Russian Relations
Strategic Ties

● Very long common border had been scene of war in 1969 and major
troop allocations until 1989.
● Russia sells weapons but military and nationalists worry about
China’s rise.
● Favour multi-polar world, decreasing US influence, and oppose
sanctions on countries violating international norms.
● China uncomfortable with Russian takeover of Crimea and incursions
into eastern Ukraine, seen as interference in another country’s
internal affairs.
● Serious competition within Shanghai Cooperation Organization (SCO)
in Central Asia, where China has economic role but Russians have
great political leverage with ruling families.
China-Russia Mutual
Perceptions, 2007-2015
● China’s view of Russia reverted
to long-term norm after spike in
2014. About half of Chinese
have a favorable opinion of
Russia.
● Russian views of China have
improved markedly, rising from
64% in 2014 to 79%.
Political Economy

● Key energy relationship, with agreements to build power plants for

China in Siberia, using Russian coal, an oil pipeline to China and
sales of natural gas.

● Big agreement on natural gas sale to China in 2015, but final price
benefited China as Russia needed to sell the gas because Europe
stopped buying Russian energy after Ukraine crisis.

● Between 2010 and 2014, trade doubled from approximately US$50

billion to US$100 billion.

● Russia exports primary products, like a developing country, (gas,

oil, gold) while China exports higher value added goods, such as
electronics.
Relations with Taiwan
and Hong Kong
Mainland Ties with Taiwan
and Hong Kong
● Similar pattern in both societies in response to Chinese
assertiveness.

● Resentment in society as business elite benefit from close economic

ties with China, while ordinary citizens feel a threat to their
freedoms, increased housing costs, rude tourists, little if any salary
increases, threats to local jobs by influx of talented Mainlanders,
growing influence on local media.

● In both societies, local identity strengthened by Chinese closer ties.

● Taiwan watches evolution of “one country, two systems,” as China

proposes this concept as a strategy for incorporating Taiwan into
China.
Independence, Reunification, and Identity:
Problems in Taiwan-Mainland Relations

● From 2000 to 2008, Chen Shui-bian became first president of

Taiwan from Democratic Progressive Party (DPP), which favours
independence, and tried to distance Taiwan from China.

● China responded by passing “Anti-Secessionist Law” (2005) which

formalized use of "non-peaceful means" if Taiwan declared
independence.

● Hu Jintao very patient on Taiwan, invited DPP officials to China,

promised former Taiwanese PM policy would not change under Xi.

● Dramatic improvement after Ma Ying-jeou, Chairman of the

Nationalist Party (KMT), became Taiwanese president in May 2008,
with a whole host of agreements.
Taiwanese Identity, 1992-2014

60.4
Taiwanese
49.3

32.7
Both Taiwanese and Chinese

25.5

Chinese

3.5
No response
Political Economy

● Taiwanese businesses have moved onto the Mainland with

perhaps one million Taiwanese living and working on the
Mainland.

● China tried to use economic leverage to influence elections

in Taiwan by mobilizing Taiwanese working in China to go
back and vote for the Nationalist Party (KMT).

● Taiwanese careful not to move final stages of high tech

products onto the Mainland.

● By 2014, 2300 new Taiwanese businesses on the Mainland

with new investment in 2014 at US$2.02 billion.
Current Status

● When President Ma Ying-jeou pushed a new trade agreement in

2013, young people occupied Legislative Yuan in the “Sunflower
Movement,” forcing Ma to shelve the law.

● 80% of Taiwanese would favour independence if China would not

attack and 40% would favour independence even if the Mainland
attacks.

● In 2015, historic meeting in Singapore between Ma and Xi – too

little, too late.

● China react forcefully when Taiwan moves away from reunification,

so trouble brewing as DPP now controls presidency and Legislative
Yuan for first time in Taiwanese history.
Hong Kong Identity: A Test of
“One Country, Two Systems”
● Deng Xiaoping allowed Hong Kong to exist under “one country,
two systems,” where Hong Kong kept its legal, economic and
political system for 50 years.
● Promised to Hong Kong people and British in Joint Declaration on
Hong Kong, registered as an international treaty at the United
Nations.
● But Hong Kong people emphasize “two systems” while Beijing
pushes for “one country.”
● Hong Kong people increasingly see themselves as Hongkongers,
more than Chinese, particularly true for under 30s, as 88% see
themselves as either Hongkongers (55%) or Hong Kong Chinese
(33%).
Which is the most appropriate
description of you?

Extreme volatility of identity

after 2008 indicates sharp
values conflict underway.
Source of Figure: http://hktp.org/list/constitutional-reform.pdf
Resisting New Laws in Hong Kong

● The Mainland effort to introduce tough National Security Law in 2003

triggered protests from 500,000 (7% of population) and 350,000 in 2004
(5% of pop.)

● Hong Kong people felt the law would decrease freedoms. The law never
introduced.

● In 2012, Hong Kong government tried to introduce National Education,

which Hong Kong youth saw as brainwashing. 90,000 protested; sit-in at
Chief Executive’s office forced him to suspend the policy.

● Emergence of youth movement among high school students who led

protests in 2014.

● Umbrella Movement led by young people wanted to have open

nominations for full democratic election for Hong Kong’s Chief Executive,
while government in Beijing wants veto power over candidates.
China’s Regional Ties
Hu Jintao and Xi Jinping on
“Periphery Diplomacy”
● In 2003, concept of “good neighborhood, secure neighborhood, and wealthy
neighborhood” coined by China’s Premier Wen Jiabao to describe its objectives
towards periphery states.

● “Periphery diplomacy,” part of Hu Jintao’s “harmonious world,” different from

potentially contentious relations with great powers.

● Xi added to focus on stability, harmony, and development by stressing defense

of territorial sovereignty and maritime resources.

● In October 2013, Xi emphasized increasing China’s cultural influence,

improving regional security cooperation, and socializing the region to accept
China’s view of its ‘core interests’ and enforcing PRC sovereignty and territorial
claims against rivals (Swaine 2014**).

** Michael D. Swaine, “Chinese Views and Commentary on Periphery Diplomacy,” China Leadership Monitor,
Hoover Institution, Standard University, Summer 2014, Issue 44.
Issues with Countries
on the Periphery

● China worries US “rebalancing” or “pivot” to Asia will have major

impact on regional ties in Northeast Asia (Korean Peninsula and
Japan), Southeast Asia, especially ASEAN ties, Central Asia and
South Asia.

● More assertive posture related to territorial disputes in South China

Sea, East China Sea, and border dispute with India.

● Sea lane access to China is a major concern as US could complicate

energy and trade ties for China.

● Yet as he toughens policy in SCS and ECS, Xi proposed “one belt,

one road,” or “Overland Silk Road,” focusing on Central Asia with
overland corridor to EU, and “Maritime Silk Road,” targeted at
Southeast Asia all the way to East Africa.
China and ASEAN
 China and ASEAN
● Rise of China means countries in SE Asia may “bandwagon” (i.e., move close to China and give
up some independence), ally with US, strengthen their own military capabilities and/or
introduce international norms to contain China.

● ASEAN (Association of South East Asian Nations), established in 1967 in response to war in
Vietnam, now includes communist government of Vietnam.

● Strategic problems complicated by strong trade relations with China.

2010 2011 2012 2013 2014

Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese
Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports

U.S.A. 283.3 102.1 324.4 122.1 351.8 132.9 360.4 152.3 396 159.0
EU 198.7 79.5 209.5 96.8 219.1 108 203.0 107.5 242 131.8
ASEAN 138.2 154.7 170.1 193 204.3 195.9 244.0 199.6 272 208.2
Japan 121 176.7 148.3 194.6 151.6 177.8 150.1 162.2 149.4 162.9

Source: China Statistic Yearbook, 2011, 2013, 2015; and Ministry of Commerce, http://zhs.mofcom.gov.cn/index.shtml; European Commission,
http://ec.europa.eu/trade.
3
 ASEAN Uses Global Norms to
Manage South China Sea Crisis
● ASEAN tried to use norms to control conflict; in 1995 pressured China to agree to
a “Code of Conduct,” reinforced in 2002, to which all abided until recently.

● The Parties undertake to resolve territorial and jurisdictional disputes peacefully

without the threat or use of force, through direct negotiations by the sovereign
states “in accordance with universally recognized principles of international law,
including the 1982 UN Convention on the Law of the Sea (UNCLOS);” use “self-
restraint,” and avoid escalating disputes and not inhabit uninhabited islands,
reefs, shoals, cays, and other features.

● In 2014, the Philippines took China to UNCLOS tribunal after China began to
build large islands in disputed territory.

● UNCLOS ruled it had authority to judge the case, but China refused to recognize
that authority.

● According to UNCLOS, the islands that China has built are not legal.
America’s Strategic Role
vis a` vis China in the Region

● 7 of 10 ASEAN states have some territorial disputes with China,

want US to stay engaged.

● In 2011, then Secretary of State Hilary Clinton speaking in

Hanoi at the ASEAN Regional Forum, a security group spun off
from ASEAN and the only security grouping in East Asia,
strongly supported “freedom of passage,” because China, by
claiming most of the SCS, is seen to threaten free passage
through those waters.

● China’s assertion of sovereignty within “9-dotted line” gives

causes some members of ASEAN to invite US and Japan into the
region.
Challenging China’s
Sense of Sovereignty

● Vietnam and the Philippines have asserted claims, with Vietnam

building small islands and Philippines stationing a ship and troops on
disputed island which it had not previously claimed.
● China challenged those claims forcefully, cutting lines, surrounding
ships, moving an oil rig into disputed territory with Vietnam, and
2014 saw China build up large islands with landing strips and naval
bases.
● China’s submarine fleet has grown much stronger, asserts position
more forcefully.
● South China Sea has become “core interest” — meaning there is no
room to compromise.
China and the
Korean Peninsula
Strategic Perspectives

● While China wants stability on Korean Peninsula, and opposes nuclear program
of North Korea, the North’s collapse would put 30,000 US troops on China’s
border.
● Rather than support very strict sanctions, China brokers “Six Party Talks” on
nuclear crisis (Russia, China, US, North Korea, Japan, South Korea), but talks
failed to stop North Korea building a bomb.
● China worries that a North Korea nuclear capacity increases the probability of
Japan building their own bomb.
● After 4th nuclear test in January 2016, US pressing Xi to intensify sanctions on
North Korea, but China, even though it is very angry, hesitates to do so.
● Usually left-wing South Korean leaders “bandwagon” with a rising China and
open up to the North, while pro-West, Korean presidents work closely with US.
● Current President Park, a conservative, only US ally to attend Chinese military
parade celebrating 70th anniversary of end of WWII, has received little from
China in terms of pressure on North Korea.
Political Economy

● Since 1990, China’s ties with South Korea has intensified,

especially trade and investment, while North Korea remains
an economic burden for China.

● China has pushed North Korea to adopt Chinese style

economic reforms but with no success.

● South Koreans worried about “hollowing out” of Korean

economy as so many enterprises move to China.
 Dramatic Difference Between Chinese Trade
with North and South Korea (US$bil)

Countries or
Regions 2010 2011 2012 2013 2014
Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese Chinese
Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports

U.S.A. 283.3 102.1 324.4 122.1 351.8 132.9 360.4 152.3 396 159.0
EU 198.7 79.5 209.5 96.8 219.1 108 203.0 107.5 242 131.8
ASEAN 138.2 154.7 170.1 193 204.3 195.9 244.0 199.6 272 208.2
Japan 121 176.7 148.3 194.6 151.6 177.8 150.1 162.2 149.4 162.9
South Korea 68.7 138.3 82.9 162.7 87.7 168.7 91.2 183.1 100.3 190.1
North Korea 2.3 1.2 3.2 2.5 3.5 2.5 3.6 2.9 3.5 2.9
India 40.9 20.8 50.5 23.4 47.7 18.8 48.4 17 54.2 16.3
Russia 29.6 25.9 38.9 40.4 44.1 44.2 49.6 39.7 53.7 41.6
Australia 27.2 61.1 33.9 82.7 37.7 84.6 37.6 98.9 39.1 97.6

Source: China Statistic Yearbook, 2011, 2013, 2015; and Ministry of Commerce, http://zhs.mofcom.gov.cn/index.shtml; European
Commission, http://ec.europa.eu/trade.
China and Central Asia:
The Shanghai Cooperation
Organization (SCO)
China and Central Asia: The Shanghai
Cooperation Organization (SCO)

● China avoids resolving conflicts in multilateral organizations,

bilateral negotiations affords more leverage.
● But to resolve Muslim crisis in Xinjiang, China established its
first multilateral regional forum, the SCO in 2001.
● Four Central Asia countries (Kazakhstan, Kyrgyzstan,
Tajikistan, and Uzbekistan), and Russia.
● In July 2015, India and Pakistan became full members;
several observers, such as Iran.
● Main goal is anti-terrorism, trade, politics and energy.
ASIA
China and Central Asia: The Shanghai
Cooperation Organization (SCO) (continued)

● “Spirit of Shanghai” includes territorial integrity and the

inviolability of borders, non-interference in internal affairs,
non-use of force, or threat of its use, no seeking unilateral
military superiority in adjacent areas.

● But SCO members must “oppose intervention in other

countries” internal affairs on the pretexts of
“humanitarianism” and “protecting human rights.”

● SCO is an important platform for China’s “one belt, one road”

strategy, but, except for Russia and Kazakhstan, there is not
much trade, although it has been increasing with all states.
China's Trade with SCO Members,
2010-14 (US$bil)

Countries/Regions 2010 2011 2012 2013 2014

Kazakhstan 20.4 25.0 25.7 28.6 22.5
Kyrgyzstan 4.2 5.0 5.2 5.1 5.3
Russia 55.5 79.3 88.2 89.3 95.3
Tajikistan 1.4 2.1 1.9 2.0 2.5
Uzbekistan 2.5 2.2 2.9 4.6 4.3

Note: Includes imports and exports.

Source: China Statistical Yearbook 2012, 2014, 2015

Conclusion

● Chinese foreign policy indeed changing, as China has become more

assertive.

● This change has roots in structure of international system, with

China’s strategic rise and the potential for power transition.

● Economic roots of China are strong, but it is still weak in “research

culture.”

● New leadership, under Xi Jinping, replaced Deng’s cautious foreign

policy, as China uses its capabilities to pursue national interests,
including its “core interests,” more directly.

● China and the world must manage China’s rise so it will not
threaten regional or world peace.
Going Out for Energy
and Resources
Energy: A Case Study of ‘Going Out’ and
China’s Foreign Behaviour

● Energy acquisition became a major driver of Chinese

foreign policy in 2000s.
● Survey by World Bank in 2006 found that 39% of firms
going out said that an important factor was the search for
resources.
● Energy links domestic politics with foreign policy,
illuminates key foreign policy actors, highlights key aspects
of China’s overseas behaviour.
● Shows dynamic between Chinese multinational companies
and the state.
Energy: A Case Study of ‘Going Out’ and
China’s Foreign Behaviour (continued)

● Suggests role of military in going out strategy.

● Shows how governments and citizens in resource rich
states respond to Chinese investment.
● Reflects on China’s internalization of global norms.
● Helps address the question of whether U.S. concern about
the power transition and China’s rise lead U.S. to use
China’s thirst for energy to contain it.
China's Overseas FDI in
Non-Financial Sector
100
90
80
70
Billion USD

60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: National Bureau of Statistics, China Statistical Yearbook, various years.

China's Outbound Oil Investment

USD (Billions) Num. Cases

35 35

30 30
Num. of Other Energy
25 25
Investment
20 20 Num. of Oil Investment

15 15 Amount of Oil
Investment
10 10
Amount of Other Energy
5 5 Investment

0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: By author’s own calculation. Cases from The China Global Investment Tracker, 2014. The Heritage Foundation
What is Special about China’s
Energy Diplomacy?

● Chinese state deeply engaged in the process.

● “Infrastructure for oil” strategy in developing world.
● Chinese national oil companies (NOCs) willing to work closer with
NOCs in developing states.
● Cash rich at a time when the world had run out of money.
● Willing to work with U.S. declared “pariah states,” such as Iran,
which are accused of violating global norms.
● Rapid growth of Chinese demand and efforts to get oil create
anxiety within the world, particularly in democratic countries.
● China’s “resource diplomacy” made it the major driver for many
countries’ economies.
What Drives Resource Diplomacy?
Domestic Politics Perspective

● Domestic need for resources and energy and the need to

maintain rapid economic growth.
● Insure popular support for central government and social
stability without which China cannot grow and be more
globally influential.
● Oil is linked to “social contract” between CCP and Middle
Class — they can have cars, air conditioning, refurbish
their homes, just don’t challenge CCP.
● Use of cars as major driver of economic growth means
China’s demand for oil must rise.
China’s Oil Production, Consumption
and Refinery, 1980-2014

X  Key point in 1993

where consumption
surpassed domestic
production and China
became a net oil
importer.

X Source: BP Statistical Review of World

Energy, 2014 (London: BP), cited in
Andrews-Speed, “China’s Energy
Needs,” in David Zweig and Yufan Hao,
eds., Sino-US Energy Triangles:
Resource diplomacy under hegemony
(Routledge, 2015), p. 53.
China’s Energy Anxiety
China, Oil and Global Politics

Explanation:

Pipelines

Sea-lines

“String of Pearls”

“choke points”

Somali pirates Thai pirates

Source: Andrews-Speed and
Dannreuther, China, Oil and
Global Politics (Routledge,
2011), p. 133.
Roots of China’s Energy Anxiety

● As hegemon, U.S. interests are worldwide, including oil rich

countries such as Saudi Arabia, Canada, and Venezuela.
● American values dominate international discourse by labelling
countries with whom China trades as “pariahs.”
● Oil in these pariah states or in U.S. allies means that China may be
pressured to scale back investments in energy rich states.
● Dependence on democratic states can lead to what I call
“pushback.”
 Transparency International Score

Transparency International Score Many of

100 China’s major
90 oil suppliers
80
70 score very low
60
50
in terms of
40 transparency.
30
20
10
0
Iran
Sudan
Venezuela
Russia
Angola
Kazakhstan
Nigeria
Congo
Equatorial Guinea
Brazil
Libya
Vietnam
Australia
Yemen
Saudi Arabia
Kuwait
Canada
Oman
UAE
Iraq
Argentina
Thailand
Indonesia
Norway
Mexico
Notes: Red bars indicate “Pariahs,” black are “Neutrals,” while blue are U.S. allies.

Source: Corruption Perceptions Index. Transparency International Index 2012. http://cpi.transparency.org/cpi2013/

More Energy Anxiety

● Energy rich countries often have unstable governments —

Venezuela, Sudan, Iran and highly “non-transparent.”
● Oil supplies sit in many global “hot spots” — Iran, Sudan, Syria,
Libya, Algeria; Human security (kidnapping) as a new issue for
China.
● China’s demand for energy far outstrips domestic capacity, which
is declining, and any energy savings that could be implemented.
● Pressure from global community to use less coal and fossil fuels
to alleviate global warming, yet much of the CO2 in the ozone
was put there by developed countries during their process of
industrialization.
China’s Strategies to Resolve
Energy Anxiety
China’s Strategies to
Resolve its Energy Anxiety

1. Diversify suppliers, including U.S. allies, and U.S. – declared

pariahs.
2. Build up pipelines.
3. Improve technology and cut usage through greater efficiency.
4. Shift to alternative energy sources.
5. Build strategic reserves.
6. Strengthen the navy to protect the sea lanes.
Efforts at Diversification Fail

● As of 2007, 22% of oil from Iran, Sudan and Venezuela, the

first two being US-declared pariahs who were often subject
to sanctions at UN.
● Between 2007 and 2012, as China worked less with pariahs,
it dependence on U.S. allies rose from 35.9% to 44.8%.
● Dependence on democratic states can lead to “push back”
from citizens who worry about Chinese influence.
● Between 2003 and 2011, China depended on 10 states for
77-82% of its supplies.
 China’s Oil Imports, 2007-2014,
by category of U.S. ties
2007 2010 2012 2014 2007 2010 2012 2014
Pariah Iran 12.9% 8.9% 8.1% 9.1% US-Ally Australia 0.0% 1.2% 1.4% 0.9%
Sudan 6.5% 5.3% 0.9% 0.6% Yemen 2.0% 1.7% 1.3% 0.8%
Saudi
Venezuela 2.6% 3.2% 5.6% 3.6% Arabia
16.6% 18.7% 19.9% 16.2%
Sub-Total 22.0% 17.3% 14.7% 13.3% Kuwait 2.3% 4.1% 3.9% 3.3%
Neutral Russia 9.2% 6.4% 9.0% 11.0% Canada 0.0% 0.1% 0.2% 0.1%
Angola 15.8% 16.5% 14.8% 13.5% Oman 8.6% 6.6% 7.2% 9.9%
Kazakhstan 3.8% 4.2% 3.9% 1.8% UAE 2.3% 2.2% 3.2% 4.0%
Nigeria 1.0% 0.5% 0.3% 0.7% Iraq 0.9% 4.7% 5.8% 9.1%
Congo 3.0% 2.1% 2.0% 2.3% Argentina 1.0% 0.5% 0.4% 0.1%
Equatorial
Guinea
2.1% 0.3% 0.7% 1.1% Thailand 0.7% 0.1% 0.3% 0.0%
Brazil 1.5% 3.4% 2.2% 2.1% Indonesia 1.4% 0.6% 0.2% 0.1%
Libya 1.8% 3.1% 2.7% 0.3% Norway 0.0% 0.0% 0.0% 0.1%
Vietnam 0.3% 0.3% 0.3% 0.5% Mexico 0.0% 0.5% 0.4% 0.2%
Sub-total 38.4% 36.8% 36.0% 33.3% Sub-total 35.9% 41.0% 44.2% 44.8%

Source: CEIC China data; China Statistical Yearbook, various years. Above Total 96.3% 95.0% 94.9% 91.4%
Strengths and Weaknesses
of Pipeline Solutions

● Key strategy to resolve Malacca Dilemma and shipping choke points.

● If pipelines from Russia, Kazakhstan and Myanmar operate at full
capacity, would carry about 14% of China’s projected imports in
2015.
● Building pipelines involves long negotiations with states, as in the
case of Russia, which played China off against Japan.
● Allows foreign penetration of Chinese territory, difficult for
sovereignty.
● Enormous investment in infrastructure.
● Vulnerable to foreign and terrorist attacks.
China’s Oil Pipelines

Explanation:

Pipelines

Sea-lines

“String of Pearls”

“choke points”

Somali pirates Thai pirates

Source: Andrews-Speed and
Dannreuther, China, Oil and
Global Politics (Routledge,
2011), p. 133.
U.S. Hegemony and the Triangular
Nature of Resource Diplomacy

● Under foreign policy triangularism, U.S. has numerous

global interests, such as human rights, non-proliferation,
transparency, anti-corruption issues, regional stability, and
keeping sea lanes open for allies such as Japan, South Korea,
Taiwan.
● So, while China thinks it is in a bilateral relationship with a
state, it suddenly discovers that the relationship is
triangular.
● U.S. has key allies who are energy and resource suppliers
such as Canada, Australia and Saudi Arabia.
● Particularly true for U.S. pariahs and allies.
How Bilateral Ties Become Triangular?

Source: David Zweig, “Modelling ‘resource diplomacy’

under hegemony: The triangular nature of Sino-US
energy relations,” in David Zweig and Yufan Hao, eds.,
Sino-US Energy Triangles: Resource diplomacy under
hegemony (Routledge, 2015), p. 25.
U.S. and China’s Energy Anxiety

● U.S. Congress: hostile to China’s rise, sees energy as a strategy for

slowing China’s rise. Blocked Unocal sale in 2005.
● U.S. Military: worried about China’s overall national strength and
military, not about China gaining control of sources of energy.
● U.S. Administration: major fear that Chinese energy commitments
will lead it to maintain ties with pariah states.
● China’s energy diplomacy in response to U.S. hegemony?
“China always acts cautiously in its relations with countries like
Iran, Venezuela and Russia, which have adopted a more strident
anti-American political stance. Chinese support for these countries
is carefully calibrated so that it does not upset the more important
economic and strategic relationship with the U.S.”**
** Andrews-Speed and Dannreuther, China, Oil and Global Politics (Routledge, 2011), p. 104.
Key Chinese Actors in
Energy Diplomacy and
Their Roles
Government and Party Leaders

● Hu Jintao worried about the “Malacca Dilemma.”

“Certain powers have all along encroached on and tried to control the
navigation through the Straits [of Malacca].”

● Chinese overseas FDI is component of China’s foreign policy; when leaders go

abroad, they try to help Chinese MNCs negotiate better deals.

● Wen Jiabao’s trip to Africa and Hu Jintao’s visit to Latin America, Xi Jinping’s
visit to Mexico and Jamaica, all argued on behalf of Chinese energy companies
and yielded energy commitments.

● Cui Tiankai, now Chinese ambassador to the U.S., speaking at Hong Kong
University in Feb 2005, said that:
“The littoral states [states along a body of water] are responsible to protect
the Straits of Malacca and China is willing to cooperate with them.”
 Government Agencies

● State Council and National Development and Reform Commission encourage

large SOEs to invest abroad in energy, published list of countries and
resources whose purchases they would subsidize through cheap loans.

● State coordinates foreign aid — roads, bridges, stadiums and harbors — to

enhance negotiating power of Chinese enterprises.

● Government’s China Development Bank as a major player in loaning funds to

Chinese MNCs and foreign governments for energy projects.

● Weak, fragmented government control, constantly shifting bureaucracies

with competing interests.

● For over a decade China has lived without a central ministerial agency to
oversee the country’s energy industry. . . . **
** Zha Daojiong, “石油安全与外交” (Oil Security and Foreign Policy), 社会观察 (Social Observer), 9 (2005): 61.
China’s Navy and Resource Diplomacy

● People’s Liberation Army Navy (PLAN) frames the issue in terms of

national security, effectively used energy security to increase
budgetary allocations for modernizing and expanding the naval fleet.

● In 2002, Journal of the National Defense University proposed a shift

from coastal defense to oceanic defense by building a powerful navy
capable of defending China’s “maritime rights and interests and
ensuring the nation’s sea lane security.”

● General Xiong Guangkai, then deputy chief of staff, said that: “The
contest for energy sources and secure supply channels among major
powers and powerful nations has become fiercer.”

● He said that the nation’s energy problem “dealt with strategically.”

● China is building aircraft carriers as it seeks the capability to guard

the sea lanes of the Persian Gulf and the Straits of Malacca.
Key Actors Outside
the Government
Company’s Interests and Actions

● Driven by profit, compete with International Oil Companies (IOCs) in energy

rich states.

● Yet because they get funding from the national government, they were seen
in the early days as often overpaying for projects. They were also seen to be
less competitive than IOCs.

● Intensive efforts to buy resources worldwide, with limited coordination, is

source of anxiety for much of the world.

● At one point, 90 Chinese companies waiting for approval from Foreign

Investment Review Board (FIRB) in Australia – led Australian government to
introduce new law to review SOE investment.

● Because they are SOEs, people overseas see them as an arm of the Chinese
state. In fact, the CEOs of the major oil companies are appointed by the
Communist Party and are members of its Central Committee, making them
among the 200 most powerful people in the CCP.
 Company-Government Relations:
Does the Tail Wag the Dog?
● Chinese observers see NOCs asking government to help them compete with
IOCs, rather than government pushing oil firms to go overseas.
“… difficult to ascertain whether a particular oil/gas venture overseas is the
result of the Chinese government dictating its state-owned energy company to
carry out a governmental mission or the domestic energy industry seeking
diplomatic assistance from the government.”*

● In 2006, Ma and Andrew-Speed saw only limited encouragement from Chinese

government for expansion of NOCs. While they saw a close government-
company link in the late-1990s, “since 2002 the link . . . . has loosened
perceptively . . . . In most cases, there is little evidence to suggest that the
government is doing anything other than support an initiative led by the NOC,
develop associated economic activities and provide a coordination role.”**

* Zha Daojiong, 中国在非洲的石油利益 (China’s Oil Interests in Africa), 国际政治研究 (Research on International Politics)，No. 4,
2006.
** Xin Ma and Philip Andrews-Speed, “The Overseas Activities of China’s National Oil Companies: Rationale and Outlook,”
Minerals and Energy, no. 1 (2006): 17-30.
Think Tanks:
Resource Diplomacy Breeds Anxiety

● 4 conferences by Chinese Institute of International Studies (CIIS)

in 2003-04, attended by military, business, government, and
academics, who laid out strategy for central leaders.
● Report in March 2003, by 73 officials — active and ex-diplomats,
experts, scholars, China’s 3 oil companies — emphasized that:
1. China’s energy security faced unfavorable shift.
2. West, particularly U.S., could contain China’s efforts to exploit
overseas oil and gas resources.
3. Violent fluctuations of oil prices and energy supply could affect
China’s energy security.
 Chinese Analysts: Insecurity in
Oil Supply and Transport, 2008

● Duo argued that Central Asian countries cannot resist U.S.,

after color revolutions putting pro-U.S. parties in power,
China will be unable to import as much oil.**
● In 2004, U.S. designed the “Regional Maritime Security
Initiative” and tried to send troops into Malacca Strait in
the name of “counter terrorism.” Indonesia, Malaysia,
Singapore, and China prevented it, but U.S. still tries to use
Singapore as an entre’ into Malacca affairs.
● Sees U.S. army in airbases in Uzbekistan, Kyrgyzstan, and
Tajikistan threating China’s land oil pipeline.

** Dou Chao, “Analyzing and Explaining the Oil Predicament,” Shipborne Weapons, 2008. (in Chinese)
Chinese Resource “Insecurity”

● “When a country the size of China imports more than 50

million tons of oil, fluctuations in the international oil
market have considerable impact on the national
economic operations of that country. China’s oil imports
began to exceed 50 million tons as early as 2000. And
since then, China has been exposed to potential risks of
oil supply disruptions.”**

**Liu Xuecheng, Senior Fellow, China Institute of International Studies, Ministry of Foreign Affairs,
Beijing

Who are the key players in China’s resource

diplomacy and do they have conflicting interests?
 University Students’ Concerns About
China’s Energy Situation, 2006

Percent
Could China’s need for oil make it a
50 dependent nation?

40

30

20

10

0
No concern 2 3 4 Crisis!
at all
Level of Concern Among University Students
Source: David Zweig and Ye Shulan, “A Crisis is Looming:
Students surveyed in 2006 saw energy as
China’s Energy Challenge in the Eyes of University Students,”
a crisis situation, but students have little Journal of Contemporary China, vol. 17, no. 55 (2008): 273-
impact on foreign policy. 296.
Case Study:
Iran – Balancing Energy Needs
and Support for Non-Proliferation
China Fills the Gap

● Following discovery in 2002 that Iran had not reported the

true extent of its nuclear program to the International
Atomic for Energy Agency (IAEA), Western powers
vacated Iran.
● China use this opportunity to move in quickly to work with
Iran which has enormous oil and gas supplies.
● China was offered excellent deals but many never
materialized.
● Still by 2007, China imported 13% of its oil from Iran.
U.S. Pressure Forces China
to Limit Energy Deals
● In 2005, Iran’s newly elected President Ahmadinejad took much
harder line on nuclear program, complicating issue for China.
● U.S. wanted to move Iran case from IAEA to United Nations
Security Council (UNSC) where it could push Iran for sanctions.
● Chinese firms pressured by U.S. laws against Iran where if they did
business with Iran, their subsidiaries listed on New York stock
exchanges could be fined.
● Chinese government also did not want to be seen as not supporting
non-proliferation regime.
● As enticement, U.S. offered China new oil links with Saudi Arabia
and United Arab Emirates (UAE).
China Works with U.S.

● So, Beijing balanced ties with Tehran and U.S. and let IAEA
pass its case to UNSC.
● President Hu Jintao, 2006, speaking at White House:
“We are ready to continue to work with the U.S. side. . . .
[on] the Iranian nuclear issue through diplomatic
negotiations to uphold the international non-proliferation
regime and safeguard global peace and security.”**

** John W. Garver, “The U.S. Factor in Sino-Iranian energy relations,” in David Zweig and Yufan Hao,
eds., Sino-US Energy Triangles: Resource diplomacy under hegemony (Routledge, 2015), p. 211.
China’s Balancing Act

● While voting for each of 4 resolutions, China always dragged out the
negotiations with U.S. and UN and watered down the resolutions to
help Iran.
● For example, it resisted referral of the Iran nuclear issue from the
IAEA to the UNSC from Nov 2003 to Jan 2006.
● According to Garver, “when continued obstruction risked identifying
China with the IRI [Iran] too closely, thereby endangering China’s
ties with Washington, Beijing eventually agreed to sanctions.”
● But it also “helped Tehran by delaying action by many months,
securing the deletion of tough rhetoric, weakening sanctions, and
most importantly ensuring that sanctions did not interfere with
Iran’s production and export of oil and gas.”
 Efforts to Support Ties with Iran

Chinese-Iranian Official ● In June 2005, Iran admitted with

Government Meetings, 2003-11** “observer” status to Shanghai Cooperation
2003 6 Organization (SCO), allows Hu Jintao and
Iranian President Ahmadinejad to meet
2004 11 frequently.
2005 14
● Carried out many official exchanges of top
2006 10 officials.
2007 17
● Chinese diplomats (at UN) and top leaders
2008 12 always supported Iran’s claim that it was
carrying out a “peaceful nuclear
2009 8
program” — Hu Jintao, 2008.
2010 7
● China continued to supply weapons to Iran,
2011 9 second major source after Russia.
** Calculated from Garver, “The U.S. Factor in Sino-Iranian energy relations,” pp. 218-219.
Conclusion to Iran:
A Successful Strategy
● China’s willingness to go into a pariah state shows it is not
intimidated by U.S. (and maybe that it is not so committed to global
norms), but U.S. economic power and legal system forced China to
cut back on activity in Iran.
● China was important go-between for U.S. and Iran negotiations on
nuclear agreement, as lifting of sanctions is an excellent outcome
for China.
● Long-term investment in ties with Iran has strengthened China
position in Asia, especially now that Iran is coming out of the cold.
● Xi Jinping, in Feb 2016, quickly traveled to Tehran immediately
after nuclear agreement.
Case Study:
Angola – Dealing with an Independent,
Neutral and Tough Partner
Political and Diplomatic Relations

● China gave support to anti-colonial struggle but helped the losing

side in the Civil War that followed.
● After victory of People’s Movement for the Liberation of Angola
(MPLA) in 1975, China refused to recognize Angola’s
independence and the MPLA-led government until 1983.
● By the 1990s, Angola became China’s second largest trading
partner in Africa due to defense cooperation.
● In October 1998, President dos Santos visited China for the first
time.
● Thereafter, cooperation between the two has involved regular
bilateral visits by key officials.
Political and Diplomatic Relations (continued)

● In 2010, China established a “strategic partnership” with Angola

and then Vice-President, Xi Jinping, who visited Luanda in March
2011, said his visit marked a new phase in relations.
● In May 2014, during his visit, Premier Li Keqiang’s signed new
agreements in construction and energy infrastructure.
● Li also acknowledged that 260,000 Chinese nationals were working
in Angola (out of one million in Africa), while some estimates put
the number at 400,000.
● Important for Angola and for President dos Santos, his family and
his top officials, China does not question the fact that billions of US$
of oil money has disappeared.
Financial and Trade Assistance

● In late 2003, economic and commercial cooperation agreement

signed by Angola’s Ministry of Finance and the Chinese Ministry
of Trade.
● In March, 2004, China Export-Import Bank (Eximbank) pledged
US$2 billion “oil-backed” loan to fund reconstruction of
infrastructure throughout the country, payable over 12 years at
deep concessional interest rate.
● China kick-started over 100 projects in energy, water, health,
education, telecommunications, fisheries, and public works.
● By 2014, Chinese Export-Import Bank and China Development
Bank have loaned Angola close to US$16 billion.
China’s Increasing Oil Demand

China’s imports
continued to rise

while U.S. imports

dropped dramatically

Source: Clarkson Research Services Limited

(CRSL), 2013, cited in Alex Vines, “Angolan
agency and Chinese and USA oil politics, 1975-
2014,” in David Zweig and Yufan Hao, eds.,
Sino-US Energy Triangles: Resource diplomacy
under hegemony (Routledge, 2015), p. 132.
 Angolan Model:
Resources for Infrastructure

● China’s EximBank used deal structure that World Bank calls

“Angolan model” or others call “resources for infrastructure,”
where repayment for infrastructure made in natural resources.
● Approach originated with Japan in China.
● For countries without adequate financial guarantees and packages
natural resource exploitation and infrastructure development.
● According to World Bank, average interest rate of 3.6%, grace
period of four years and a maturity of twelve years.
● Chinese terms of loan are London Interbank Offered Rate (LIBOR)*
plus a spread of 1.5%, with grace period of up to three years.

* LIBOR is the interest rate that banks charge other banks.

China’s Angolan Anxieties

● Angola is an excellent example of resource rich state that

protects its sovereignty and independence.
● Despite getting key financial support from China in 2003-
2004, Angola does not favour China’s NOCs.
● Sinopec twice blocked by Sonagol from buying oil fields
after negotiating deals and giving signature bonuses of
US$1.1 bil.
 China’s Waning Influence in Angola

● Corkin: “There is in fact little evidence to support continued

preferential treatment at the bidding table for Chinese oil companies
due to extensive Chinese loans. . . . Political posturing indicates that
both China and Angola see each other as necessary strategic allies for
the foreseeable future, but this may mask an uneasy marriage of
convenience.”*
● Horta: Given the important loans, “one would expect . . . that Angola
would fall under greater Chinese control. While China has gained an
impressive economic presence in Angola, its political and diplomatic
influence is growing weaker by the day, and its soft power is rather
weak.”**
* Lucy Corkin, “Uneasy allies: China's evolving relations with Angola,” Journal of Contemporary African Studies, April 2011.

** Loro Horta, “China’s Waning Influence in Angola,” Diplomatic Courier, 26 August 2011
Recent Events

● Oct 2015, Angola borrowed US$6 bil. from Chinese

sources.
● Dos Santos went to China in Feb 2016 to renegotiate
terms of loan agreements in new economic environment.
● Price of loan repayment would have gone up dramatically,
given the drop in the price of oil.
● Angola should be searching for markets for its oil, as U.S.
purchases of oil have dropped dramatically.
● Also, China’s share of Angolan oil exports has dropped.
Conclusion to Angola

● Relationship remains robust. Visits on both sides are

frequent and successful.
● China’s “Angolan model” now less popular in Angola,
especially as dropping oil prices increases cost of loans.
● China is very active in helping reconstruct Angola, but
many question the deeper impact of Chinese investment
due to corruption in the regime.
● While China has limited leverage, Angola needs money and
China is still willing to loan it with few questions.
● But Chinese oil companies have to fight hard to succeed.
Case Study:
Australia – Energy Diplomacy
with a U.S. Strategic Ally
China’s Economic Leverage

● China has strong leverage in Australia due to what

Australians call their “economic security.”
● In the 10 years between 2003 and 2013, about 12% of
Australia’s GDP growth depended on exports to China.
● Trade with China cushioned Australia from the 2008
financial crisis.
● Top Australian companies — Rio Tinto — depend on China —
as of 2013, China supplied 100% of Rio’s growth — and a
cohort of resource billionaires who sell Australian resources
to China speak loudly on behalf of China.
 China’s Share of Australian Exports,
2004-2012 ($AUS bil.)

2004 2005 2007 2008 2009 2010 2011 2012

Australian
11.0 16.1 23.8 32.3 42.5 58.4 71.5 73.3
Exports to China

China’s Share of
9.4% 11.6% 14.1% 14.5% 21.6% 25.3% 27.3% 29.5%
Australian Exports

China’s Rank 3rd 2nd 2nd 2nd 1st 1st 1st 1st

Source: Australian Bureau of Statistics, various years

China’s Share of Australian Energy and
Resource Exports, 2005-2011 ($AUS bil.)

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Metallurgical coal 2.9 2.9 1.6 12.3 18.3 17.5

Crude oil 3.1 3.2 6.1 6.1 10.7 18.4

Copper (c) 35.5 26.4 33.5 35.4 32.7 32.3

Iron ore (c) 51.6 52.6 56.9 69.0 68.0 68.7
Lead 49.6 39.3 23.4 38.1 41.5 50.0
Zinc 10.9 21.9 35.4 45.0 55.1 42.0

Note: Runs from March to March; (c) Excludes Hong Kong.

Source: Australian Mineral Statistics, various years
 Australia’s Stock Market and China’s
Economic Growth, 2002-2013
Australia All Ordinaries Index

7000.0 16.0%
Australia's
14.0%
share market
6000.0

growth closely
5000.0 12.0%

4000.0
10.0%
tracks China's
3000.0
8.0% economic
6.0% growth.
2000.0
4.0%
1000.0 2.0%
0.0 0.0%

Australian Sharemarket China GDP Growth Year to Date

Note: The March 2002 All Ordinaries Index was unavailable, so we used April 2002.
Source: Australia Securities Exchange, http://www.asx.com.au/research/historical_equity_data.htm#End_of_month_values
and National Bureau of Statistics of China, Quarterly statistics.
China’s Strategic Dilemma

● Despite this enormous economic link, China has had only marginal
success in persuading Australia to weaken its strategic ties to the U.S.

● When Australian officials voice strong support for Chinese foreign policy
goals, American government often pushes back.

● China undermines efforts to weaken strategic ties to U.S. through its

assertiveness in South China Sea, through which over 55% of Australian
trade travels. Australians get nervous.

● With strong democratic traditions, Australian citizens resist efforts by

Chinese companies to buy land and invest in important Australian
companies.

● Australian governments shift positions, depending on who is in power.

They worry about too much investment by SOEs in the Australian
economy.
China’s Australia Strategy

● Chinese Foreign Ministry low-key, cautious and responsive to

Australian policy, rather than proactive.
● Has tried to press Australia to distance itself from defense
commitments to the U.S., especially as relates to any future
fight between the U.S. and China over Taiwan.
● Speak out when Australians take steps that can harm Chinese
investment in Australian resource sector.
● Uses the bilateral, ongoing dialogue among Chinese and
Australian scholars to push for greater distancing from U.S.
Case Study:
Australia’s Quixotic Policy Towards
China – Trade’s Strategic Significance
Australia’s Quixotic Policy
Towards China, 1999

● In 1999, top Asian advisor to future U.S. president Bush

warned Australia that it expected support if U.S. found
itself in a conflict with China over Taiwan, otherwise the
entire defense relationship would be reconsidered.
● China, on the other hand, warned Australia of “very serious
consequences” if Australia sided with the U.S. in a conflict
over Taiwan.
● Yan Xuetong of Tsinghua University wrote that China
favored “tighter regional relations” with Australia to
“defuse international hegemonism by the United States”
and “cut into its influence”.
 China Gains Some Ground Under
Howard Government

● In mid-2000s, Howard’s conservative government did not support

containment of China.
● In 2004, Foreign Minister Downer, after meeting Prime Minister Wen
Jiabao in Beijing, said that Australia-New Zealand-U.S. defense treaty
(ANZUS) did not commit Australia to help U.S. in fight with China over
Taiwan.
● U.S. Deputy Secretary of State Armitage forced Howard to rebuke
Downer.
● But Chinese saw opportunity to turn Australia into another France, i.e.,
U.S. ally who was not so close on strategic issues, and sent Madam Fu
Ying as Ambassador with plan to try to pry Australia away.**
** David Uren, The Kingdom and the Quarry: China, Australia, Fear and Greed
(Collingwood, AU: Black Inc. 2012), p. 118.
Chinese Successes, 2004-2006

● Howard gives China “market economy” status, despite

active U.S. opposition, as it helps China defend itself
from attacks for “dumping” – selling overseas at prices
below domestic costs – at WTO.
● During April 2006 trip of U.S. National Security Advisor,
Condoleeza Rice to Australia, Australia disagreed with
U.S. over level of threat from China.
● Australia didn’t participate in Quadrilateral Talks, which
reflect containment by U.S., Japan, India and Australia.
More Successes, 2013

● Feb 2013, Australian Defense Minister: “Australia does not want to be put in
the position where we have to choose between the U.S. and China.”
● Presented a benign view of China’s military rise. “China has every right to
seek greater strategic influence to match its economic weight. The extent to
which this can be peacefully accommodated will turn ultimately on both the
pattern of China’s international behaviour and the extent to which the
existing international order intelligently finds more space for China.”**
● During 2013 trip to China, PM Gillard strengthened military ties with PLA,
established “strategic dialogues” at the level of prime minister, foreign
minister and finance minister, established a Renminbi-Australian dollar swap
mechanism which will treat the RMB as a reserve currency.

** Hugh White, “Could the US and China share equal billing in Asia?” The Sydney Morning Herald,
5 March 2013.
Australian Government “Push-Back”

● In 2009, Treasurer Swan tightened control by the Foreign

Investment Review Board (FIRB), especially if the investor was a
state-owned enterprise (SOE) or a sovereign wealth fund (SWF),
increasing FIRB’s latitude to block investments by foreign SOEs or
SWFs based on perceptions of Australian national interest.
● No specific country, SOE or SWF was identified, but China was
perceived as the target.
● A Wikileaks cable (Sep 2009) quotes Head of Foreign Investment
Division of Treasury and a member of the FIRB, telling U.S.
diplomats that new rules were intended to “pose new disincentives
for larger scale Chinese investments.”
● However, a number of potentially contentious investments by
Chinese SOEs have been conditionally approved.
China Withdraws Bids for
Coal-Seam Gas Investment

● Society has also forced the government to cancel resource

acquisition efforts by Chinese companies.
● Between summer 2012 and spring 2013, Petro-China initiated 5
purchases of rural land in Queensland to drill for coal seam gas
(CSG).
● Farmers and green groups worried about the drilling on
subterranean structures, allying the ‘latte sipping elite’ and
landlords to oppose Chinese engagement in rural land.**
● In early 2013, 500 landowners rallied against Chinese investment,
forcing New South Wales government to rescind approval for coal
seam project and demand more scientific information by federal
government.
**Zweig’s interview of Australian journalist, Rowen Callick, 2013.
 Australian Views on Chinese
Investment in Australia, 2009-2012
Overall, do you think the Australian government is …

2009 2010 2011 2012

… allowing too much

50% 57% 57% 56%
investment from China

… allowing about the right Concerns clearly

42% 34% 35% 37% grew between
amount of investment
2009 and 2012
… not allowing enough
3% 3% 3% 3%
investment from China

Don’t know 5% 6% 5% 4%

Source: Fergus Hanson, “Australia and New Zealand in the World: Public Opinion and Foreign Policy,”
Lowi Institute for International Policy, 2012, table 23, pp. 25.
Conclusion to Australia

● China has been able to use its economic influence to gain

some important policy concessions from Australia.
● China has also been able to gain important resources,
though not without some serious difficulties.
● Has also created some problems for the U.S.
● But in the end, has not been too successful in prying
Australia away from U.S. security links.

How do you explain the different relationships between

China and the three countries in our case studies?
What Can States Do?
Background

● Since 1978, China’s leaders have seen the accumulation of

talent, particularly people who have worked or studied
abroad, as a key component of developing national power.

● In speeches, policies, funding, etc., they see overseas

Mainlanders as critical for developing scientific capability,
educating future generations in China, transferring
technology, strengthening global competition of national
champions through enhanced management, and overall, for
generating an innovative society and competitive economy.
 Broad Policy Environment

● Improve policy and political context in which return migrants must function.
● With the brain drain often attributed to political instability, creating a stable
polity – though not necessarily a democracy – is necessary.
● Attract entrepreneurs, deregulate the market to create opportunities and
confidence among overseas sojourners.
● Promote the private sector and secure intellectual property rights.
● Newland*: to facilitate circular migration, governments must at a minimum
create an enabling environment in the country of origin. “The most fundamental
(and most difficult) elements of this are establishment of the rule of law,
property rights, open and transparent government, lack of corruption and other
attributes of good governance, including dual citizenship or eliminating visa
requirements for members of the diaspora who are citizens of another country.”
* Kathleen Newland, Circular Migration and Human Development, Human Development Research Paper, no. 42 (New York: United
Nations Development Programme, 2009), p. 13.
 Broad Policy Environment (continued)

● Cut bureaucratic predation (corruption, red tape, payoffs and rent-seeking) and
the transaction costs of doing business.
● Introduce coherent science and technology policy and invest in S&T. “When real
opportunity exists within the context of coherent internal policies and
investments in science and technology, returning to the home country becomes
an attractive option for emigrants.”*
● Sending countries must “develop an adequate scientific, technological and
business environment that will provide rewarding opportunities for the return
of individuals who have upgraded their skills abroad.”**
● States must overcome bias against returnees at national, institutional or
individual levels.***
* Nancy Gore Saravia and Juan Francisco Miranda, “Plumbing the brain drain,” Bulletin of the World Health Organization, no. 82
(2004): 608-615.
** OECD Observer, “International Mobility of the Highly Skilled,” Policy Brief, July 2002.
*** F. P. Cerase, “Expectations and reality: a case study of return migration from the United States to Southern Italy,
“International Migration Review, vol. 8, no. 2 (1974): 245-62.
Government Policies Targeted
at the Flow of Talent

● Deregulate controls on human movement, lower transaction

costs of reverse migration.
● Create high tech zones, with tax breaks, discount floor space,
and also help entrepreneurs enter the local market.
● Inform overseas communities of the benefits of reverse
migration, though this information usually travels through
personal or professional networks.
● Foster professional networks overseas.
● Bring overseas nationals back to see, first-hand, the
opportunities that await them.
Explaining China’s Success
How to Explain China’s Relatively
Successful Reverse Brain Drain?

● In China, leaders are very important to public policy because in a

Leninist system, policies are led from the top and new leaders often
bring in new ideas.
● Leaders overcome bureaucratic recalcitrance and fear of linking
internationally.
● Sustained attention to this policy from leaders over 35 years.
● Investment in R&D and enhanced status of private sector.
● New projects tested in small environments — organizations or
communities — where new policies generate less opposition and if
they fail, the impact is limited.
● Cities are major actors in China’s development, power is often
decentralized, yet upward mobility for territorial CCP officials or
mayors depends on increasing local GDP.
 China's R&D Investment
2001-2014 (RMB 100 mil.)

2001 2002 2004 2005 2007 2009 2010 2011 2012 2013 2014
China’s R&D Spending 1042.3 1287.6 1966.3 2450.0 3710.2 5802.1 7062.6 8687.0 10298 11846 13015

China’s Percent Growth 14.1% 22.8% 19.5% 19.9% 14.8% 26.5% 21.7% 23.0% 18.5% 15.0% 9.9%

R&D Spending as
Percent of GDP

China 0.95% 1.07% 1.23% 1.32% 1.40% 1.70% 1.76% 1.84% 1.98% 2.01% 2.05%

Japan 3.07% 3.12% 3.13% 3.31% 3.46% 3.36% 3.25% 3.38% 3.34% 3.47% 3.58%

South Korea 2.34% 2.27% 2.53% 2.63% 3.00% 3.29% 3.47% 3.74% 4.03% 4.15% 4.29%

USA 2.64% 2.55% 2.49% 2.51% 2.63% 2.82% 2.74% 2.76% 2.70% 2.74%

Taiwan 2.02% 2.10% 2.26% 2.32% 2.47% 2.84% 2.80% 2.90% 2.95% 3.01% 3.01%

European Union 1.70% 1.71% 1.67% 1.67% 1.70% 1.84% 1.84% 1.88% 1.92% 1.93% 1.94%

Source: CEIC database; Ministry of Science and Technology

A Core Concept: Shortage

● Shortage goods – skills, resources, technology, networks or

information acquired abroad that is in high demand in home society
and creates economic or personal opportunity for those who return
with it.
● Skills, knowledge, or networks people gain abroad and become part
of their attributes may be called transnational human capital (TNHC).
● Success comes when people overseas find an overseas good that is in
high demand in China, making short-term profits high.
● Use it to negotiate special deals.
● Leadership in China aware of the need to fill in the technological
gaps, emphasize this issue in speeches, documents and policies.
 Limits on the State’s Role

● International Environment – changes in global economy, movement of MNCs,

relative price of labour in different countries, all move people around.

● People often don’t know what global forces are shaping their choices.

● Networks – friends, working colleagues who may return first, regional

associations, all share information and create examples to emulate.

● Institutions such as MNCs transfer people home.

● Individual decision to return often driven by family conditions, need of aging

parents, spouses’ viewpoint, and children’s age.

● These are individual choices, made outside the boundaries of China, where
traditional state influences do not play a role — largely a free choice.

● Still the movement of high-end human talent is deeply affected by the state,
albeit at times indirectly.
The History of the Policy
Deng Xiaoping:
Sending Students Abroad

● Spring 1978, Deng: “Backwardness must be recognized

before it can be changed. One must learn from those who
are most advanced before one can catch up with and
surpass them.”
● Jun 1978, Deng criticized Ministry of Education (MOE),
saying policy on overseas students was too inflexible.
● Aug 1979, Deng proposed that China send 10,000 students
abroad each year, but MOE cut the quota to 3,000/year for
five years.
Zhao and Hu: Decentralizing Controls
over Global Channels, 1984-1985

● Two leading reformers, CCP General Secretary Hu Yaobang

and Prime Minister Zhao Ziyang, introduced educational
reforms.
● Authority over educational exchanges decentralized, allowing
universities to set up bilateral exchanges with overseas
universities.
● Students could apply directly for overseas study and
scholarships.
● National Natural Science Foundation established becoming
major source of competitive funding for returning scientists.
Zhao Promotes Brain Circulation

● By 1987, 3% of self-paying students returning, triggering big

debate within government about overseas education.
● State Education Commission (new name for MOE), wanted to
cut back or cancel program.
● State Science and Technology Commission (SSTC): staying in
West gave access to technologies, helping China.
● Ministry of Personnel afraid there were no jobs for returnees
back in China.
● Leading reformer Zhao Ziyang spoke of storing brain power
overseas, early recognition in 1988 of brain circulation.
 June 4th Creates Instant “Brain Drain”
of Overseas Chinese Talent

PRC, Taiwanese and Indians awarded US doctorates in

science and engineering: 1985-2002

3000

2500
Tiananmen
2000
PRC

1500 Taiwan
India
1000

500

0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: Science and Engineering Doctorate Awards, 2002 (SRS Home Page, October 2003).
Improving Policy
After Tiananmen
Deng Overcomes Politicization in 1992

● After June 4th, 1989, MOE looking for class enemies among overseas
students.
● West gives Mainlanders in their countries permanent residence in
early 1990s: US  50,000, Canada  11,000, Australia  20,000
● Jan 1992, Deng calls on all students to return, all anti-government
activities overseas to be forgiven.
● Deng: If people want to contribute to China they must return.
● Spring 1993, new policy, 12 Character Program, includes freedom to
come and go, resolving worries for those thinking of returning about
getting trapped back in China.
● Deregulation of controls over where return migrants could settle.
 Intense Inter-municipality Competition

● In 1989-90, Shenzhen and other cities introduce policies to

attract entrepreneurs, tax free equipment, cars, houses, free
floor space in the incubator.
● In 1990s, over 100 cities built incubators for overseas
entrepreneurs in new high tech zones and some zone
management committees invested in the start-ups.
● Program directed by State Science and Technology Commission
(similar to a Ministry of Science).
● 2009, under 1000 Talents Plan, each city had to draft a plan
outlining their needs in human capital.
● Leadership Group on Talent to recruit such talent from overseas.
Jiang and Zhu’s Innovations
in Late-1990s

● 1996, 100 Talents Program in Chinese Academy of Sciences

(CAS).
● 2 mil. RMB for equipment, labs, supplement returnee’s
salary (by 20%), given authority over research team in
their lab.
● Policy of Strengthening the Country through Talent
promotes S&T.
● May 1998, 985 Plan to create world class universities, lots
of money for some schools, 20% of funds to recruit
overseas talent.
Jiang and Zhu’s Innovations
in Late-1990s (continued)

● In 1999, private sector enshrined in Chinese constitution.

● Capitalists can join CCP.
● Jiang sees Chinese talent as global commodity – Let people
go out to increase their human capital and then China must
compete for their talent in international market.
● Prime Minister Zhu Rongji, Sep 2001, henceforth China
would change the emphasis of the open policy from
attracting foreign capital to attracting human talent and
technology.
Diaspora Option, 2001

● Borrowing from programs in countries, such as Colombia,

China introduces a new policy in 2001.
● Drafted by 18 ministries.
● Recognizing people will stay abroad, it encourages them to
help China.
● Major shift from accusing people who stay abroad of treason
to accepting that desire to stay abroad not traitorous.
First 25 Years: Limited Success

● Key work by ministries of Education, Personnel, and Science

and by Chinese Academy of Sciences.
● By 2004, 100 Talent’s Program had brought back  899
scientists.
● Changjiang Scholar, funded by MOE and Li Ka-shing – by 2004
 537 academics.
● Natural Science Foundation of China Distinguished Scholars
Program, in 1994-2004  1,176 scholars
● Good results, not “system transformative.”
Bringing the Party Back In:
The 1000 Talents Program
(2002-2008)
Bringing the Party Back In,
2002-2003

● May 2002, CCP introduced 2002-2005 Outline for Building

the Ranks of Nationwide Talent.
● Dec 2002, Director of CCP Organization Department
promulgated idea that the Party manages all top talent, not
just in CCP.
● Jun 2003, Politburo established Central Leadership Small
Group to Coordinate the Work on Talent (LSGT).
● Localities also established Leadership Groups on Talent.
● Dec 2003, General Secretary Hu Jintao reinforced shift from
CCP managing cadres to CCP managing talent.
CCP Meets Limited Success

● Zweig’s 2002 survey found that Mainland expatriates

favoured systematic reform of China's policies on human
talent, rather than special privileges.
● Web survey in 2004 (3,000 respondents)  strongest force
stopping people from returning was complicated role of
human relations in Chinese society.
● To get positions, grants, be promoted, need to spend too
much time building ties to people in authority.
● By 2007, 93% of Chinese who received U.S. PhD in Science
and Engineering in 2002, were still in the U.S.
● The worst case in the world!
Staying After School, 2002-2007

Shocking data for

Chinese Leaders!
Systematic Shift Begins in 2007

● State Councilor responsible for education, in Mar 2007

admitted universities not have enough talent to make China
a creative society.
● China needed new ways of thinking, more mature, world
class professors and new methods to bring people back to
China, including using the state’s research monies.
● Oct 2007, Li Yuanchao became head of CCP Organizational
Department and LSGT.
● Human talent a strategic resource, bringing them back a
strategic investment critical to making China an innovative
society.
Li Yuanchao:
Building China through Talent

● Dec 2008, Li Yuanchao called for relaxed, tolerant and

lenient environment.
● Told Chinese executives to appeal to overseas Mainlanders’
love of their careers and need for self-esteem, doesn’t
believe love of country will bring them back.
● Put them in leadership positions, trust them.
● Li: Talent is “core” of a nation’s global creativity and
competitiveness.
● Applauded National Institute of Biological Science in
Jan 2009 for introducing world standards in hiring and
allocating funds to research teams based on merit.
The 1000 Talents Program
The 1000 Talents Program

● Dec 2008, LSGT declared 1000 Talents Program — to bring back

2,000 highly talented over 5-10 years.
● Called for returnees who can make breakthroughs in key
technologies, scientific and technological leaders who can develop
emerging fields.
● Foreign PhD, under 55, willing to work in China for 6 months each
year.
● LSGT taken over in 2008 by CCP Organization Department and its
Office of Human Talent.
● All ministries involved in returned talent programs are members,
but CCP Organization Department coordinates competing interests
to insure policy's success.
Qualities of Awardees

● Experts and scholars with titles on a par with professors in

prestigious foreign universities and scientific research institutes.
● Senior technical and management professionals working in well-
known international companies and financial institutions.
● Entrepreneurs owning intellectual property rights or who
mastered core technologies, have overseas experience as
entrepreneur [i.e., owned their own company], are familiar with
related industries and international practice.
● Technologies must be internationally advanced that “can fill the
domestic gap [i.e., shortage – Zweig], in this regard, have market
potential and can be put into industrialized production.”
Benefits to Awardees

● One-time subsidy of RMB 1 million, medical care, social

insurance, pensions, medical insurance, and work-related
injury insurance.
● Housing, food allowance, subsidy for home leave, and
children-education allowance, all tax free.
● Could buy second house.
● Salary reached through consultation must be reasonable in
light of their previous salary overseas.
● Big drawback: no tenure/permanent posts under program,
but institutes can give such guarantees.
CCP Mobilizes Municipalities

● Fall 2009, municipal CCP committees nationwide and their Leadership

Groups on Talent assess talent locality needed.

● Cities committed to get that talent: Beijing 1500 people, Guangzhou 300,
Jinan 150, all in 3-5 years.

● Dec 2009, Shanghai team seeks 115 people in financial sector in New
York, Toronto and Singapore, task made easier by Global Financial Crisis.

● Although not meeting quotas not to affect careers, local official said:
policy now under the CCP, so pressure is greater.

● Expectations especially heavy for units that use returnees – universities,

high tech parks, research institutes and SOEs – which were to make
internal environment attractive to overseas Mainlanders.

● Lots of money for lower quality universities that brought people back.
Evaluating 1000 Talents
Policy and its Limits
5-Year Stay Rate (2001-2011) of Chinese
Science and Engineering PhD Recipients in U.S.

100
From 97% in 2001
to only 85% in 2011
95 staying longer term
in U.S.
90
Note: 5-Year stay rate means
how many people who
received a PhD still in U.S. 5
85 years later.

80
Source: Finn (2014) Stay Rates of
Foreign Doctorate Recipients from U.S.
Universities
https://orise.orau.gov/files/sep/stay-
75 rates-foreign-doctorate-recipients-
2001 2003 2005 2007 2009 2011 2011.pdf
Percent with PhDs in
Government Programs, 2011
% with
% with Foreign
Program Years Total No Foreign
Experience
PhDs

NSF Distinguished Scholar 1994-2004 1176 98.5 32.8

MOE Changjiang Scholars 1994-2004 537 90 37.2

CAS 100 Talent's Program 1994-2004 899 86.5 43.6

CCP’s 1000 Talents Program* 2008-2011 1100 n.a. 88%

Source: Simon and Cao, China's Emerging Technological Edge, p. 240;

*Zweig’s Research
Number of Overseas Students
and Returnees, 1993-2013

By 2013, there were

1.4 million Mainland
students and
2007-08 saw significant
change in returnee policy scholars who
remained overseas.
2006 policy on going
overseas for education
liberalized
Note: Scale of Brain
Stock number is on
the right hand side.

Source: National Statistical Bureau of China, China Statistical Year Book, various years.
Policy Complaints Change Over Time

● Problems with policy changed over time.

● Original concerns in 1990s was low salaries.
● By 2011, concerns about access to research funding,
excessive role of personal ties in getting grants and
graduate students, academic misconduct, bias against
returnees, and excessive power in hands of
administrators dominant.
 Government Policies Do Not
Match Reality
Government Policy Survey by CCP Organization Department, Critiques by Scholars**
Priorities* 2011
• Salaries competitive • Research Culture is a major problem • Personal relations too
with those overseas complex
• Lots of research • Research funds allocated based on • Research Culture
money which is “relationships” (guanxi) not quality; dominated by
relatively easy to get Returnees must share awards with administrators
locals in same unit

• Residence permits to • Administrative intervention is • Academic misconduct

decrease “transaction common; may determine who can hurts returnees
costs” apply for grants. reputations
• Size of apartment, • Research Project application too • Organizations or the
children’s education, complex State must remove
spouse’s work “bias” vs. returnees
Notes:
* Policy statements for Changjiang Scholar Plan and Thousand Talent Plan. ** Cao (2008) “Why Government Policy
have Failed to Attract First-rate Returnees;” Zweig’s presentation to Minister Li Yuanchao, Shenzhen, 2012.
Part-time versus Full-time for
Under 1000 Talents Plan, 2011

Type Full-time Part-time Total Need to create

“part-time”
A - innovative 99 (26.5%) 275 (73.5%) 374 (74.7%) program or few
academics and
B - innovative 36 (80.0%) 9 (20.0%) 45 (9.0%) scientists would
return.

C - entrepreneur 73 (89.0%) 9 (11.0%) 82 (16.4%)

Total 208 (41.5%) 293 (58.5%) 501 (100%)

Notes:
Percentages are row percentages (501 cases).
A - scholars working in universities and research institutes.
B - scientists or managers working in enterprises.
C - entrepreneurs run own company or with friends.
Xi Jinping and Returnees

● Emphasis on helping them maximize their capabilities

after they return.
● Current political environment, very tight control over
funding, difficulties in accessing overseas websites,
emphasis on ideology and Party leadership, all negative
incentive for many.
● In spring 2016, many students and scholars overseas
being told by parents to stay abroad.
Case Study:
Academics and Universities
Changjiang Scholars as
Major Academic Program

● Jiang Zemin’s May 1998 speech in honour of Peking University’s

100th anniversary called for establishing world class universities,
Hong Kong billionaire Li Ka-shing, established Changjiang
Scholars.
● Create 500 chairs at top universities in key fields in 3-5 years.
● By 2006, 97 schools had received chairs, including 799
Distinguished Professors, who returned full time, 308 Chair
Professors, who retuned part time, and 14 Changjiang
Exceptional Scholar Awards.
● Among Distinguished Professors, 29% came directly from
overseas or returned in previous three years.
Funding for “985 Plan” Universities

Peking University (US$220 mil.) Wuhan University (US$100 mil.)

Tsinghua University (US$300 mil.) Jilin University (US$85 mil.)
Fudan University (US$200 mil.) Tongji University (US$70 mil.)
Harbin Institute of Technology (US$130 mil.) Northwest Polytech Univ. (US$110 mil.)
Nanjing University (US$200 mil.) Nankai University (US$85 mil.)
Shanghai Jiao Tong (US$145 mil.) Xiamen University (US$100 mil.)
Xi‘an Jiao Tong (US$110 mil.) East China Normal (US$70 mil.)
Zhejiang University (US$170 mil.) Southeast University (US$70 mil.)
Beijing Institute of Technology (US$120 mil.) Shandong University (US$145 mil.)
Beijing Normal (US$145 mil.) Sichuan University (US$85 mil.)
Beihang University (US$110 mil.) Tianjin University (US$85 mil.)
Huazhong University of Science and University of Science and Technology of
Technology (US$70 mil.) China (US$150 mil.)

Source: Ministry of Education

Why Do Academics Return?

● Surveys show improved social status and salaries were important.

● Swap position in mediocre overseas university for a good platform in
China; schools gave administrative posts and good jobs to returnees.
● Preferential policies – good housing, rapid promotion, schools for
children.
● Failure hypothesis confirmed by survey of returnees from Canada
whose 3rd major reason for returning was inability to integrate into
Canadian society.
● 10 years ago, several HKUST faculty who failed to get tenure became
Deans in Beijing.
● Some want to get involved in policy process which is much easier
from within China.
Indicators of Transnational
Human Capital (TNHC)
Returnees (%) Locals (%)
Received: National level research project 43.1 27.8
Collaborative project with industry 24.8 13.3
National Patents 10.1 2.2
Publications: in international journals 38.5 22.2
in key domestic journals 42.2 74.4
Paper at conferences outside China 38.5 11.1
Hold post in national academic associations 45.0 24.4
Supervise PhD students 94.4 44.9
Teach new elective graduate courses 51.4 23.3
Hold administrative post in university 57.8 37.8
Helped students go overseas 60.6 23.3
Set up international collaboration projects 29.4 14.4
------------------------------------------------------------------------------------------------------
Very satisfied with housing 22.1 11.1
Promoted “quickly” or “very quickly” past 5 years 23.9 10.0
“Able” or “very able” to use capabilities 64.2 47.8
------------------------------------------------------------------------------------------------------
Total 109 90
Note: All findings statistically significant at .05
Source: Academic interviews in China, Spring 2001.
Indicators of Transnational
Human Capital (TNHC) (continued)
1997 Survey LTS (%) STS (%)
“Very satisfied” with housing 14.3 5.5
Believed they received more research
money than locally trained colleagues 65.0 42.3
Believed they were promoted faster than
colleagues who had not gone overseas. 47.7 27.4
Believed they got better housing than
colleagues who had not gone overseas. 33.3 15.6

2002 Survey Returnees Locals

Unit's leader "warmly welcomed" returnees 12.8 26.7
Unit's leader didn't care 24.8 10.0
State "over-emphasized" returnees 2.8 10.0
Returnees contribute "much" or "somewhat more" 78.0 53.3

Note: LTS refers to “long term sojourners,” who had been overseas for more than three years.
STS refers to “Short-term sojourners” who had been overseas for 3 years or less. 75% of LTS
had an overseas PhD.
Efforts at University Reform

● To create a better environment for returnees, Peking University’s

leaders in 2003 tried to introduce Western promotion and tenure
system, requirements to publish overseas, teach in English,
criteria returnees could meet but locally trained PhDs could not.
● Generated sharp battle between returned and local PhDs.
● Program defeated by Humanities faculty who feared these rules.
● Lecturers who had graduated from Peking University worried
they would be unable to shift into tenure track posts as policy
would ban Peking University hiring its own PhDs.
● Opponents of plan expressed views to local media.
● Party Secretary backed off quickly.
Academics and Universities:
Current Reforms
Current Reforms

● Part-time Deans who still hold positions overseas, unafraid

of local faculty, so will introduce major reforms.
● One Shanghai university has leaped up national rankings
due to jump in overseas publications by faculty.
● Under Dual Track Promotion System, returned academics
held to Western academic standards. But they get much
higher salaries.
● Local PhDs can sign up for same benefits and risks!
● Special Academic Zones include institutes in universities
with only returnees (and foreign faculty), with very limited
administrative interference.
Advantages from the 1000
Talents Plan to Universities

● Oct 2012, an interview at a university in Xian by Zweig.

● The 1000 Talents Plan is very important for Western areas of
China because it brings changes. The government here [in
Xian] are all leftists – they are not willing to reform.
● Before the 1000 Talents Plan, if a returnee’s wife wanted to
live here [in Xian] but was a US citizen, she had to go back to
the U.S. yearly to renew her China visa. We could not get her
a long-term resident permit.
● But now the city government has agreed to give people a
green card or long-term resident permit. We didn’t have it
here before — Shanghai did — but now we do.
Problems in the Past and Present

● Studies of business schools suggest that 35% of faculty in a

department or school must be returnees to be able to carry
out significant reform.
● Promises made to returnees not always kept — on housing,
salaries, workload, etc.
● Preferential policies given to returnees who may not be
better than top locally trained researchers incite anger.
● At Yunnan University, in southwest China, most returnees
are Kunming natives, so Mainlanders trained at top ranked
universities or CAS who joined the university could be as
good or better than the returnees, yet they get no
preferential policies.
Zweig’s Findings on National Programs

● Some university presidents are not keen on bringing back

large numbers of overseas academics, despite pressure
from the CCP.
● See returnees as too competitive for locally trained
scholars.

● After Zweig observed a confrontation between the Director

of the CCP Organization Department and a president of a
good university who sharply criticized the 1000 Talents
Plan, Zweig decided to run a statistical test.
Foreign Trained University Presidents Bring
More Top Talent to China, 1999-2013

● Using data from 1999 to 2013, for 27 top universities in China,

combined with a data set of high quality returnees who participated
in the Changjiang and 1000 Talents programs, we found that:
1. Universities with presidents who held overseas PhD degrees
recruited almost 2 more high-end returnees every year than
universities whose presidents had gone abroad as a Visiting
Scholars or who had no overseas educational/research experience.
2. Universities whose president was appointed from outside the
university brought back at least one or more high-end returnees
who were on national programs than schools whose president
rose to that position from within the university.
Case Study:
Scientists and the Chinese
Academy of Sciences
Incentives to Return in the Early Years

● The 100 Talents Program offers 2 mil. RMB, laboratory,

research team, 20% of money for salary (approx.
US$1500/month, subsidy).
● Many gain excellent posts after only being a post-doc
overseas.
● Significant funding from Ministry of Finance for CAS
institutes working on bio-tech, nanotech, environment,
energy.
● In early days of the 100 Talents Plan, returnees received
automatic promotion to Full Professor or rapid promotions
after only a few years.
Pace of Promotion in Past 5 Years,
Associate to Full Researchers, CAS, 2002
Pace of Promotion Returnees Local Total
Very Quickly Count 12 1 13
% Within Returnee / Local 14.3% 2.4% 10.4%
Rather Quickly Count 19 3 22
% Within Returnee / Local 22.6% 7.3% 17.6%
Relatively Slowly Count 14 13 27
% Within Returnee / Local 16.7% 31.7% 21.6%
Very Slowly Count 12 10 22
% Within Returnee / Local 14.3% 24.4% 17.6%
Not Fast Nor Count 21 10 31
Slow
% Within Returnee / Local 25.0% 24.4% 24.8%
Total Count 84 41 125
Notes: Chi-Square is p<.02. No Answer = 3 (2.4%), Don't Know = 3 (2.4%)
Source: Chen and Zweig survey, 2002.
Rewards to People Who Brought
Back “Shortage Good”

● Many who returned had developed expertise in a field in

short supply in China, which they presented at their job
at interview at CAS Research Institutes.
● In 2002, returnees specialty in much greater demand
than expertise of locals in CAS.
 Supply of Returnees’ Specialty in China,
CAS, Returnees vs. Locals, 2002
Returnees Locals Total
Extremely Short Supply Count 9 5 14
% within Returnee /Local 10.6% 10.9% 10.7%
Relatively Short Supply Count 47 17 64
% within Returnee /Local 55.3% 37.0% 48.9%
Not so Short Supply Count 26 7 33
% within Returnee /Local 30.6% 15.2% 25.2%
No Shortage or Oversupply Count 1 11 12
% within Returnee /Local 1.1% 23.9% 9.2%
Don’t know Count 2 6 8
% within Returnee /Local 2.4% 13.0% 6.1%
Total Count 85 46 131
% of Total 64.9% 35.1% 100.0%

Source: Chen and Zweig survey, 2002.

Bias Against Returnees at CAS, 2002

How would you evaluate the contribution of returnees?

Very good/good: Locals - 50% Returnees - 78.8%

Average: Locals - 25% Returnees - 15.3%

What do you think about the government’s emphasis on returnees?

Too High: Locals - 36% Returnees - 14.1%

Source: Survey by Chen Changui and David Zweig, 2002

The Need for Reform at the
Chinese Academy of Sciences
Problems at Chinese Academy
of Sciences (CAS)

● In 2002, only 3.6% (3/82) of scientists we interviewed in Changsha,

Guangzhou, Wuhan and Kunming earned over US$35,000/year on eve of
returning  all post-docs.

● Suddenly they direct projects without ever doing independent research

or leading research team overseas; likelihood of failing in a second
project high.

● Of 466 highly talented people brought into CAS from inside or outside
China, 11.6% had been Full or Associate Professors, 10% were Assistant
Professors, and the rest were researchers, visiting scholars and post-
doctoral fellows.**

● So, now reevaluate 100 talents recipients every 5 years.

● Also, too many institute directors did not have a foreign PhD.
**http://www.cctr.ust.hk/materials/conference/conference/papers/Cao,Cong_paper.pdf
 International Experience of CAS
Institute Directors, 2002 and 2013

No Overseas
Year Visiting Scholar Overseas PhD
Experience

2002 41.9% 18.9% 39.2%

2013 45.5% 26.8% 27.7%

Note:
Clearly some greater internationalization, but for 28% of directors
to have no overseas experience in 2013 is quite surprising.
Problems at Chinese Academy
of Sciences (CAS) (continued)

● CAS leading scientific research institute in China before 2000, but

universities have surpassed them.
● Reinforces argument that internal culture is critical.
● CAS president under no pressure from MOE, though Organization
Department should have some impact.
● Principal Investigator system, where lead researchers hire new
researchers, reinforces paternalism.
● CAS applicants only internally vetted, while Changjiang Scholars
and 1000 Talents vetted by international panels.
● CAS returnees in 2011-2012 produced lower quality academic
publications than returnees who join universities under
Changjiang and 1000 Talents Plan.
 Quality of Publications of Returnees
to CAS Under Different Programs
100 Talents Changjiang Scholar
Sample Group All Programs Column 3 compares
2011-12 and 1000 Talents1
returnees to CAS under
Column (1) (2) (3) 100 Talents Plan to
returnees to CAS under
Returnee to CAS -.100*** (.021) -.109*** (.024) -.108** (.029)
1000 Talents and
Male .212** (.057) .102 (.133) -.004 (.173) Changjiang Scholars
plans.
Year of Return .022** (.009) -.019 (.013) .016 (.012)
Part Time .588** (.141) .571** (.142) .567** (.141) The quality of
publications by CAS’
Age on Return -.035** (.010) -.036** (.011) -.032* (.013)
own selections is lower
Talent Program controlled controlled controlled than people entering
_cons -42.1 (19.1) -34.4 (25.7) -28.9 (24.9) CAS but awarded by
other two programs.
Subjects controlled controlled controlled
Observations 1070 851 760

Note: 1This model takes CAS 100 Talents returnees as baseline and compares them to returnees to CAS under
Changjiang and 1000 Talents Plan. * p<0.1 **p<0.05 *** p<0.01
Slow Progress for Chinese
Academy of Sciences (CAS)

● CAS establishing new institutes, but none of the new

institutes has overseas PhD as director.
● Vice President of CAS expressed no interest in following
Western norms.
● In Sep 2014, CAS announced plan for profound reform,
whose key words are Open and Rejuvenate CAS and bring
in high-end talent. (People’s Daily, 29 Sep 2014)
Discussion

Why do you think that China has not

been so successful in attracting a
reverse flow of talent?
Case Study:
Entrepreneurs and the
Municipal Governments
Government Role

● Established high tech zones which ease re-entry under SSTC in 1999.
● Legal protection for entrepreneurs increased in 1999 as private
sector enshrined in Chinese constitution.
● Party/State’s role in attracting entrepreneurs increased with the
1000 Talents Program.
● Ministries of Science, Personnel, Education and State Bureau for
Foreign Experts promoted high tech zone policy in 2000-2002, with
a document called Test Point on Building a Model Enterprise Zone
for Overseas Students.
● 21 test sites established and 5 more documents outlined how to run
a zone.
● Today Organization Department in cities and provinces run annual
meetings to promote innovative firms run by returnees.
 Overseas Returnees Enterprise Parks

● Shanghai’s municipal government built four Centres for

Returned Scholars in city’s 4 development zones.
● By 1994, over 100 returned PhDs in Zhangjiang High Tech Zone.
● In 1996, first national Overseas Returnees Enterprise Park
established in Suzhou.
● Between Jun 2000 and Jun 2001, 21 model Overseas Returnees
Enterprise Parks established around the country.
● By 2012, more than 160 Returnees Enterprise Parks nationwide
with over 8,000 enterprises and over 20,000 returnees working
there.
Inter-city Competition

● Aug 1989 Shenzhen allowed returnees to change residence legally,

keep foreign exchange earned in Shenzhen, buy a new house at near
cost, establish private business, and “enjoy precedence over ordinary
people with similar conditions and qualifications in the use of
scientific and technological development funds.”
● Smaller cities – Weihai on Shandong Peninsula near South Korea –
introduced incentives in 1992.
● Shanghai’s Office of Overseas Chinese Affairs strengthened overseas
alumni associations from Shanghai universities, used overseas
scholar organizations to collect information about new organizations.
● Shanghai first city to give returnees with foreign citizenship long-
term residence visas; in 2015 introduced new 21 points for returnees
and expatriates.
Source of Inter-city Competition

● Due to link between locality’s GDP and promotions of local

leaders.
● Wuxi government’s 530 Plan, most generous program in
China, in 2010, became 50% partner for enterprises moving
to city.
● Still, survey in 2004 showed that while returnees needed
local government to get through China’s difficult business
milieu, they resented some of these offices.
 Entrepreneurs’ Relations
with Government, 2004
Importance1 Rating2
Returnee Local Returnee Local t-test
(n = 100) (n = 100) (n=100) (n = 100) (significance)3
Personnel Department 30 15 3.10* 2.33 -2.81 (0.007)
Science and Technology Bureau 52 12 2.83* 2.33 n.s.
New and High Technology Office 45 19 3.07* 2.00* -3.65 (0.001)
Public Security Bureau 10 35 1.80* 2.20* n.s.
Tax Bureau 76 96 2.43 2.36 n.s.
People’s Bank, Branch 29 58 2.62 2.55 n.s.
Foreign Exchange Office 15 3 2.13 1.67 n.s.
Office of local party secretary 2 2 2.50 1.00* n.s.
Municipal government secretary 17 36 2.59 1.92* -2.38 (0.024)
1. No. of respondents (out of 100) indicates importance of bureau for them.
2. Mean rating of relations with a bureau (1=rather positive, 4=rather negative).
* indicates whether mean is significantly different from 2.5 at 0.10 or higher.
3. Two-sided t-test on mean ratings between returnees and locals.
Source: Survey by Chinese Academy of Social Sciences under contract to Zweig, et. al., 2004.
Entrepreneurs, Technology and
the Search for Shortage
Shortage as an Incentive to Return

● Market forces a prime driver for reverse migration – in mid-2000s,

many returnees engaged in technology arbitrage, bringing back first
or second tier Western technology unavailable in China but which was
in high demand.
● In 2004, we interviewed 100 returned entrepreneurs in three cities,
all of whom had been in business for at least one year.
● 27% said main reason for returning was that they had a technology
that while not world class, was unavailable in Chinese market, i.e., in
short supply.
● 28% selected this as second reason for returning.
● Business success related to quality of technology in firms, suggesting
that market, more than government assistance, was most important.
Level of Technology in Firm,
by Migration Status, 2004

Level of Technology Returnee Local

1. Newest international technology 34 9
2. Not new international technology, 46 32
but new for China
3. New technology for region in China 8 24
4. Not new technology 5 33
Total 93 94

Source: Interviews in Beijing, Shanghai and Guangzhou, 2004.

p < .001
 Explaining Success2 of Firms1

Independent Variable Parameter Significance

Year Registered 0.056 (0.01)
Level of Technology 0.184 (0.00)
Transnational Capital: - Work Experience Abroad 0.606 (0.08)
- Reliance on Overseas Network -0.158 (0.01)
Social Capital: - Friends/Family as Distributors 0.586 (0.05)

- Friends/Family as Financiers -0.640 (0.09)

R2 = 0.21; F-value (significance) = 1.84 (0.02)

1 Model with 21 variables; those significant at p = 0.10 or higher are shown.

2 “Success” based on subjective evaluation by entrepreneurs of their relative position vis a vis competitors.
Discussion

In what way has “shortage” helped

drive reverse migration in China?
Case Study:
The Diaspora Option
– Serving China from Abroad
Conceptualizing the Diaspora Option

● Brain circulation** occurs when people go abroad but they, or

their information and technology, circulates back to home
country.
● Meyer calls this the diaspora option***, when countries turn
human capital lost through the brain drain into force for
development by encouraging educational migrants to help
their home country.

** AnnaLee Saxenian, Silicon Valley’s New Immigrant Entrepreneurs (San Francisco, CA: Public Policy Institute of
California, 1999).

*** Jean-Baptiste Meyer, et. al., “Turning Brain Drain into Brain Gain: The Colombian Experience of the Diaspora
Option,” Science, Technology and Society 2 : 2 (1997): 285.
The Diaspora in Canada

● In summer 2015, Zweig interviewed Mainland professors at the University

of Toronto and York University in Toronto.
● There were absolutely outstanding! One math genius analyzed the spread
of HIV within China using a data set supplied by the Chinese Ministry of
Health.
● He had been part-time Changjiang Scholar and established collaborative
relationship with top university in western China.
● Every year he hosts post-docs and sends members of his team to China.
● Has major grants from Canadian and Chinese governments.
● Will neither return nor join any national program even part time. Simply
too busy.
● But contributes significantly to effort to track the development of AIDs in
China.
Module Conclusion
Module Conclusion

● Chinese state remarkably active in promoting reverse

migration of academics, scientists and entrepreneurs. New
ideas and strategies are always forthcoming.
● Relatively successful in bringing back good talent, but not
enough of the very best Mainland talent that received PhDs
abroad are returning.
● Chinese state hard pressed to transform the domestic
scientific culture, and without such changes, money may not
be enough.