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

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R URAL C HINA

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

R URAL C HINA ECO N O M I C

AND

SOCIAL CHANGE

IN THE L ATE T WENTIETH

AND

CENTURY

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

An East Gate Book

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

4

APPLIED THEORY IN WORKPLACE SPIRITUALITY

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

2004-13795

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

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

ix xv

Introduction

3

Distinct Features of the Process of Change Social Change

5 7

2. Zhen Settlements: Between Urban and Rural

11

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

12 13 15 17 21 21 23 24 33

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

33 33 39 48 48 52 62 65 65

v

vi

CONTENTS

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

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

CONTENTS

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

vii

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

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

16

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

19 27

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

28

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

34

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

35

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

43

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

46 50

4.6 Factors of Population Increase in Zhen, 1984–1992

52

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

54

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

54 54

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

56

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

58

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

59

4.13 Occupations of Temporary Inhabitants in Selected Provinces, 1997

59

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

62 69

ix

x

LIST OF TABLES, FIGURES, AND MAPS

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

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

LIST OF TABLES, FIGURES, AND MAPS

xi

5.27 Budget of Xiangyang, 1999

129

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

131

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

132

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

133 135

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

137

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

143

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

145

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

146 148

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

149

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

150

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

151 152

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

153

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

154

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

155

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

156 158

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

166

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

166

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

167

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

168 170

7.1 Grades of State Cadres

180

7.2 Administrative Structure Levels, Dongting Zhen, 1993

186

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

187 188

xii

LIST OF TABLES, FIGURES, AND MAPS

7.5 Rural Cadres in the Investigated Areas, 1992–1993

189

7.6 Members of the Dongting Party Committee, 1993

191

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

192 205

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

217

8.2 Structural Change of Wuxi County’s Leadership

224

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

224

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

226 226

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

227

8.7 Village Committee, Yuwang, Pingle Zhen, 1994

233

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

241 242

9.3 Summary: Importance of Life Spheres in Zhen

242

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

243

9.5 Purposes of Investments

243

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

245 246

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

247

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

249

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

251

9.11 Relationships to Management in Examined Zhen

251

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

252 255

9.14 Trends in the Change of the Subculture of the Peasantry

257

9.15 Trends in the Change of Values

258

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

273 274

LIST OF TABLES, FIGURES, AND MAPS

xiii

Figures 1.1 Interdependence of Economic, Social, and Political Change

9

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

25

4.1 Organizational Structure of the Rural Supply System in China

42

4.2 Hierarchy of Markets

44

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

45

5.1 Number of Individual Companies, China, 1990–2001

67

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

67

5.3 Number of Private Companies, China, 1989–2001

68

5.4 Growth Rate of Private Companies, 1990–2001

68

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

77

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

81

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

82

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

82

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

89

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

96

5.11 Total Rural and Agricultural Labor Force, 1978–2001

96

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

97

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

182

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

182

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

183

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

183

7.5 Development of CCP Membership, Zongshizhuang, 1979–1992

204

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

204

7.7 Individuals Leaving the CCP, Zongshizhuang, 1979–1992

206

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

206

7.9 CCP Members by Age, 1985 and 1991

207

7.10 Zongshizhuang Party Members, by Time of Joining

207

xiv

LIST OF TABLES, FIGURES, AND MAPS

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

223

8.2 Wangyiba Village Administration, Wuxi County, 1993

231

8.3 Village Administration Committee of Chunleicun, Dongting Zhen, 1993

231

8.4 Village Administration Committee of Kongmuzhuang, Zongshizhuang Zhen, 1993

232

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

248 253

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

254

Map 3.1 Analyzed Towns

22

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

xv

R URAL C HINA

1

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

3

4

CHAPTER 1

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

INTRODUCTION

5

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

6

CHAPTER 1

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

INTRODUCTION

7

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

8

CHAPTER 1

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

INTRODUCTION

Figure 1.1

9

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

Economic Privatization

New Strata/ New Elites

Regionalism/ Communalism

Migration

Individualization

Opening Toward World Market

Decentralization

Division of Labor

Urbanization/ Industrialization

Economic Change of Values

Development of Market

Economic Pluralization

= Social Change

New Interest Groups

Urge for Participation

Participation in Economic Decision Making

Participation in Political Decision Making

Market Behavior Competition/Responsibility

Political Change of Values

Change of Elites

Social Pluralization

= Political Change

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

10

CHAPTER 1

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

2

Zhen Settlements Between Urban and Rural

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

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

12

CHAPTER 2

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

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

13

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

14

CHAPTER 2

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

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

15

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

16

CHAPTER 2

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

Total population (in millions)

Nonagrarian population (in millions)

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

612 1,982 2,844

6,708 9,121 9,308

7,467 7,467

11,777 11,777

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

29.41 30.83 36.59 44.15 52.28 61.43 65.36 64.88 72.30 129.62 74.74

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

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

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

17

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

18

CHAPTER 2

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

ZHEN SETTLEMENTS: BETWEEN URBAN AND RURAL

19

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

Hebei

Heilongjiang Jiangsu Ningxia

Sichuan China

685 139

893 221

433 160

1,073 729

61 11

1,705 540

19,184 7467

32,428

42,088

39,579

34,058

32,235

28,098

35,350

5,802 546

7,792 672

15,471 273

9,951 344

18,650 50

5,669 1,165

7,350 11,777

28,854

34,167

26,811

40,383

22,631

26,563

31,958

3,516 1.14 2.24

4,864 1.21 1.67

11,953 1.68 2.32

9,954 0.79 2.07

8,202 3.90 1.60

4,931 1.96 2.46

6,346 1.33 2.08

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

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

20

CHAPTER 2

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

3

Field Research Fieldwork Procedures and the Surveyed Zhen

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

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Map 3.1

Analyzed Towns

Heilongjiang

Yuquan

Jilin Xinjiang Liaoning

Beijing

Nei Mongol

Jinji

Qinghai

Tianjin

Hebei

Zongshizhuang

Shanxi

Ningxia

Shandong

Gansu Shaanxi

Tibet

Henan

Jiang-

Dongting

su

Xiangyang Hubei

Anhui

Shanghai

Sichuan

Pingle

Zhejiang

Xin-

Hunan

Jiangxi

zhou Guizhou

Fujian

Yunnan Guangxi

Guangdong

National Border Provincial Border

Xinzhou

Analyzed Towns (zhen)

Hainan

Design: M. Scheibner

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

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

23

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

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

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

GDP of surveyed provinces as a percentage of the Chinese average

Figure 3.1

25

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

250

Hebei Heilongjiang

200

Jiangsu Sichuan Guizhou Ningxia Total China

150

100

50

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

0

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

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

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

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

27

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

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

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

1,697 2.628 3.449 2.675 954 745 2.571

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

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

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

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

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

Zongshizhuang

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

— —

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

Xinzhou

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

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

Jinji

74.21 1,901 — 1,231 1,504 966 8

11.22 287

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

Yuquan

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

Table 3.2

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

31.04 1,525

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

Pingle

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

36.00 2,625

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

Xiangyang

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

33.29 838

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

Dongting

28 CHAPTER 3

FIELD RESEARCH: PROCEDURES AND THE SURVEYED ZHEN

29

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

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

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31

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

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

4

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

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

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China (national average)

1994

1999

341 616 1,368 277 202 600 580

835 516 1,530 495 257 934 756

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

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

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

913 3,221 60.30 91.14 1.50 1.20 67.90 93.50

Jiangsu

406 7,377 60.30 188.03 1.80 1.60 83.30 98.00

Heilongjiang

78.60

652 38.60 9.68 12.60 9.20 80.60

2,761

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

Sichuan

93.20

1,447 16.50 10.30 8.30 4.70 35.00

1,633

611 5,477 27.90 51.50 4.20 2.60 93.50 87.40

Guizhou

94.40

1,273 28.00 27.10 5.20 1.70 48.10

231

53 4,232 52.70 86.57 5.10 4.90 71.70 92.50

Ningxia

83.20

2,106 24.90 32.90 5.00 3.10 87.30

27,552

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

China*

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

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

Hebei

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

Table 4.2

SETTLEMENTS AND POPULATION 35

36

CHAPTER 4

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

SETTLEMENTS AND POPULATION

37

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

38

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

SETTLEMENTS AND POPULATION

39

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

40

CHAPTER 4

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

SETTLEMENTS AND POPULATION

41

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

42

CHAPTER 4

Figure 4.1

Organizational Structure of the Rural Supply System in China

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

SETTLEMENTS AND POPULATION

43

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

1985

1990

1995

1999

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

380.1 53.0 63.2 80.9 16.6 25.4

725.0 48.5 216.8 61.4 29.9 37.8

2,062.0 43.2 1,159.0 46.7 56.2 60.8

3,113.5 38.7 2,170.8 43.2 69.7 77.9

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

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

44

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Figure 4.2

Hierarchy of Markets

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

SETTLEMENTS AND POPULATION

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

main road

M-market

Suiyang

road

(5–10)

m

S-market

Qingyuan

20 km Street distance

12

14

km

(1–6)

Maopo

(9–8)

Feiyun

(3–8)

(1–6)

4k

(5–10)

m

Lutang

8k m

m

Hebao

Luxin

Simianshan

8 km

12 k

Zhengchang

km

Laobo (3–8)

K-market

(2–7)

(3–8)

17 km

Zunyi

Yumen (1–6)

(5–10)

(1–6)

(2–7)

Yanglu (2–7)

Baohe

Xiaxi

18 km

29 km

Xinbo

Lilong

12 km

Jiulong

18 km

12 km

12 km

km 20

km 21

1

km

m 7k

km

m

15 k

m 10 k

8

7

(2–7)

(4–9)

8 km

(4–9)

Tuanze

Xinzhou

11 km

11 k

(5-10) market days

8 km

Figure 4.3

45

(5–10)

Sandu (2–7)

(3–8)

Source: Authors’ field survey.

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

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Table 4.4 Characteristic Features of Surveyed Markets Zhen

Hierarchical level

Visitors

Yearly turnover (million yuan)

Rhythm of market days

Xinzhou Xiangyang Pingle Jinji Zongshizhuang Dongting Yuquan

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

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

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

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

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

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

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

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

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

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

33.5 9.3 37.8 19.4 100.0

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

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

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

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

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

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

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

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

14 million 30 million 49 million 98 million 191 million

7% 16% 26% 51% 100%

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

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

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

1993–1994

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

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

Out-migrants

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

1993–1994

2000–2001

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

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

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

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

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

Out-migration

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

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

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

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

56.6

53.1

In-migrants

Out-migrants

36.5

47.2

2000– 2001

32.1

28.6

1993– 1994

47.4

46.4

2000– 2001

Other county within the province

14.8

14.8

16.1

6.4

2000– 2001

Outside the province 1993– 1994

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

1993– 1994

Origin/ Destination

Same county

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

Table 4.10

100.0

100.0

1993–1994, 2000–2001

Total

3,003

3,030

1993– 1994

1,002

424

2000– 2001

Absolute

56 CHAPTER 4

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

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

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

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

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

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

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

Xiangyang

Yuquan

78.4 7.4 7.4 6.7 100.0 283

50.4 0.0 0.0 49.6 100.0 369

Rural enterprises Trade Service Others Total Number

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

Hebei Heilongjiang Jiangsu 50.30 1.70 22.60 9.40 0.56 15.44 100.00 0.48

38.10 17.30 14.50 8.20 0.40 21.50 100.00 1.03

47.30 2.60 12.60 5.30 0.30 31.90 100.00 3.40

Sichuan

Guizhou

45.70 1.20 17.30 10.80 1.40 23.60 100.00 1.05

45.60 3.10 25.50 10.10 1.10 14.60 100.00 0.34

Ningxia 48.30 7.50 18.40 9.30 0.40 16.10 100.00 0.10

China 54.70 4.10 14.30 7.80 0.56 18.50 100.00 37.27

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

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

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

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

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

11.4 8.7 41.4 24.4 11.5 2.0 0.6 100.0

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

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

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

5

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

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

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.1

67

Number of Individual Companies, China, 1990–2001

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

Increase (in %)

Figure 5.2

Growth Rate of Individual Companies, China, 1989–2001

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

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

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

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Figure 5.3

Number of Private Companies, China, 1989–2001

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

Growth Rate of Private Companies, 1990–2001

Increase (in %)

90 80 70 60 50 40 30 20 10 0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2 001

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

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

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

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

1991

1996

1998

2000

47.3 52.7

59.4 40.6

62.9 37.1

61.3 38.7

41.8 58.2

51.4 48.6

56.9 43.1

52.7 47.3

31.1 68.9

34.6 65.4

37.7 62.3

43.8 56.2

30.0 70.0

34.1 65.9

37.0 63.0

42.1 57.9

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

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

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

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

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

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

China (total) Guizhou Hebei Heilongjiang Jiangsu Ningxia Sichuan

Investment

Production value

Turnover

Trade volume

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

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

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

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

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

China (total) Guizhou Hebei Heilongjiang Jiangsu Ningxia Sichuan

Investment

Production value

Turnover

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

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

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

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

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

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

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

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

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

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.5

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

a) Share of retail trade in private sector

b) Share of wholesale trade in private sector

c) Share of catering trade in private sector

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

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

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

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

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

Total

Zhen

Village

Lianban

Private

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

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

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

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

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

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

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

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.6

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

a) Share of retail trade in private sector

b) Share of catering trade in private sector

c) Share of services trade in private sector

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

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Figure 5.7

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

100 90

88.9

88.4

87

80

percent %

70 60 50

45.9

44

41. 6

40 30 20 10 0 1990

1992 Enterprises

1993 Persons

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

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

percent

Figure 5.8

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

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

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

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

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

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

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

ECONOMIC STRUCTURES AND ECONOMIC CHANGE

Figure 5.9

89

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

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

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

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

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

2000

Private

Collective

Private

Collective

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

2,041

92.7

162

7.3

2,004

96.1

80

3.9

Employees (10,000)

6,801

52.9

6,060

47.1

8,987

70.1

3,832

29.9

Net value of production (100 million yuan)

5,236

35.88

9,359

64.12

17,731

65.29

9,424

34.7

Turnover (100 million yuan) 25,157

43.9

32,142

56.1

70,951

65.8

36,883

34.2

53.95

1,496

46.05

4,149

70.5

1,733

29.5

Profit (100 million yuan)

1,754

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

State 2.2

Collectives, mostly local governments

Managers

Other private individuals

Foreigners

Total

31.6

22.9

37.6

5.7

100.0

Source: Zhongguo xiangzhen qiye nianjian (2000).

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

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

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

Rural enterprises (million yuan)

Percent of total exports

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

9.2 11.0 15.2 19.0 15.5 17.5 25.5 44.5 32.6 47.9

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

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

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

Export

Import

36.6 12.0 9.7 5.6 0.8 9.5

36.0 12.0 5.0 4.0 0.6 14.0

Source: Zhongguo tongji nianjian (2003).

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

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

100.0

0.0

0.0 423.7

77.6 22.4 — 0.0

328.9 94.8 — 0.0

%

971.6

11.7

630.2 311.7 157.5 18.0 14.6

Absolute value

1985

100.0

1.2

64.9 32.1 16.2 1.8 1.5

%

2,392.5

104.8

1,306.4 852.3 532.0 129.0 118.3

Absolute value

1990

100.0

4.4

54.6 35.6 22.2 5.4 4.9

%

7,691.0

1,042.1

2,620.1 3,143.4 2,569.7 885.3 798.7

Absolute value

1994

100.0

13.5

34.1 40.9 33.4 11.5 10.4

%

12,611.1

2,300.5

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

Absolute value

1999

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

Total

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

Absolute value

1978

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

Table 5.9

100.0

18.2

28.2 35.4 27.7 18.2 17.1

% ECONOMIC STRUCTURES AND ECONOMIC CHANGE 95

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

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

Source: Zhongguo tongji nianjian (1995 and 2002).

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

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

60

Percentage

50

40

30

20

10

Tibet

Xinjiang

Y unnan

Heilongjiang

Inner Mongolia

Jilin

Qinghai

Hainan

Guizhou

Ningxia

Henan

G uangxi

Gansu

Shaanxi

Anhui

Hunan

Sichuan

Jiangxi

Chongqing

Hubei

Liaoning

Shandong

Fujian

Shanxi

Hebei

Jiangsu

Guangdong

Tianjin

Zhejiang

Beijing

Shanghai

0

Source: Zhongguo tongji nianjian (2003).

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

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

TVEs (collective) (%)

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China (total)

All rural enterprises (in 1,000s)

Private and individual (%)

1993

1999

1993

1999

%

1993 Absolute value

37.0 33.0 75.3 42.3 21.2 33.8 46.7

19.5 26.2 40.4 17.5 18.3 7.5 25.3

63.0 67.0 24.7 57.7 78.8 66.2 53.3

80.5 73.8 59.6 82.5 81.7 92.5 74.7

100.0 100.0 100.0 100.0 100.0 100.0 100.0

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

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

1999 Absolute value

1993

1999

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

29.6 36.4 34.0 20.0 10.1 21.0 27.9

29.7 16.7 30.3 14.2 7.4 25.5 27.1

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

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

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

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

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China

Private

Individual

Total

Absolute value

%

Absolute value

%

Absolute value

%

Absolute value

%

17.97 4.38 62.80 9.45 2.05 0.25 427.89

25.7 41.5 59.8 24.2 36.3 18.8 39.5

15.47 3.39 22.86 7.33 0.83 0.48 261.02

22.1 32.2 21.8 19.8 14.7 35.8 24.1

36.41 2.78 19.40 21.84 27.77 0.61 395.35

52.1 26.3 18.5 56.0 49.0 45.4 36.5

69.85 10.55 105.06 39.02 5.65 1.34 1084.26

100 100 100 100 100 100 100

Source: Zhongguo xiangzhen qiye tongji nianjian (2000).

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

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

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

1992

1999

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

1.8 3.5 38.2 12.0 4.4 27.9 4.1 8.1 100.0 55.23

0.5 1.2 16.9 12.4 9.7 47.9 4.0 7.4 100.0 257.49

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

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

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

2.6 3.7 11.0 9.7 5.7 7.3 7.5

1992

0.9 0.3 4.5 1.0 1.6 0.3 1.6

Village enterprises 1.4 1.4 6.6 3.8 4.2 3.9 3.2

Total

1999

7.2 0.9 11.0 8.4 63.2 4.7 6.8

Collective enterprises 4.1 0.1 20.1 2.1 16.0 1.1 10.2

Total 35.4 32.7 25.3 33.2 22.1 16.4 31.6

Township enterprises

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

Hebei Heilongjiang Jiangsu Sichuan Guizhou Ningxia China

Township enterprises

Share of enterprises with losses (%) 1992

25.9 13.6 16.2 19.9 10.4 12.3 20.9

Village enterprises

30.9 27.1 22.1 30.4 21.0 15.8 27.6

Total

Credit load*

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

Table 5.13

1999

20.6 17.8 19.2 20.7 11.0 24.0 18.8

Collective enterprises

17.0 13.6 16.6 19.0 14.7 19.9 15.6

Total

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

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

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

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

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Table 5.14 Stockholders, by Capital Share, 1999

Million yuan Percentage

State

Collectives

Factory owners

0.49 2.2

7.12 31.6

5.17 22.9

Private individuals Foreigners 8.49 37.6

1.28 5.7

Total 22.56 100.0

Source: Zhongguo xiangzhen qiye nianjian (2000).

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

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

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

22.6 15.1 13.2 11.3 11.3 7.5 5.7 5.7 5.7 1.9 100.0

Source: Authors’ field survey, 1993–1994.

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

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

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

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

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

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

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

Absolute value

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

Employees (in millions)

1999 %

Absolute value

32.1 9.2 10.7 26.3 21.7 100.0

3,334 3,235 — 15,923 11,697 33,189

1992 %

Absolute value

10.0 9.7 — 48.0 32.3 100.0

1.84 0.32 0.22 1.36 0.45 4.19

1999 %

Absolute value

%

43.9 7.6 5.3 32.5 10.7 100.0

0.38 0.20 — 2.14 1.45 4.16

9.1 4.8 — 51.5 34.6 100.0

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

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

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

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

Zongshizhuang Xinzhou

Yuquan

Pingle

Xiangyang

Total population, 1992–1993

21,830

30,540

64,771

39,036

21,808

15,002

Total population, 1999–2000

23,293

31,025

70,823

39,419

22,963

15,677

Share of nonagrarian population, 1992–1993 (%)

29.6

2.8

3.9

68.9

8.6

13.4

Share of nonagrarian population, 1999–2000 (%)

20.3

0.7

5.7

—

11.2

12.5

Net income per farmer (yuan) 1992–1993

886

812

780

1,231

987

1,130

Net income per farmer (yuan) 1999–2000

3,356

3,679

1,735

3,154

2,896

2,940

Source: Data provided by local administrations.

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

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

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

Total population (10,000)

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

Source: Information provided by the respective administrations.

1,954

Net income per farmer (yuan)

Zunyi County (Xinzhou)

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

64.1

2,571

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

58

2,745

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

50.6

3,449

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

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

Table 5.19

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

66.7

2,628

Acheng City (Yuquan)

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

30.3

2,674

Wuzhong City/Urban District Litong (Jinji)

118 CHAPTER 5

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

Zongshizhuang Xinzhou

892.2

756.6

290.8

225.9

Increase in turnover compared with the previous year (%)

–1.8

56.0

34.0

—

Profit (millions of yuan)

58.12

36.01

19.70

24.68

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

–3.1

4.0

0.7

Taxes (millions of yuan)

17.45

35.57

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

–24.5

14.0

4.23 18.5

— 2.30 —

Jinji

Pingle

249.5

235.2

8.3

14.3

31.00

6.37

deficit*

–13.5

7.74

5.16

0.3

50.8

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

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

1995

–10

–251

Cement producer

Total

Source: Authors’ investigations, 1999–2000.

–38

–6,875

0

–36

39 250 –196 –70 –97 55

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

Vinegar factory

–1,280

–920 –970

–3,650

–43

0 0

Dairy Steelworks

Wood processing

–67

Chipboard

1994

–7,740

Bankrupt

–20

Merging with chipboard enterprise 52 153 Bankrupt Bankrupt –115 40

–1,840 –4,130

–1,880

1996

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

Table 5.21

1997

–5,790

3,830

10

40 100

920 20 0

380 190

2,510 Stopped production

600

1998

–2,750 –540

2,600 –920

–5,120

1999

–19,860

Stopped production

–70 –30

–5,000 –300

700

–15,160

2000

80

220 Stopped production

–3,300 –400

Stopped production 3,560

120 CHAPTER 5

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

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

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

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

1994

1996

1997

1998

1999

2000

365 16 349 2,340 1,763 577

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

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

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

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

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

100.70 57.20 43.50

205.82 136.70 69.12

242.95 127.13 115.82

265.95 108.07 157.88

269.19 58.00 211.19

342.26 88.66 253.60

Source: Documents provided by the Jinji government.

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

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

Average-size plant Collective Private

1994

1995

1996

1997

1998

1999

2000

13.2 111.4 2.16

108.4 123.8 8.50

21.4 189.9 3.16

12.6 191.2 3.38

33.9 193.0 17.18

5.7 175.8 4.02

5.0 267.3 3.69

Source: Zhongguo tongji nianjian.

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

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

Collective enterprises

Private enterprises

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

602 141 269 381 130 1,523

3,453 823 445 592 296 5,609

6 1 — — — 7

1,055 218 — — — 1,273

596 140 269 381 130 1,516

2,398 605 445 592 296 4,336

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

1995

1996

1997

1998

1999

2000

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

3,218 1,870 –6,880

3,711 3,410 –7,740

4,384 6,030 –5,770

5,399 3,840 –24,200

4,378 4,100 –19,860

5,388 5,300 80

53,420

75,070

102,400

71,370

53,120

101,340

3.50

4.54

5.89

5.38

7.72

5.23

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

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

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

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

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

Source: Local information, 2000.

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

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

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

1999 (plan)

1999 (actual)

Difference (actual–plan)

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

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

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

600.00 500.00 7.50 85.00 0.80 30.00 200.00 1,423.30

624.24 543.80 7.51 94.26 0.66 22.16 0 1,292.63

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

Source: Information provided by the administration of Xiangyang zhen.

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

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

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

Production Traffic, transport Trade Catering industry Total

Collective enterprises

Enterprises

Employees

Enterprises

173 46 61 18 298

2,057 316 382 191 2,946

13 — — — 13

Employees 472 — — — 472

Private enterprises Enterprises 160 46 61 18 285

Employees 1,585 316 382 191 2,474

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

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

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

Total Collective Percent of total

Number of enterprises

Number of employees

Turnover (1,000 yuan)

Profit (1,000 yuan)

Tax (1,000 yuan)

298 13 4

2,946 472 16

29,078 4,000 14

1,970 298 15

423 116 27

Source: Information provided by the local government.

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

968 25 192 50 65 1,300

736 111 177 278 201 1,486

1999 4,176 851 242 200 125 5,594

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

1999

Employees 1993

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

Industry Construction Traffic Trade Catering industry Total

1993

Enterprises

All enterprises

89 1 1 1 — 92

1993 6 1 — — — 7

1999

Enterprises

1,806 267 3 2 — 2,078

1993

332 258 — — — 590

1999

Employees

Collective enterprises

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

Table 5.30

879 24 191 50 65 1,209

1993

730 110 160 278 201 1,479

1999

Enterprises

2,370 584 239 200 125 3,518

1993

3,474 773 177 408 301 5,133

1999

Employees

Private enterprises ECONOMIC STRUCTURES AND ECONOMIC CHANGE 133

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

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

Year

Absolute value (10,000 yuan)

1994 1995 1996 1997 1998 1999 2000

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

Profit

Rate of increase (%)

Absolute value (10,000 yuan)

166 746 12 –46 56 13

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

Tax Rate of increase (%)

Absolute value (10,000 yuan)

Rate of increase (%)

263 361 –15 –36 4 25

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

273 344 –10 –26 14 –22

Source: Information provided by the local government.

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

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

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

Agriculture Industry Construction Traffic Trade Catering industry Total

Collective enterprises

Private enterprises

Enterprises

Employees

Enterprises

Employees

Enterprises

Employees

2 440 16 351 430 160 1,399

25 1,957 723 394 562 236 3,897

2 8 1 — — — 11

25 580 265 — — — 870

— 432 15 351 430 160 1,388

— 1,377 458 394 562 236 3,027

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

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

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

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

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

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

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

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

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

Zhen proper

Villages under the zhen

Other villages and towns in the same county

30.1 25.7

46.4 38.1

15.7 22.1

6.8 11.1

1.0 2.9

100.0 100.0

394 307

25.9

26.2

10.9

11.3

25.7

100.0

338

19.4 61.2

62.2 23.9

12.4 12.0

4.5 2.9

1.5 0.0

100.0 100.0

331 253

73.1 67.6

18.6 3.3

3.8 6.6

2.1 11.1

2.4 11.4

100.0 100.0

293 289

22.5 24.2

65.0 52.7

5.8 6.0

6.7 17.1

0.0 0.0

100.0 100.0

224 296

27.2 25.1

59.9 44.9

11.3 19.0

1.6 9.9

0.0 1.2

100.0 100.0

257 269

38.2 57.3

56.2 33.2

2.5 6.5

2.0 2.7

1.0 0.3

100.0 100.0

303 294

33.7 43.2

46.7 32.9

9.4 12.0

5.2 9.3

5.0 2.6

100.0 100.0

2,140 1,708

Other counties in the same province

Other provinces

Total

Number of interviewees (valid cases)

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

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

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

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

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

Interviewees (valid cases)

Rural

Urban

Unknown

Total %

79.3 59.8

20.7 38.9

0.0 1.3

100.0 100.0

400 319

82.4

16.7

0.9

100.0

352

95.8 80.9

4.2 19.1

0.0 0.0

100.0 100.0

335 253

25.9 11.4

73.1 88.3

1.0 0.3

100.0 100.0

301 290

82.7 72.0

17.3 27.7

0.0 0.3

100.0 100.0

226 296

93.3 85.3

6.3 13.6

0.4 1.1

100.0 100.0

268 269

90.9 76.3

9.1 23.1

0.0 0.6

100.0 100.0

307 321

78.7 63.9

21.0 35.5

0.3 0.6

100.0 100.0

2,189 1,748

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

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

10.0 15.0 41.5 29.0 4.0 100.0 200

Workplace arrangement

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

2000– 2001

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

1993– 1994

Move with change of hukou

4.2 8.8 27.7 57.2 0.7 100.0 285

1993– 1994 3.5 10.5 7.9 50.0 28.1 100.0 114

2000– 2001

Move without change of hukou

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

Table 5.35

5.1 4.5 47.2 41.1 2.1 100.0 1,666

6.5 10.4 15.3 41.9 25.9 100.0 1,031

2000– 2001

Local applicants 1993– 1994

5.4 6.0 44.1 42.1 2.4 100.0 2,151

1993– 1994

Total

5.4 10.3 14.6 42.8 26.9 100.0 1,156

2000– 2001

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

17.6 22.3 20.2 12.3 10.1 8.2 9.1 100.0 1,128

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

7.3 15.3 20.7 16.7 15.4 8.9 15.7 100.0 970

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

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

2000– 2001

Female

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

1993– 1994

Age

Male

14.1 27.8 19.5 11.7 11.7 9.3 5.9 100.0 205

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

2000– 2001

In-migrants with change of hukou

32.6 39.3 11.6 6.7 3.2 1.8 4.9 100.0 285

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

2000– 2001

In-migrants without change of hukou

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

Table 5.36

25.9 22.7 19.8 10.5 9.0 6.3 5.6 100.0 1,704

1993– 1994

8.4 17.2 24.6 17.7 14.5 6.6 11.0 100.0 1,099

2000– 2001

Locals

25.7 25.3 18.7 10.1 8.5 6.0 5.6 100.0 2,194

1993– 1994

Total

9.9 18.0 23.3 17.2 13.2 7.1 11.3 100.0 1,741

2000– 2001

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

Without change of hukou

With change of hukou

Locals

8.9 8.9 21.0 10.5 12.9 10.5 27.4 100.0

33.3 5.1 5.1 10.3 7.7 10.3 28.2 100.0

23.2 15.8 22.1 11.0 8.7 6.9 12.3 100.0

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

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

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

1993– 1994

Illiterates, semi-illiterates, primary school 14.1

2000– 2001

1993– 1994

2000– 2001

Locals 1993– 1994

Total

2000– 2001

1993– 1994

2000– 2001

9.1

20.8

8.7

14.8

6.3

15.5

7.5

Lower secondary school

53.7

54.5

60.6

24.6

63.7

49.5

62.4

50.9

Upper secondary school

25.9

18.2

16.3

38.6

21.0

37.4

20.9

36.1

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

6.3

18.2

2.4

28.1

0.4

6.8

1.2

5.5

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

205

11

289

114

1,701

1,103

2,196

1,726

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

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

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

Cadres, technicians

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

5.9

18.2

2.8

6.3

1.3

2.9

1.9

3.7

Employees in state-owned or collective enterprises

15.2

27.3

11.2

8.9

8.8

8.8

9.7

7.8

Peasants

36.8

36.4

46.0

29.5

46.2

43.2

45.3

46.7

5.4

18.1

6.7

17.9

5.0

12.3

5.3

13.0

30.4

0.0

30.2

12.5

35.4

19.3

34.2

16.1

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

6.3

0.0

3.1

24.9

3.3

13.5

3.6

12.7

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

204

11

285

112

1,668

1,037

2,157

1,650

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

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

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

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

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

58.0 11.8

45.5 9.1

79.6 5.9

43.4 18.6

67.4 8.1

51.8 10.4

68.1 8.2

52.1 10.4

21.9 3.4 0.5 4.4 100.0

36.4 0.0 0.0 9.0 100.0

8.9 1.4 0.7 3.5 100.0

27.4 5.3 1.8 3.5 100.0

18.7 2.7 1.2 1.9 100.0

25.0 7.0 2.3 3.5 100.0

17.7 2.6 1.1 2.3 100.0

24.1 6.7 2.4 4.3 100.0

205

11

289

113

1,688

1,078

2,182

1,681

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

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

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

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

Locals

Total

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

1993– 1994

2000– 2001

43.1 25.2 29.2 2.5 100.0

27.3 54.5 18.2 0.0 100.0

18.9 43.9 35.8 1.4 100.0

25.9 22.3 49.1 2.7 100.0

37.4 26.4 31.2 5.1 100.0

28.4 26.4 43.3 1.9 100.0

35.4 28.6 31.7 4.3 100.0

28.4 27.0 42.9 1.7 100.0

202

11

285

112

1,677

1,054

2,164

1,649

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

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

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

Locals

Income groups

Former income

Present income

Former income

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

5.7 7.1 7.1 12.9 7.1 22.9 5.8 31.4 100.0 70

0.0 0.9 0.0 2.8 3.7 13.1 27.1 54.4 100.0 107

10.5 13.4 9.6 16.2 4.0 23.3 11.0 12.0 100.0 626

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

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

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

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Table 5.43 Arable Land per Household, 1993–1994 and 2000–2001 (in percent) Arable land (mu )