Home Political science Dancing with the devil : the political economy of privatization in China
Before the communist revolution, Wenzhou had a long-standing tradition in handicraft industries and commerce dating back to the sixth century (Shang Jingcai 1989b). Situated on the East China coast, it was opened up as a “treaty port” (tongshang kouan) for foreign trade in 1876 as a result of the Chefoo Convention (also known as the Yantai Treaty) between China and the United Kingdom. In the following decades Wenzhou saw the rise and expansion of the production of modern industrial products and became a hub for the distribution of various handmade merchandises from the rural household sector, including homespun cloth, Chinese medicine, dry foods, and seasonings. But political turmoil (especially the war of resistance against Japan during 1937-1945 and the civil war during 1946-1949) in the first half of the twentieth century significantly constrained the growth of the modern sector. In 1949 the ratio of industrial to agricultural output was one to four (Chen Hongyuan 1999, 471).
During the first decade of the People’s Republic the local economy recovered and resumed growth. But the socialist transformation in the mid to late 1950s eliminated all formal organizations of private industry and commerce. Yet the entrepreneurial spirit among locals was not wiped out. A major sustaining force was resource constraint. As noted above, farmland is scarce in Wenzhou, and the rugged terrain poses additional difficulty for farming. Moreover, Wenzhou is in the southern end of the province and close to the Taiwan Strait. It was considered by the CCP leadership as part of the “front region” (qianxian) in the strategic planning for armed conflict with the KMT regime in Taiwan. The concern about vulnerability to military attacks by external hostile forces limited state investment in the prefecture. In the three decades after 1949 the cumulative investment allocated to the prefecture was 559 million yuan, accounting for only 4.9% of the total received by the ten prefectures in Zhejiang province (Chen 1999, 2-3). As a result of this, modern industry and infrastructure were underdeveloped, and commerce was suppressed. To eke out a meager living and cope with rising pressures from fast population growth, many locals defied government regulations and engaged in various traditional sideline activities based on the household (Shang Jingcai 1989b).
The desire and determination among locals to improve their economic conditions through private production and exchange were further sheltered by a shallow degree of socialist transformation in Wenzhou. The rugged terrain of the prefecture raised administrative costs, which the poorly funded local state could ill afford to fully absorb, thereby spawning slack in behavioral monitoring and control. Even more challenging to state penetration was the communication barrier. The Wenzhou dialect is one of the most difficult dialects in the Chinese language. Dialect affinity based on mutual intelligibility between Putonghua (the official spoken language) and the Wenzhou dialect features the widest gap among seventeen major dialect groups (Cheng 1997). Underinvestment and fiscal deficiencies of the local government made it impossible to carry out intense propaganda activities and to make fast improvement in education, especially during the Cultural Revolution. The resultant low literacy rate (see table 5.1) exacerbated the difficulty of communication and ideological indoctrination. For many local citizens, especially those in mountainous rural areas, socialism meant coercion rather than moral persuasion because of limited exposure to official propaganda, loss of meaning in translation, and weak reinforcement of the essential messages of Maoism. The lack of strong ambivalence toward pursuing self-interest in light of their traditional frames of reference thus lowered self-imposed hurdles to rule-breaking behavior among local citizens.
As agents of the party-state, however, local officials could still use coercive force to suppress such behavior. Indeed the postrevolution history of Wenzhou featured numerous episodes of fierce crackdowns on the private pursuits oflocal citizens (Shang Jingcai 1989b). Under the Leninist state local officials were driven to follow the party line so as to avoid punishment, secure their positions, and even advance their careers. But they also faced constraints. The most important constraining factor was the fact that in order to carry out the basic functions of public administration and socioeconomic governance local officials needed the cooperation from local citizens. For grass-roots cadres who were members of the local community, there was also the additional social pressure to look after the well-being of their relatives and fellow citizens. When state policies met stiff resistance from local citizens, self-interest calculations could force local officials to retreat from full compliance with the rules imposed by higher-level authorities. There was a delicate balance to strike, though, as bending the rules inevitably involved a political risk. The extent to which this risk could be contained depended greatly on the plausibility and strength of the justifications the rule benders were able to offer.
In Wenzhou extreme economic hardship resulting from local geography, demographics, and state investment policy in the Mao era led many local officials to relax restrictions on private economic activities and to embrace a “moral economic” argument originating from local citizens to justify their rule-bending behavior. An illustration of this can be found in a book-length account, compiled by the Party History Research Office of Yongjia County (ZGYJXWDSYJS 1994), about the repeated attempts by local officials to supplement or even replace collective farming with family farming (the presocialist mode of rural economic organization) during 1956-1978. Although the main motivation of these accounts is to give due credit for local institutional innovation in the county before national agricultural reform in the late 1970s, what they reveal sheds light on the long road of privatization in Wenzhou and beyond.
The gist of the story is that the rule bending by local officials was both driven by the enormous economic survival pressures faced by the locals and justified on the ground of such pressures. A poor and mountainous county with a very unfavorable farmland-population ratio, Yongjia was highly vulnerable to the economic squeezes and mishaps under Maoist socialism. The attempts by local officials to revert to family farming intensified during periods of exogenously elevated economic difficulty, such as the Great Famine in the early 1960s, the heyday of Maoist radicalism in the mid-1970s, and various spells of natural disasters. To reinforce the defense for their behavior, local officials pointed to the chronic dependence of the county on fiscal subsidies and to the immediately demonstrable benefits of family farming, which resulted not only from the inherent incentive effect on agriculture but from the concurrent resumption of sideline activities and private trade that had long been part of the local household economy. There were limits, however, to the extent of rule bending under Mao. Periodic attempts to deviate from the party line were followed by periods of crackdowns and retrenchment. There were also variations in the intensity of rule bending. Some communes and brigades contracted out the bulk of the farmland to households; some contracted out only farmland of lesser quality; and some remained under collective farming all along. Such a variegated pattern of rule bending also holds true for Wenzhou at large. This raises the issue of the composition of local officials.
As noted in Liu (1992)5 study, the local leadership of Wenzhou was dominated by nonnative officials, often broadly referred to as “southbound cadres” (nanxia ganbu),u after the communist revolution. A survey of the gazetteers of all the cities and counties in Wenzhou reveals that during 1950-1980 79% of the 1,633 leading officials (i.e., party secretaries, deputy party secretaries, chief administrators, and deputy chief administrators) at the prefectural, city, and county levels were nonnative appointees from outside of Zhejiang province;  and 68% of them were from the northern province of Shandong. According to the memoir of Wang Fang (2006, 97), who served as acting party secretary of Wenzhou prefecture in 1965-1966 (and party secretary of Zhejiang province in 1983-1987), a special personnel policy of the CCP stipulated that the party secretaries of local governments in the “front region” of China’s southeastern coast should preferably be those who had prior experience in the People’s Liberation Army (and thus tended to be nonnative persons). Such policy bias inevitably had a dampening effect on the career aspirations of native officials. But it is an oversimplification to claim that there was a factional divide between native and nonnative officials and such division led to predictably different (draconian vs. lenient or protective) orientations of regulatory behavior concerning local citizens’ private pursuits.
With the potential effect of shortening social distance, native place ties indeed could provide a platform on which to forge and advance common interests. Yet this platform was unstable. Officials with common native place ties could be personal rivals and have quite different policy views and agendas. In Wenzhou, despite the structural bias favoring nonnative officials in prefectural, city, and county governments, neither they nor the native cadres in the local party-state apparatus were a homogenous group. According to a retired official who had worked in various local offices of the CCP in Wenzhou during 1952-1986 (informant, 31/1996), in all the major political movements (e.g., the Anti-Rightist Campaign, the Great Leap Forward, the Socialist Education Movement, and different phases of the Cultural Revolution) in the Mao era, both native and nonnative officials could be found on different gradations of the local political spectrum. There were also cases where native and nonnative cadres cooperated or colluded for common interests, as well as cases where native and nonnative officials sabotaged, outmaneuvered, or conspired against their own kind to advance their careers.
Equally important to note here is that below the county level there were very few cadres from outside of the Wenzhou prefecture (informant, 31/1996; informant, 11/ 1 998; informant, 7/2006). This is where the interactions between the local state and local citizens concentrated. As suggested by the variegated pattern of cadre behavior regarding the reversion to family farming in Yongjia county, native officials did not demonstrate behavioral uniformity. Indeed, some of them stayed with collective farming throughout the Mao era, and some even played an active role in the investigation and punishment of the native officials who bent the rules (informant, 14/1997). Shifting alliances in response to changes in the macropolitical environment, rather than factional loyalty along the native-nonnative divide, appear to have been the predominant force that drove local politics.
What, then, was the impact (if any) of the local political elite composition on private economic activities in Wenzhou during the Mao era? The personnel policy bias favoring nonnative officials in the top echelon of local leadership at the prefectural, city, and county levels added complications to local politics. That, I argue, was probably a contributing factor to making Wenzhou one of the most conflict-ridden regions in China during the Cultural Revolution, which consequently undermined the governing capacity of the local state andfurther weakened the propensity of local citizens to comply with state authority.
As noted above, the native-nonnative divide may blur the fact that neither group of officials was internally homogenous. But the divide did matter to local political life. It demarcated the center and periphery of power in the local party-state establishment. Yet it neither eliminated interdependence between establishment members across the divide nor provided any effective mechanism to fortify solidarity within the two sides. It was possible for players from the periphery to enhance their power through ad hoc alliances with those in the center, and for those in the center to outshine and outmaneuver their “competitive comrades” by cultivating support from the periphery. Relative to those in regions (e.g., northern and northeastern China) where the native-nonnative divide was not as stark, power relations in Wenzhou were therefore more prone to fragmentation because of an enhanced probability of additional permutations of political alliance formation and change (e.g., native-native, nonnative- nonnative, and native-nonnative at and across different levels of authority). The added nodes of discrete interests increased the fluidity of power struggles among the local political elite. At times of structural instability and open conflict, such fluidity could increase the difficulty of power consolidation and thus become a major debilitating force for the local state.
The history of the Cultural Revolution in Wenzhou appears to bear this out. In most other regions ofthe country, the violent period of the revolution ended in 1968-1969, when the old government had been overthrown by rebels and martial law was imposed by the military forces that Mao sent to restore political order. But violence in Wenzhou continued through the mid-1970s. There were three massive waves of armed conflict with heavy casualties during the extended revolution (1967-1968, 1972-1973, and 1974-1975), as well as frequent and numerous rounds of personnel reshuffling at all levels of the local party-state. After Mao’s death in October 1976, there were further rounds of purges to eradicate the remnants of “leftist” radicals and “troublemakers” in the revolution. Deeply involved in these conflicts and struggles were players from both sides of the divide, who jousted for political advantage by repositioning and regrouping themselves in response to major shifts in national politics (e.g., the purges after the Lin Biao Incident in 1971 and the “Anti-Lin Biao Anti-Confucius Campaign” in 1974). In the words of a former middle- ranked official who worked in the city government of Wenzhou during the revolution (informant, 7/1998):
There were all kinds of factions [paixi] back then. ... It’s true that the northerners always had the advantage of holding leading positions, but it’s hard to say there was a “northern faction.” The factional conflicts were definitely not just a matter of native-versus-nonnative struggle. . Many of the fighting groups had both native and nonnative participants, sometimes openly, sometimes from behind the scenes. Some people switched sides too. Even those in power at any given time were not united among themselves. Few lasted long.
The open and covert conflicts and frictions in the local party-state during the Cultural Revolution increased inconsistencies in economic policy and weakened the abilities of local cadres to control the behavior of local citizens despite continued and even intensified reliance on the use of coercion. The chaos caused by power struggles and the naked manipulation by political opportunists for self-interest also exposed the dark nature of the Maoist system. This seriously undermined the legitimacy of the state authority and further hardened the determination of many local citizens to defy or overcome restrictions on the efforts to change their economic conditions. During the Cultural Revolution, a large number of local residents broke the ban on spatial movement and traveled away from Wenzhou to earn illegal income by peddling small items of merchandise and providing various urban services, such as haircutting, shoe repairing, tailoring, and quilt fluffing (Chen Hongyuan 1999; Shang Jingca 1989b).
The disruption and stoppage of production in urban public enterprises amid the long-lasting political turmoil also created opportunities for rural nonfarm activities to grow. From 1971 to 1977 the industrial output from commune and brigade enterprises (CBEs) increased by 81% (Shang Jingcai 1989b, 309). Unlike CBEs in the southern Jiangsu region that drew on the strength (e.g., human resources, technology, supplies, and subcontracting opportunities) of state-owned enterprises in nearby urban centers, CBEs in Wenzhou had to cope on their own, especially when local SOEs were paralyzed during the extended revolution. What they did instead was to draw on private economic elements. Some farmed out their work to rural households; some simply resold household-made products for a fee; and most of them relied on the hundreds and thousands of largely private supply and sales agents (gongxiao yuan) for securing orders and inputs and for selling products (Chen Hongyuan 1999). There were also various entirely private, “underground” factories, construction teams, and retail shops. In 1977, for example, some forty-seven hundred regular private retailers were on the tracking list of local authorities in Wenzhou, and more operated off the official record (Shang Jingcai 1989b, 309).
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